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Calamos Asset Management, Inc. Reports First Quarter 2016 Results and Declares Dividend

CLMS, -3.51% representing the public shares outstanding, owns 22.2% of the operating company, Calamos Investments LLC, with the remaining 77.8% privately owned by Calamos Family Partners, Inc. Calamos Asset Management, Inc. (CAM) and Calamos Investments LLC together operate a diversified global investment firm offering U.S. growth equity, global equity, convertible, multi-asset and alternative strategies, and today reported consolidated results for first quarter 2016 and comparative periods.

Highlights

Non-GAAP diluted earnings per share was $0.09 for the first quarter compared with $0.18 in the previous quarter and $0.17 in the first quarter of 2015. [1] The decrease in non-GAAP diluted earnings per share in the first quarter 2016 compared with the fourth quarter of 2015 was the result of higher income tax expense related to the expiration of employee stock options and lower operating income. Non-GAAP net income attributable to Calamos Asset Management, Inc. was $1.6 million for the quarter compared with $3.2 million last quarter and $3.1 million in the first quarter of 2015.

GAAP diluted loss per share was $0.08 for the first quarter of 2016 compared with GAAP diluted earnings per share of $0.05 in the previous quarter and $0.01 in the first quarter of 2015. The decrease in GAAP diluted earnings per share in the first quarter of 2016 compared with the fourth quarter of 2015 was the result of higher income tax expense related to the expiration of employee stock options, non-operating losses, lower operating income, and the consolidation of certain open-end funds in the period. Net loss attributable to CAM was $1.3 million for the quarter compared with net income attributable to CAM of $830,000 last quarter and $101,000 in the first quarter of 2015.

Assets Under Management [2] were $21.0 billion at March 31, 2016 compared with $21.9 billion at the end of last quarter and $24.5 billion at March 31, 2015. Net outflows were $426 million for the quarter compared with net outflows of $1.0 billion in the previous quarter and net inflows of $556 million in the first quarter of 2015.

Total revenues for the current quarter were $48.5 million compared with $55.5 million in the previous quarter and $57.4 million in the first quarter a year ago. Operating margin was 8.8% for the first quarter, 16.4% in the previous quarter and -2.6% in the first quarter of 2015. Non-GAAP operating margin was 17.5% in the first quarter of 2015.

The Board of Directors of CAM declared a regular quarterly dividend of 15 cents per share payable on May 24, 2016 to shareholders of record on May 10, 2016.

The table below highlights certain GAAP and non-GAAP financial measures:


Three Months Ended


March 31,


December 31,


March 31,


2016


2015


2015

(in millions)






Ending Assets Under Management

$21,020


$21,908


$24,476

Average Assets Under Management

$20,632


$22,682


$23,677

Net flows

($426)


($1,000)


$556







(in thousands, except earnings per share)






Total revenues

$48,501


$55,494


$57,417

Total operating expenses

$44,213


$46,369


$58,922

Operating income (loss)

$4,288


$9,125


($1,505)

Non-GAAP operating income

$4,288


$9,125


$10,039

Operating margin

8.8%


16.4%


(2.6%)

Non-GAAP operating margin

8.8%


16.4%


17.5%

Net income (loss) attributable to CAM

($1,322)


$830


$101

Non-GAAP net income attributable to CAM

$1,622


$3,177


$3,137

Diluted earnings (loss) per share

($0.08)


$0.05


$0.01

Non-GAAP diluted earnings per share

$0.09


$0.18


$0.17

Business Commentary

In the first quarter of 2016, the firm named John S. Koudounis as Chief Executive Officer, effective Monday, April 4, 2016. Mr. Koudounis is responsible for executing the firm's growth strategy and expanding the firm's global footprint. In his previous role as President and Chief Executive Officer of Mizuho Securities USA, Inc. he significantly grew the firm to become a top-10 investment banking enterprise. John P. Calamos, Sr. remains Founder, Chairman and Global CIO, focused on investing and the continuity of Calamos' investment-centric culture.

Also during the quarter, work was completed in converting Phineus Partners LP's hedge fund into a '40 Act fund, the Calamos Phineus Long/Short Fund. The new fund enhances Calamos' product offerings and role as an innovator in liquid alternatives. We are encouraged about the growth opportunities of the fund, in part because the fund was able to retain its 14-year track record which has outpaced both the S&P 500 and the MSCI World Index since inception in May of 2002. [3] Further reflecting the firm's focus on the liquid alternative space, the quarter also marked the one-year anniversary of the Calamos Hedged Equity Income Fund, which placed in the top quintile of its Morningstar peer category for the one year period ending March 31, 2016. [3]

Calamos Investments LLC repurchased 520,444 shares of CAM's common stock during the first quarter, for a total cost of $4.7 million.

Assets Under Management and Flows

Assets Under Management as of March 31, 2016 were $21.0 billion, a decrease of $888 million from the end of the fourth quarter.

  • For the quarter, net outflows were $426 million. Market depreciation of $462 million was experienced primarily in equity strategies.
  • Fund net outflows were $532 million for the quarter, primarily driven by outflows from the U.S. equity strategy and a decrease in closed-end fund leverage.
  • For the first quarter of 2016, net flows into separate accounts were $106 million.

Financial Discussion

Operating Income

First quarter 2016 revenues of $48.5 million decreased $8.9 million from first quarter 2015 primarily due to a decrease in Average Assets Under Management. Total operating expenses for the first quarter were $44.2 million, a decrease of $14.7 million from $58.9 million in the first quarter of 2015, primarily a result of $11.5 million of closed-end fund launch expenses incurred in the prior year and lower distribution expenses and general and administrative expenses. Excluding the prior year closed-end fund launch, non-GAAP operating income was $4.3 million for the first quarter compared with $10.0 million in the first quarter of 2015 and non-GAAP operating margin was 8.8% for the first quarter compared with 17.5% for the first quarter of 2015. GAAP operating income was $4.3 million for the first quarter versus an operating loss of $1.5 million in the first quarter of last year. GAAP operating margin was 8.8% for the first quarter, up from -2.6% in the first quarter of 2015.

Non-Operating Income

GAAP non-operating loss was $14.3 million for the first quarter of 2016 compared with income of $5.0 million for the first quarter of 2015, as presented in Table B. Non-GAAP non-operating loss, net of redeemable non-controlling interest in partnership and consolidated funds, [4] was $7.2 million during the first quarter of 2016 compared with non-GAAP non-operating income, net of redeemable non-controlling interest in partnerships and consolidated funds, of $2.0 million for the first quarter of 2015.

Income Taxes

CAM's income tax provision for the first quarter of 2016, as presented in Table D, exceeded income before tax provision attributable to CAM resulting in an income tax rate that is not meaningful. The income tax provision for the first quarter of 2016 includes $964,000 of deferred tax expense related to expired employee stock options and an allowance for employee stock options expected to expire in future periods. For the first quarter of 2015, CAM's effective tax rate was 81.7%, a result of $238,000 in expense related to expired employee stock options. Excluding these items, CAM's effective tax rate was 38.3% and 38.6% for the first quarter of 2016 and 2015, respectively.

Financial Position

As of March 31, 2016, the corporate investment portfolio was $360.1 million, which included cash, cash equivalents, receivable for investments sold, and investments that were principally comprised of investments in products that the company manages. The corporate investment portfolio is used to provide seed capital for new products, to maintain conservative levels of capital for the company's regulated subsidiaries and to invest in other corporate strategic initiatives.

As of March 31, 2016, total long-term debt was $46.0 million and total equity was $346.4 million.

Market Capitalization

As of March 31, 2016, CAM, representing the public shares outstanding, owns 22.2% of the operating company, Calamos Investments LLC, with the remaining 77.8% privately owned by Calamos Family Partners, Inc. Because of our ownership structure, reported market capitalization does not reflect the entire value of the company, but rather only the market capitalization pertaining to CAM's 22.2% interest, which is publicly traded.

Investor Conference Call

Management will hold an investor conference call at 3:30 p.m. Central Time on Tuesday, April 26, 2016. To access the live call and view management's presentation, visit the Investor Relations section of the company's website at www.calamos.com/investors. Alternatively, participants may listen to the live call by dialing 800.768.6563 in the U.S. or Canada (785.830.7991 internationally), then entering conference ID #9374683. A replay of the call will be available for one week following the date of the call by dialing 888.203.1112 in the U.S. or Canada (719.457.0820 internationally), then entering conference ID #9374683. The webcast also will be available on the Investor Relations section of the company's website at www.calamos.com/investors for at least 90 days following the date of the call.

Calamos Asset Management, Inc. CLMS, -3.51% is a diversified global investment firm offering innovative investment strategies including U.S. growth equity, global equity, convertible, multi-asset and alternatives. The firm offers strategies through separately managed portfolios, mutual funds, closed-end funds, private funds, an exchange traded fund and UCITS funds. Clients include major corporations, pension funds, endowments, foundations and individuals, as well as the financial advisors and consultants who serve them. Headquartered in the Chicago metropolitan area, the firm also has offices in...


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