Rodman & Renshaw Capital Group, Inc. Announces Financial Results for the Second Quarter of 2009

Business Wire, July 30, 2009

NEW YORK -- Rodman & Renshaw Capital Group, Inc. (NASDAQ:RODM) today announced its results for the second quarter of 2009.

The Company reported record revenues of $33.4 million for the second quarter compared to $5.8 million in the first quarter of 2009. Total revenues excluding principal transactions for the second quarter were $27.8 million, compared to $7.8 million in the first quarter. The Company also reported record net income of $15.9 million, or $0.42 per diluted share, for the quarter, compared to a net loss of $12.3 million, or $(0.35) per share, for the first quarter of 2009. During the second quarter, the Company completed 25 financing transactions raising $399.4 million, compared to 5 financing transactions raising $58.4 million, in the first quarter. Rodman was once again ranked the number one investment bank in PIPE transactions by volume for the second quarter and the first half of 2009.1

Adjusting for certain non-cash events related to principal transactions and acceleration of stock-based compensation associated with terminated employees, and the impairment of goodwill, the Company reported a net income on a non-U.S. GAAP basis of $10.9 million, or $0.29 per diluted share, for the quarter, compared to a net loss of $6.4 million, or $(0.18) per share, for the first quarter of 2009. A reconciliation between GAAP results and non-GAAP measures is contained in the tables that accompany this release, under “Non-GAAP Financial Measures.”

BUSINESS HIGHLIGHTS

Investment Banking

Investment banking revenue was $27.0 million for the second quarter, which included $9.6 million related to warrants received as compensation for activities as underwriter or placement agent valued using Black-Scholes, compared to $6.9 million in investment banking revenue, which included $1.4 million related to warrants received, for the first quarter of 2009. Private placement and underwriting revenue for the second quarter was $25.4 million, compared to $4.0 million for the first quarter of 2009. Strategic advisory fees for the second quarter were $1.6 million, compared to $2.9 million for the first quarter of 2009.

Sales & Trading

• Commissions for the second quarter were $0.7 million, compared to $0.8 million for the first quarter of 2009.
• Principal transaction revenue for the second quarter was $5.6 million, compared to principal transaction losses of $2.0 million for the first quarter of 2009.

Operating Expenses

Compensation Expense

• Employee compensation and benefits expense for the second quarter was $11.8 million, compared to $12.1 million for the first quarter of 2009.
• Employee compensation and benefits expense for the second quarter represented 35% of revenue, compared to 207% for the first quarter of 2009. For the first half of 2009, employee compensation and benefits expense represented 61% of total revenue.
• The Company employed 105 employees as of June 30, 2009, compared to 106 employees as of March 31, 2009.

Non-Compensation Expense

Non-compensation expense for the second quarter, excluding impairment of goodwill, was $5.0 million, compared to $5.4 million for the first quarter of 2009.

Cost Savings and Restructuring Initiatives

As a result of our cost savings initiatives as detailed in our first quarter earnings release, the Company has reduced its budgeted quarterly fixed cash costs to approximately $6.0 million. Actual quarterly fixed costs, excluding non-recurring costs, were approximately $6.0 million for the second quarter of 2009.

Income Taxes

Due to the prior period operating losses, we did not record a material amount of income tax expense for the second quarter of 2009. We will continue to review the value of our net deferred tax assets and may reverse a portion of our valuation allowance associated with these net deferred tax assets if the Company continues to generate sufficient operating income in the future.

Capital

Cash and cash equivalents were $14.3 million as of June 30, 2009, compared to $8.8 million as of March 31, 2009. Liquid assets were $19.5 million, consisting of cash and cash equivalents, “Level I” assets 2 and current receivables, compared to $12.1 million as of March 31, 2009. Book value per common share was $0.96 as of June 30, 2009. Book value per common share is based on common shares outstanding including unvested and vested restricted stock and restricted stock units.

Cash Flows

The increase in cash and cash equivalents of $5.5 million since March 31, 2009 is a result of cash inflows from operations of $5.0 million including a second quarter cash bonus of $3.4 million that was paid in July 2009; offset by $1.2 million of deferred acquisition payments to Miller Mathis, $0.6 million to Aceras for investing purposes, and $1.1 million related to leasehold improvements, severance, and legal fees related to an ongoing arbitration.