(Source: Business Wire)
HFF, Inc. (NYSE:HF) reported today its financial and production volume
results for the third quarter 2009. HFF, Inc. (the Company), through its
Operating Partnerships, Holliday Fenoglio Fowler, L.P. (HFF LP) and HFF
Securities L.P. (HFF Securities and collectively HFF LP and HFF
Securities are also referred to as the Firm), is one of the leading
providers of commercial real estate and capital markets services to the
U.S. commercial real estate industry based on transaction volume and is
one of the largest full-service commercial real estate financial
intermediaries in the country.
Consolidated Earnings
Third Quarter Results
The Company's third quarter 2009 revenues of $20.6 million were
approximately $4.2 million, or 25.6%, higher than its second quarter
2009 revenues of approximately $16.4 million. Notwithstanding the third
quarter 2009 revenue increase over the second quarter 2009 revenues, the
Company's third quarter 2009 revenues of $20.6 million, when compared to
the third quarter 2008 revenues of $31.0 million, decreased $10.4
million, or 33.6%. The decrease in third quarter 2009 revenues compared
to third quarter 2008 revenues is due to declines in transactional
activity which are directly attributable to the combined effects of
unprecedented losses and write-offs incurred by global financial
institutions resulting in continuing overall liquidity and credit
constraints in the global debt and equity markets combined with a
continued deep recession in the U.S. and other global economies during
the third quarter and the first nine months of 2009.
The Company had operating income of $0.8 million in the reporting period
compared to an operating loss of $0.1 million for the third quarter of
2008, representing an increase in operating income of $0.9 million
despite the 33.6% quarter over quarter decrease in revenues in 2009
compared to 2008. Offsetting the decrease in revenues was a reduction in
total operating expenses of $11.4 million during the third quarter of
2009 compared to the same period of the prior year. The decreases in
operating costs were driven by the variable cost categories, which are
directly tied to the lower capital markets services revenues, as well as
the implementation of cost-savings initiatives taken in the fourth
quarter 2008 and the second quarter 2009, which also resulted in a
comparable decrease in fixed costs, and finally through the Company's
continued aggressive management of discretionary spending.
Interest and other income, net, decreased $0.9 million, or 50.2%,
primarily due to a decrease in income recognized on mortgage servicing
rights and by lower interest earned on the Company's cash balances due
to decreased interest rates as compared to the same period in the prior
year.
The Company recorded income tax expense of $2.1 million in the third
quarter of 2009, compared to income tax expense of $0.4 million in the
third quarter of 2008. The income tax expense in the third quarter of
2009 is primarily the result of a change in the tax rate used to measure
the deferred tax assets.
The Company reported a net loss of $39,000 for the quarter ended
September 30, 2009 (after an adjustment to the third quarter results of
$1.3 million to reflect the impact of the noncontrolling interest of HFF
Holdings LLC (Holdings) in the Operating Partnerships), compared with
net income of $0.3 million for the same period last year (after
adjustments to the results for the quarter ended September30, 2008 of
approximately $1.3 million to reflect the impact of the noncontrolling
interest of Holdings in the Operating Partnerships). Net income for the
quarter ended September 30, 2009 was $0.00 per diluted share.
EBITDA (a non-GAAP measure whose reconciliation to net loss can be found
within this release) was $4.3 million for the quarter ended September
30, 2009, an increase of approximately $1.2 million as compared to $3.1
million in the same period in the prior year.
Nine Month Results
The Company reported revenues of $50.3 million for the nine months ended
September 30, 2009, a decrease of $56.5 million, or 52.9%, compared to
the same period last year. The Company continued to experience a
decrease in production volumes and related capital markets services
revenues from the same period in the prior year although, as previously
stated, the Company's third quarter 2009 revenues were approximately
$4.2 million or 25.6% higher than our second quarter 2009 revenues. The
year over year decreases in third quarter revenues were caused, in large
measure, by the continuing and significant downturn in debt and
investment sales transaction activity in the U.S. commercial real estate
markets as evidenced by data from Real Capital Analytics (RCA) and the
Mortgage Bankers Association (the MBA). RCA's data reports a 74% overall
decline of sales activity in the U.S. through the third quarter of 2009
compared to the same period in 2008, which is on top of the 71% decline
in investment sales activity for full year 2008 when compared to the
full year period in 2007. Similarly, the MBA reported a 62% decline in
loan origination volume during the first half of 2009 compared to the
same period in 2008 (the MBA's data for the third quarter of 2009 is not
currently available, and the MBA's data through the end of the second
quarter is its most current available data). This is in addition to the
full year 2008 decline in loan originations of 65% compared to full year
2007.
The Company reported an operating loss of $7.1 million for the nine
month period ended September 30, 2009, compared to operating income of
$1.8 million for the nine months ended September 30, 2008, which
represents a decrease in operating income of $8.9 million. This decrease
in operating income for the nine month period is primarily attributable
to the significant decrease in production volumes and related capital
markets services revenues from the prior year, for the reasons stated
above. Partially offsetting this decrease in revenues of approximately
$56.5 million is a reduction in total operating expenses of
approximately $47.6 million during the first nine months of 2009
compared to the same period of the prior year. This reduction in
operating expenses is a result of a decrease in cost of services of
approximately $36.3 million, which is primarily due to the decrease in
commissions and other incentive compensation directly related to the
lower capital markets services revenues, and a decrease in operating,
administrative and other expenses (including depreciation and
amortization) of $11.3 million, which is primarily related to a
reduction in other performance-based accruals and cost reductions due to
the cost savings initiatives previously mentioned and through the
continued aggressive management of the Company's discretionary spending.
The income (loss) before income taxes for the first nine months of 2009
and 2008 included income of $1.7 million and $3.9 million, respectively,
related to a decrease in the estimated amount due to Holdings under a
tax receivable agreement (see Note 2).
Income tax expense for the nine months ended September 30, 2009 was
approximately $1.1 million, compared to approximately $4.8 million of
income tax expense for the same period in 2008. This decrease is
primarily attributable to lower pre-tax book income, which is partially
offset by the effect of changes in the rates used to measure the
deferred tax assets. The largest component of the deferred tax assets
relates to the tax basis step up resulting from the reorganization
transactions completed in 2007 in connection with the Company's initial
public offering. The effect of changes in the rates used to measure the
deferred tax assets on income tax expense for the nine months ended
September 30, 2009 and 2008 was approximately $2.0 million and $4.6
million, respectively. This additional tax expense due to the
remeasurement of the deferred tax assets resulted in a higher effective
tax rate. During the nine month periods ended September 30, 2009 and
2008, this tax expense and its impact on net income was partially offset
by a decrease of $1.7 million and $3.9 million, respectively, in the
payable under the tax receivable agreement (as shown on the consolidated
operating results before the line item "income (loss) before income
taxes"). The effect of changes in the rates used to measure the deferred
tax assets and the corresponding effect of the related remeasurement of
the payable under the tax receivable agreement resulted in an overall
net decrease to net income of approximately $0.3 million, or an
estimated $0.02 per share on a fully diluted basis for the nine month
period ended September 30, 2009 and approximately $0.7 million, or an
estimated $0.04 per share on a fully diluted bases for the nine month
period ended September 30, 2008.
The Company reported a net loss of $2.3 million (after an adjustment to
the nine months results of $1.2 million to reflect the impact of the
noncontrolling ownership interest of Holdings in the Operating
Partnerships) for the nine month period ended September30, 2009,
compared with net income of $0.4 million (after an adjustment to the
results for the nine month period ended September 30, 2008 of $4.1
million to reflect the impact of the noncontrolling ownership interest
of Holdings in the Operating Partnerships) for the same period last
year. Net loss attributable to controlling interest for the nine month
period ended September 30, 2009 was $2.3 million, or $0.14 per diluted
share.
EBITDA was $0.5 million for the nine months ended September 30, 2009, a
decrease of $11.5 million as compared to the same period in the prior
year.
HFF, Inc.
Consolidated Operating Results
(dollars in thousands, except per share data)
(Unaudited)
For the Three Months Ended Sept. 30, For the Nine Months Ended Sept.