NATIONAL FINANCIAL PARTNERS CORP - FORM 8-K - EX-99.1 - NATIONAL FINANCIAL PARTNERS CORP. PRESENTATION

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8-K - FORM 8-K - NATIONAL FINANCIAL PARTNERS CORP	d296210d8k.htm

FOURTH QUARTER 2011 EARNINGS CALL PRESENTATION

FEBRUARY 8, 2012

Exhibit 99.1

Related to Forward-Looking Statements

Certain items in this presentation and in today’s discussion, including matters relating to revenue, net income, Adjusted

EBITDA, cash earnings, cash earnings per diluted share and percentages or calculations using these measures,

acquisitions, capital structure or growth rates and other financial measurements and non-financial statements in future

periods, constitute forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of

1995. These forward-looking statements are based on management's current views with respect to future results and are

subject to risks and uncertainties. These statements are not guarantees of future performance. Actual results may differ

materially from those contemplated by forward-looking statements. National Financial Partners Corp. (“NFP” or the

“Company”) refers you to its filings with the SEC, including its Annual Report on Form 10-K for the year ended December

31, 2010, filed on February 10, 2011, for additional discussion of these risks and uncertainties as well as a cautionary

statement regarding forward-looking statements. Forward-looking statements made during this presentation speak only

as of today's date. NFP expressly disclaims any obligation to update or revise any forward-looking statements, whether

as a result of new information, future events or otherwise.

Related to Non-GAAP Financial Information

The Company analyzes its performance using historical and forward-looking non-GAAP financial measures called cash earnings,

cash earnings per diluted share, Adjusted EBITDA, and percentages or calculations using these measures. The Company believes

these non-GAAP financial measures provide additional meaningful methods of evaluating certain aspects of the Company’s

operating performance from period to period on a basis that may not be otherwise apparent under GAAP. Cash earnings is defined

as net income excluding amortization of intangibles, depreciation, the after-tax impact of the impairment of goodwill and intangible

assets, the after-tax impact of non-cash interest, the after-tax impact of change in estimated acquisition earn-out payables recorded

in accordance with purchase accounting that have been subsequently adjusted and recorded in the consolidated statements of

operations, the after-tax impact of management contract buyouts and the after-tax impact of certain non-recurring items. Cash

earnings per diluted share is calculated by dividing cash earnings by the number of weighted average diluted shares outstanding for

the period indicated. Cash earnings and cash earnings per diluted share should not be viewed as substitutes for net income and net

income per diluted share, respectively. Adjusted EBITDA is defined as net income excluding income tax expense, interest income,

interest expense, gain on early extinguishment of debt, other, net, amortization of intangibles, depreciation, impairment of goodwill

and intangible assets, (gain) loss on sale of businesses, net, the accelerated vesting of certain RSUs, any change in estimated

acquisition earn-out payables recorded in accordance with purchase accounting that have been subsequently adjusted and recorded

in the consolidated statements of operations and the expense related to management contract buyouts. Adjusted EBITDA should not

be viewed as a substitute for net income. A reconciliation of these non-GAAP financial measures to their GAAP counterparts for the

periods presented herein is provided in the Company’s quarterly financial supplement for the period ended December 31, 2011,

which is available on the Investor Relations section of the Company’s Web site at www.nfp.com.

Reconciliation: Net Income to Cash Earnings

(1)

Cash earnings is a non-GAAP financial measure, which the Company defines as net income excluding amortization of intangibles, depreciation, the after-tax impact of the impairment of goodwill and intangible

assets, the after-tax impact of non-cash interest, the after-tax impact of change in estimated acquisition earn-out payables recorded in accordance with purchase accounting that have been subsequently adjusted

and recorded in the consolidated statements of operations, the after-tax impact of management contract buyouts and the after-tax impact of certain non-recurring items.

(2)

The

sum

the

per-share

components

cash

earnings

per

diluted

may

not

agree

cash

earnings

per

diluted

due

rounding.

Q4 2011

Q4 2010

2011

2010

GAAP net income

$11,245

$ 15,269

$ 36,932

$ 42,558

Amortization of intangibles

8,271

8,211

32,478

33,013

Depreciation

3,313

3,095

12,553

12,123

Impairment of goodwill and intangible assets

8,319

11,705

2,901

Tax benefit of impairment of goodwill and intangible assets

(3,390)

(15)

(4,729)

(1,147)

Non-cash interest, net of tax

670

802

2,602

5,094

Accelerated vesting of certain RSUs, net of tax

8,174

Gain on early extinguishment of debt, net of tax

(5,914)

Change in estimated acquisition earn-out payables, net of tax

(731)

(699)

Cash earnings (1)

$27,697

$ 27,362

$ 90,842

$ 96,802

GAAP

net

income

per

diluted

$ 0.27

$ 0.34

$ 0.84

$ 0.96

Amortization of intangibles

0.20

0.18

0.74

0.75

Depreciation

0.08

0.07

0.29

0.27

Impairment of goodwill and intangible assets

0.20

0.27

0.07

Tax benefit of impairment of goodwill and intangible assets

(0.08)

(0.11)

(0.03)

Non-cash interest, net of tax

0.02

0.06

0.12

Accelerated vesting of certain RSUs, net of tax

0.19

Gain on early extinguishment of debt, net of tax

(0.13)

Change in estimated acquisition earn-out payables, net of tax

(0.02)

Cash

earnings

per

diluted

(2)

$ 0.65

$ 0.60

$ 2.07

$ 2.19

Reconciliation: Net Income to

Adjusted EBITDA

For a reconciliation of Adjusted EBITDA per reportable segment for the three months ended March 31, 2011, June 30, 2011, September 30, 2011 and December 31, 2011, please

see the Company’s quarterly financial supplement for the period ended December 31, 2011 which is available on the Investor Relations section of the Company’s Web site at

www.nfp.com.

Corporate

Individual

Advisor

(in thousands)

Client Group

Services Group

Consolidated

For the twelve months ended December 31, 2011

GAAP net income

36,932

Income tax expense

28,387

Interest income

(3,333)

Interest expense

15,733

Gain on early extinguishment of debt

Other, net

(6,386)

Income from operations

48,169

14,167

8,997

71,333

Amortization of intangibles

21,553

10,925

32,478

Depreciation

6,107

4,275

2,171

12,553

Impairment of goodwill and intangible assets

1,246

10,459

11,705

(Gain) loss on sale of businesses, net

(103)

(1,135)

(1,238)

Accelerated vesting of certain RSUs

Change in estimated acquisition earn-out payables

(414)

Adjusted EBITDA

(1)

76,558

38,691

11,168

126,417

For the twelve months ended December 31, 2010

GAAP net income

42,558

Income tax expense

26,481

Interest income

(3,854)

Interest expense

18,533

Gain on early extinguishment of debt

(9,711)

Other, net

(8,303)

Income from operations

43,046

15,202

7,456

65,704

Amortization of intangibles

21,398

11,615

33,013

Depreciation

6,298

4,458

1,367

12,123

Impairment of goodwill and intangible assets

1,931

970

2,901

(Gain) loss on sale of businesses, net

(8,058)

(2,237)

(10,295)

Accelerated vesting of certain RSUs

7,394

6,001

13,395

Change in estimated acquisition earn-out payables

Adjusted EBITDA

(1)

72,009

36,009

8,823

116,841

Adjusted EBITDA is a non-GAAP financial measure, which the Company defines as net income excluding income tax expense, interest income, interest expense, gain on

early extinguishment of debt, other, net, amortization of intangibles, depreciation, impairment of goodwill and intangible assets, (gain) loss on sale of businesses, net, the

accelerated vesting of certain RSUs, any change in estimated acquisition earn-out payables recorded in accordance with purchase accounting that have been subsequently

adjusted and recorded in the consolidated statements of operations and the expense related to management contract buyouts.

The reconciliation of Adjusted EBITDA per reportable segment does not include the following items, which are not allocated to any of the Company’s reportable segments:

income tax expense, interest income, interest expense, gain on early extinguishment of debt and other, net. These items are included in the reconciliation of Adjusted

EBITDA to net income on a consolidated basis.

(1)

JESSICA BIBLIOWICZ

Chairman, President & Chief Executive Officer

2011 Highlights

Revenue over $1 billion driven by

Revenue growth +3.2%

Organic revenue growth +2.3%

–

Corporate Client Group +3.6%

–

Advisor Services Group +16.1%

Acquisitions

Adjusted EBITDA grew 8%; margin expansion

Executed on balanced capital allocation strategy in 2011

$50 million, approximately, for strategic acquisitions and sub-acquisitions

$50 million stock repurchase plan

–

Completed program in February 2012

Reinvestment in existing businesses

2012 Balanced Capital Allocation Strategy

Strategic acquisitions of $80 million

Includes approximately $20 million for management contract buyouts

Recurring revenue businesses

AGS acquisition completed in 1Q12

NFP Dreyfuss & Birke management contract buyout completed in 1Q12

New

repurchase

authorization

$50

million

Intend to commence in May 2012, due to restrictions in our credit facility and

subject to market and other conditions

Reinvestment in existing businesses

Enhance leadership position in benefits, insurance and wealth management

Business Segments

$351.4

34.7%

$249.8

24.6%

$412.2

40.7%

Advisor Services Group

Individual Client Group

Corporate

Client Group

FY 2011 organic revenue growth +3.6%

FY 2012 expectations for CCG

3% -

4% organic growth

Adjusted EBITDA margins

Growth from acquisitions

FY 2011 organic revenue decline -6.9%

Strong performance in wealth management

FY 2012 expectations for life insurance

Volatility and uncertainty remains in the

market

Could cause further declines

–

Anticipate 1Q12 weaker than

1Q11

FY 2011 organic revenue growth +16.1%

FY 2012 expectations for ASG (depending on

performance of financial markets)

4% -

5% organic growth

Investments in recruiting and marketing

Adjusted EBITDA margins approximately 4.5%-5%

($ in millions)

Corporate Client Group

Individual Client Group

Advisor Services Group

FY11 Revenue $1,013.4 million

–

19%-20% in second half of 2012

–

Approximately 18.5% in each of

1Q12 and 2Q12

FY10

Recurring

revenue

58.0%²

($ in millions)

FY11

Recurring

revenue

62.4%

FY10 Revenue $981.9 million

FY11 Revenue $1,013.4 million

Individual Client Group

Corporate Client Group

Advisor Services Group

FY Recurring Revenue by Business Segment

Recurring revenue includes revenue from corporate and executive benefits, property & casualty, wealth management and asset-based fees and trails.

Previously reported as 57.0%; updated due to re-categorization of certain asset-based fees and trails.

DOUG HAMMOND

Chief Operating Officer

Business Segment

FY11 Overview & Components of Revenue

Corporate Benefits

Executive Benefits

Property & Casualty

34.7%

Retail Life

Marketing Organization & Wholesale Life

Brokerage

Wealth Management

Asset Based Fees & Trails

Commissions & Non-Recurring Fees

% of CCG

Revenue

% of ICG

Revenue

% of ASG

Revenue

81.9%

10.7%

7.4%

40.7%

17.9%

31.9%

50.2%

63.2%

36.8%

24.6%

Steady and recurring business

Diversification of products and

services

Health & Welfare

–

Health care reform

Retirement

NFP Executive Benefits

P&C

Strategic acquisition pipeline

Life insurance

Challenges and uncertainty

remain in the market

Strategic repositioning

Wealth management

Strong performance continues

AUM $9.7 billion, up 3.7% YOY

Growth drivers

New assets

Advisor recruitment

Asset-based fees (due to broader

financial market performance)

Corporate Client Group

Individual Client Group

Advisor Services Group

DONNA BLANK

Chief Financial Officer

4Q11 Consolidated Financial Highlights

($ in millions)

56.4%

60.7%

Recurring

Revenue

Individual Client Group

Corporate Client Group

Advisor Services Group

Adjusted EBITDA Margin

4Q10

4Q11

Corporate Client Group

18.7%

18.6%

Individual Client Group

10.8%

14.8%

Advisor Services Group

5.5%

4.0%

Consolidated

12.7%

13.9%

Adjusted EBITDA growth +11% and margin expansion

The sum of the components may not agree to total due to rounding.

$36.1

$40.1

$284.3

$289.2

Revenue

Adjusted EBITDA & Margin

Operating Cash Flow

In Q1, larger payments to principals typically occur as bonus fees to

principals for prior year performance are paid

(1)

Sum of the quarters may not agree to the full year total due to rounding.

$124

($ in millions)

(1)

$119

-$6

Quarterly/Annual Operating Cash Flow

New Total Compensation Ratio

Operating Expenses

Commissions and fees

Compensation expense-employees

Fees to principals

Non-compensation expense

Operating Expenses

Commissions and fees

Compensation expense

Non-compensation expense

Management fees

Renamed

Compensation expense

Revenue

Management Fees

Income Before Management Fees

(Compensation expense-employees) +

(Fees to principals)

Revenue

Old Format

New Format

Total compensation ratio

Two compensation metrics

Total Compensation Ratio by Segment

Qtrly

YTD

Corporate Client Group

Individual Client Group

49.7%

47.8%

48.6%

50.2%

50.0%

49.2%

49.0%

46.0%

47.0%

48.0%

49.0%

50.0%

51.0%

Q1'11

Q2'11

Q3'11

Q4'11

54.0%

52.3%

51.7%

50.7%

52.4%

52.3%

52.2%

49.0%

50.0%

51.0%

52.0%

53.0%

54.0%

55.0%

Q1'11

Q2'11

Q3'11

Q4'11

2011 Balanced Capital Allocation

Balanced approach to capital allocation; maintain financial flexibility

Strategic acquisitions and sub-acquisitions

–

Approximately $50 million cash consideration

Direct capital return to shareholders –

stock buyback

Reinvestment in existing businesses

$50 million NFP stock buyback authorization completed

4Q11

Total Program as

of February 6,

2012

# of shares repurchased

1,030,593

3,992,799

Average share price

$12.80

$12.45

Total $ amount repurchased (in millions)

$13.2

$50

$ amount remaining outstanding (in millions)

$8.2

–

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