Tiptree Financial, Inc. :TIPT-US: Earnings Analysis: Q1, 2016 By the Numbers : May 23, 2016

Tiptree Financial, Inc. reports financial results for the quarter ended March 31, 2016.

We analyze the earnings along side the following peers of Tiptree Financial, Inc. – Ventas, Inc., Universal Health Realty Income Trust, HCP, Inc., Ashford Hospitality Trust, Inc., Welltower, Inc., CIM Commercial Trust Corporation, Duke Realty Corporation, Sabra Health Care REIT, Inc. and Healthcare Trust of America, Inc. Class A (VTR-US, UHT-US, HCP-US, AHT-US, HCN-US, CMCT-US, DRE-US, SBRA-US and HTA-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 139.80 million, Net Earnings of USD 5.52 million.
  • Gross margins narrowed from 41.97% to 40.39% compared to the same period last year, operating (EBITDA) margins now 9.55% from 9.96%.
  • Year-on-year change in operating cash flow of -1,042.47% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2015-03-31 2015-06-30 2015-09-30 2015-12-31 2016-03-31
Relevant Numbers (Quarterly)
Revenues (mil) 110.02 119.3 135.39 122.15 139.8
Revenue Growth (%YOY) 129.73 152.53 185.28 101.67 27.07
Earnings (mil) -2.63 -1.03 -4.55 -0.24 5.52
Earnings Growth (%YOY) -215.03 -200.1 -525.12 -188.24 310.32
Net Margin (%) -2.39 -0.86 -3.36 -0.2 3.95
EPS -0.03 -0.04 -0.13 -0.08 0.16
Return on Equity (%) -2.22 -1.02 -4.49 -0.24 5.47
Return on Assets (%) -0.14 -0.07 -0.53 -0.03 0.86

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Market Share Versus Profits

Revenues History
Earnings History

TIPT-US‘s change in revenue this period compared to the same period last year of 27.07% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that TIPT-US is holding onto its market share. Also, for comparison purposes, revenues changed by 14.45% and earnings by 2,400.42% compared to the immediate last period.

Revenues Growth Versus Earnings Growth


Earnings Growth Analysis

The company’s earnings rose year-on-year. But this growth has not come as a result of improvement in gross margins or any cost control activities in its operations. Gross margins went from 40.39% to 41.97% for the same period last year, while operating margins (EBITDA margins) went from 9.55% to 9.96% over the same time frame.

Gross Margin Versus EBITDA Margin


Cash Versus Earnings – Sustainable Performance?

Operating Cash Flow Growth Versus Earnings Growth

TIPT-US‘s change in operating cash flow of -1,042.47% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.


Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from -4.10% to 3.56% and (2) one-time items. The company’s pretax margins are now 3.56% compared to -5.33% for the same period last year.

EBIT Margin Versus PreTax Margin
EBIT Margin History
PreTax Margin History

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Company Profile

Tiptree Financial, Inc. is a holding company, which engages in the acquisition and management of controlling interests of operating businesses. It operates through the following segments: Insurance and Insurance Services, Specialty Finance, Real Estate, Asset Management, and Corporate and Other. The Insurance and Insurance Services segment consists of Fortegra, which offers consumer related protection products, including credit insurance, non-standard auto insurance, warranties, service contracts, auto warranty, and roadside assistance. The Specialty Finance segment consists of a controlling ownership interest in Siena, which provides asset-based loans to smaller businesses. The Real Estate Segment consists of Care, which acquires and owns seniors housing properties. The Asset Management segment consists of income from the collateralized loan obligations (CLOs) under management and from its management of Non-Profit Preferred Funding Trust 1, a portfolio of tax exempt securities owned by third party investors. The Corporate and Other segment incorporates revenues from the investments in CLOs and tax exempt securities, income from credit investment portfolio, and net gains or losses from the corporate finance activity. The company was founded by Flint D. Besecker on March 19, 2007 and is headquartered in New York, NY.

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