SIEBERT FINANCIAL CORP. 10-Q Summary
Business Context and Reporting Period
This filing is a Quarterly Report (Form 10-Q) for Siebert Financial Corp. and its subsidiaries, covering the period ended March 31, 2009. The Company operates as a broker-dealer and investment banking firm, primarily through its subsidiary Muriel Siebert & Co., Inc. The report reflects operations during a period of significant financial market volatility and new lows in stock markets due to the global financial crisis.
Key Financial Metrics
| Metric | Q1 2009 | Q1 2008 |
|---|---|---|
| Total Revenues | $7,000,000 | $7,897,000 |
| Net Loss | $(332,000) | $(128,000) |
| Loss Per Share (Basic/Diluted) | $(0.01) | $(0.01) |
| Cash and Cash Equivalents | $26,243,000 | $34,589,000 (Beginning of Q1 2008) |
| Net Capital (Regulatory) | $23,119,000 | N/A |
| Net Cash Used in Operating Activities | $(3,341,000) | $(1,168,000) |
Material Changes vs. Prior Period
- Revenue Decline: Total revenues decreased by 11.4% ($897,000) compared to Q1 2008. This was driven by a 26.4% drop in commissions and fees due to reduced institutional and retail trading volumes.
- Investment Banking Growth: Investment banking revenues increased 49.3% to $1.877 million, attributed to participation in more new debt market issues.
- Trading Profits Surge: Trading profits rose 1,261.5% to $531,000, primarily due to the addition of a debt sales-trader and increased volume.
- Expense Increase: Total expenses rose 4.4% to $8.376 million. Notably, professional fees increased 64.3% ($763,000) due to legal fees related to a dispute with a former employee.
- Equity Investment Income: Income from equity investees turned positive, contributing $844,000 to the bottom line (compared to a $57,000 loss in 2008), largely driven by strong performance at Siebert Brandford Shank & Co., LLC (SBS).
- Liquidity: Cash and cash equivalents decreased by $3.374 million during the quarter. However, the Company maintains a strong liquidity position with $29 million in highly liquid assets.
Outlook, Risks, and Contingencies
- Market Conditions: Management notes that profitability is adversely affected by reduced financial market activity, as certain expenses (salaries, occupancy) remain relatively fixed.
- Stock Repurchase: The Company continues a share repurchase program authorized in January 2008. In Q1 2009, 4,382 shares were purchased at an average price of $1.68. Approximately 283,768 shares remain available for purchase under the plan.
- Regulatory Capital: Siebert maintains net capital of approximately $23.1 million, significantly exceeding the minimum requirement of $250,000.
- Legal Contingencies: The Company is involved in a dispute with Pershing LLC regarding a $1.5 million advance and potential claims for costs and lost revenues. Management believes the claims are without merit and the outcome will not have a material adverse effect. Routine lawsuits are also ongoing but are not expected to be material.
- Forward-Looking Risks: Risks include fluctuations in security volumes and prices, competition from electronic discount brokers, system failures, and customer non-payment.
Investor Verification Checklist
- Verify the sustainability of the 49.3% increase in investment banking revenues given the volatile debt market environment.
- Monitor the resolution of the legal dispute with Pershing LLC and the associated professional fee expenses.
- Assess the impact of continued declines in retail and institutional trading volumes on commission revenue.
- Review the performance of equity investees (SBS and SBSFPC), which contributed significantly to the quarter's income but carry their own market risks.
- Confirm the Company's ability to maintain regulatory net capital requirements if market conditions deteriorate further.