Categories
Market Wire

Thomas Weisel Partners Group, Inc. Reports Strong Fourth Quarter Earnings Led by Investment Banking Revenues and Private Equity Investment Gains

Thomas Weisel Partners Group, Inc. Reports Strong Fourth Quarter Earnings Led by Investment Banking Revenues and Private Equity Investment Gains

Thomas Weisel Partners Group, Inc.

(NASDAQ: TWPG) reported net revenue of $76.5 million in the fourth quarter

of 2006 and $276.3 million for 2006 driven by investment banking revenues

and private equity investment gains, representing net revenue increases of

8% and 17% over the comparable periods in 2005. These increases exclude

management fees earned in 2005 from Thomas Weisel Capital Partners (TWCP),

which we no longer receive, as discussed below. If management fees earned

in 2005 from TWCP were included, net revenue for the fourth quarter and

full year 2006 represented increases of 4% and 10%, respectively, over the

comparable periods in 2005.

Net income increased to $8.7 million in the fourth quarter of 2006 from

$7.1 million in the fourth quarter of 2005 and increased to $34.9 million

in the full year of 2006 compared to a net loss of $7.1 million in the full

year 2005. Diluted earnings per share for the fourth quarter and full year

2006 were $0.33 and $1.34, respectively.

After adjusting for certain one-time events, including our conversion to a

corporation, non-GAAP net income and diluted earnings per share were $9.8

million and $0.37 for the fourth quarter of 2006 and $23.7 million and

$0.93 for 2006. A reconciliation between our GAAP results and these

non-GAAP measures is discussed below.

Fourth Quarter 2006 Business Highlights

— Investment Banking. The fourth quarter of 2006 was our strongest

investment banking quarter since the first quarter of 2001, led by M&A

revenues of $15.2 million. Total investment banking revenues in the

fourth quarter increased 33% to $37.3 million, compared to the fourth

quarter of 2005. We completed 28 investment banking transactions in the

fourth quarter compared to 18 transactions in the fourth quarter of 2005.

Of those transactions, 23 were capital raising, up from 13 in the fourth

quarter of 2005. We also completed five M&A transactions in the fourth

quarter of 2006.

For the full year of 2006, investment banking revenues increased 65% to

$124.1 million from 2005, our best year in investment banking since 2000.

This growth was driven by equity financing which grew 114% to $93.1 million

compared to $43.4 million in 2005. In 2006 and 2005, we book- and lead-

managed approximately 30% of our underwriting transactions – we completed

18 book- and lead-managed transactions in 2006 compared to 12 in 2005.

Gaining momentum in the second half of 2006, M&A generated $23.4 million in

revenues compared to $7.6 million in the first half of 2006. We completed

ten M&A transactions in the second half of 2006 compared to five in the

first half. Also contributing to investment banking growth, private

placement revenues increased to $7.8 million in the second half of 2006

compared to $3.9 million in the first half of 2006. We completed seven

private placement transactions in the second half of 2006 compared to four

in first half of 2006.

Notable fourth quarter transactions included a sole book-managed initial

public offering for Netlist, Inc., a joint book-managed initial public

offering for Double-Take Software, Inc. and a co-lead-managed initial

public offering for RRSat Global Communications Network. Additionally, we

were the sole book-manager for two follow-on offerings, Occam Networks,

Inc. and Cray Inc. Other notable fourth quarter transactions included

advising USinternetworking, Inc. in its sale to AT&T Inc. for approximately

$300 million, Broadwing Corp. in its sale to Level 3 Communications, Inc.

for approximately $1.4 billion, and Nomura Holdings Inc. in its $1.2

billion acquisition of Instinet Inc. Finally, we were the sole placement

agent for a private placement offering for HomeAway and completed a

preferred stock PIPE offering for Vertical Communications.

“We experienced significant momentum in our M&A and private placement

revenues in the fourth quarter and second half of 2006 and, looking

forward, we are optimistic that these trends will continue into 2007,” said

Thomas Weisel, CEO and Chairman. “We entered 2007 with seven initial

public offerings and two follow-on offerings in registration and five

announced M&A transactions.”

— Asset Management. Asset management investment gains were our

strongest since the fourth quarter of 2004, with private equity gains of

$5.9 million compared to $2.4 million in the fourth quarter of 2005. In

total, asset management revenues improved 12% to $9.3 million in the fourth

quarter of 2006 compared to the fourth quarter of 2005, after excluding

management fees earned in 2005 from TWCP, which we no longer receive, as

discussed below.

— Brokerage. Brokerage revenues were $29.0 million in the fourth

quarter. Compared to the third quarter of 2006, both equity volumes and

commissions per share increased but were offset by a higher loss ratio and

lower convertible trading revenues.

— Discovery Research. We launched our new small-cap research product

from our office in Mumbai, India in the fourth quarter. Discovery Research

focuses on growth companies with an average market cap of $500 million and

with coverage by two or fewer sell-side analysts. Currently, ten

publishing Discovery Research analysts cover 90 companies. We are

expecting 15 publishing analysts covering 250 companies by the end of 2007.

— Newly Elected Directors. On February 14, 2007, the Board of Directors

elected Matthew Barger and Michael Brown to serve as additional members of

the Board of Directors. Mr. Barger is the former Managing General Partner

of Hellman & Freidman LLC, a private equity firm with offices in San

Francisco, New York and London, and is currently a Senior Advisor to

Hellman & Freidman and a director or advisory board member of several

private firms and charitable organizations. Mr. Brown was formerly the

Chief Financial Officer of Microsoft Corporation and has also previously

served as a Governor of the National Association of Securities Dealers and

the Chairman of the Nasdaq Stock Market Board of Directors. Mr. Brown

currently serves as director of several public and private companies.

“We are pleased to announce the addition of these two distinguished

business leaders to our Board of Directors,” stated Thomas Weisel, CEO and

Chairman. “Mike Brown brings a wealth of technology and securities

industry experience both from his past involvement with Microsoft and in

the governance of Nasdaq and the NASD as well as his experience as an

investor in quantitative and alternative trading businesses. Matt Barger

has extensive experience in the private equity business with particular

experience in investing in asset management firms and we welcome his

expertise and perspective as we work to expand our asset management

business.”

Revenues

Investment Banking

Fourth Quarter, 2006

Investment banking revenues increased 33% to $37.3 million compared to the

fourth quarter of 2005. We closed 28 transactions in the fourth quarter of

2006 compared to 18 in the fourth quarter of 2005.

Capital raising revenues increased 51% to $22.1 million compared to the

fourth quarter of 2005. We completed 23 capital raising transactions

compared to 13 in the fourth quarter of 2005. Within capital raising

revenues, private placement revenues increased to $3.0 million in the

fourth quarter from $0.8 million in the fourth quarter of 2005.

Strategic advisory revenues increased 14% to $15.2 million compared to the

fourth quarter of 2005. We completed five strategic advisory transactions

in the fourth quarter of 2006 and in the year-ago quarter.

Full Year, 2006

Investment banking revenues increased 65% compared to 2005 to $124.1

million. We completed 87 transactions compared to 63 in 2005 and our

average revenue per transaction increased to $1.4 million compared to $1.2

million in 2005. The increase in the average revenue per transaction was

attributable to an increase in the average size and an increase in our

share of the total revenue of the capital raising transactions we

participated in.

Capital raising revenues increased 114% to $93.1 million compared to 2005.

We completed 72 capital raising transactions compared to 48 in 2005.

Within capital raising revenues, private placement revenues increased to

$11.7 million in 2006 compared to $6.3 million in 2005. We completed 11

private placement transactions in 2006 compared to seven in 2005.

Strategic advisory revenues declined 3% to $31.0 million compared to 2005.

We completed 15 strategic advisory transactions in both 2006 and 2005.

Investment banking revenues are typically recognized at the completion of

each transaction. As a result, our investment banking revenues have and

likely will continue to vary significantly between periods. Our investment

banking engagements typically relate to only one potential transaction and

do not provide us with long-term contracted sources of revenue.

Brokerage

Fourth Quarter, 2006

Brokerage revenues declined 15% compared to the fourth quarter of 2005 to

$29.0 million. The decrease from the fourth quarter of 2005 was due to

decreases in trading volumes and commissions per share in our equity

trading and in our convertible trading revenues partially offset by

increases in assets under management and related fees in our private client

services business.

Full Year, 2006

Brokerage revenues decreased 11% to $123.8 million compared to 2005. The

decrease was due to our average daily trading volume and average commission

per share in equity securities trading declining from 2005 to 2006,

partially offset by increases in our retention rate and assets under

management and related fees in our private client services business and

convertible trading revenues.

Asset Management

Fourth Quarter, 2006

Asset management revenues increased 12% to $9.3 million compared to the

fourth quarter of 2005, after excluding management fees earned in the

fourth quarter of 2005 from TWCP, which we no longer receive. The

increases were mainly due to $5.9 million of investment gains from private

equity compared to $2.4 million in the fourth quarter of 2005. Management

fees were $3.0 million in the fourth quarter of 2006.

Including management fees from TWCP in the fourth quarter of 2005, total

asset management revenue decreased 15% compared to the fourth quarter of

2005 (asset management revenue for the fourth quarter of 2005 was $10.9

million). The management of TWCP was transferred to a third party in the

fourth quarter of 2005 and following that transfer we no longer receive

management fees from TWCP. Management fees received from TWCP in the

fourth quarter of 2005 were $2.6 million. We continue to receive

investment gains and losses from our capital account with TWCP.

Full Year, 2006

Asset management revenues for 2006 were $25.8 million, an increase of 22%

over the comparable period in 2005, after excluding management fees earned

in 2005 from TWCP, which we no longer receive, as described above. The

increases were mainly attributable to $12.4 million in investment gains

from private equity compared to $4.4 million in 2005. Management fees were

$12.4 million in 2006.

Including management fees from TWCP in 2005, total asset management revenue

decreased 30% in 2006 compared to 2005 (asset management revenue for 2005

was $36.7 million). Management fees received from TWCP in 2005 were $15.6

million.

Expenses

Compensation and Benefits

Fourth Quarter, 2006

Compensation and benefits expense increased 11% in the fourth quarter of

2006 to $41.2 million compared to the same period in 2005. Compensation

and benefits expense in the fourth quarter included $1.9 million of

non-cash compensation expense relating to equity awards made in connection

with our initial public offering.

As a percentage of net revenues (excluding investment gains and losses

attributable to investments in partnerships and other securities),

compensation and benefit expense (excluding expense relating to equity

awards made in connection with our initial public offering) was 56% for the

fourth quarter.

Full Year, 2006

Compensation and benefits expense decreased 1% in 2006 to $152.2 million

compared to 2005. Compensation and benefits expense included $7.0 million

of non-cash compensation expense relating to equity awards made in

connection with our initial public offering.

As a percentage of net revenues (excluding investment gains and losses

attributable to investments in partnerships and other securities),

compensation and benefit expense (excluding expense relating to equity

awards made in connection with our initial public offering) was 55% for

2006.

In connection with our initial public offering, we indicated that beginning

in 2006 we intend to maintain our aggregate compensation and benefits

expense (excluding expense relating to equity awards made in connection

with our initial public offering), within the range of 55% to 58% of our

net revenues (excluding investment gains and losses attributable to

investments in partnerships and other securities), although we retain the

ability to change this rate in the future. Our accruals for compensation

and benefits expense in 2006 were consistent with this policy.

Non-compensation

Fourth Quarter, 2006

Non-compensation expense decreased 12% to $25.6 million in the fourth

quarter of 2006 compared to the fourth quarter of 2005. The decrease was

primarily due to recording costs related to transferring the management of

our private equity fund, TWCP, to a third party in the fourth quarter of

2005. The decrease was partially offset by additional expenses related to

increased business activity and additional professional services expenses.

Full Year, 2006

Non-compensation expense decreased 4% to $98.0 million in 2006 compared to

2005. The decrease was primarily due to recording costs associated with

TWCP, described above, in 2005.

Provision for Taxes, Tax Benefit

Fourth Quarter, 2006

Our tax expense for the fourth quarter of 2006 was $1.0 million, which

represents a 10% tax rate and is significantly below our composite federal

and state tax rate of 42%. The 32% rate benefit resulted primarily from a

$3.0 million downward adjustment to the valuation allowance we previously

recorded at the time of our conversion from a limited liability company to

a corporation. The $3.0 million downward adjustment was related to capital

gains in investment partnerships and other securities recorded in the

fourth quarter of 2006.

Full Year, 2006

Our tax benefit for the full year of 2006 was $8.8 million, which

represents a negative tax rate of 34%. The negative tax rate, as compared

to our composite federal and state tax rate of 42%, is primarily the result

of tax benefits from our conversion from a limited liability company to a

corporation in the first quarter of 2006. The conversion resulted in a net

$13.8 million tax benefit. Also, additional tax benefits resulted from

subsequent downward adjustments totaling $4.1 million to the valuation

allowance established at the conversion date. The $4.1 million downward

adjustments primarily related to capital gains recorded in 2006 in

investment partnerships and other securities. In 2006, our effective tax

rate, after excluding first quarter one-time events but including the

effect of downward adjustments to the valuation allowance, was 25%.

Non-GAAP Financial Measures

This press release includes non-GAAP financial measures. We have reported

in this press release our net income for the fourth quarter of 2006 on a

non-GAAP basis by excluding the $1.1 million after-tax non-cash expense

incurred in the fourth quarter of 2006 associated with the initial grant of

restricted stock units made in connection with our initial public offering.

We have also reported in this press release our net income for full year

2006 on a non-GAAP basis by (i) excluding the effect of recognizing during

the first quarter of 2006 a $13.8 million one-time net deferred tax benefit

resulting from our conversion to corporation from a limited liability

company (but not excluding subsequent adjustments to the related valuation

allowance), (ii) excluding the $4.1 million after-tax non-cash expense

incurred in 2006 associated with the initial grant of restricted stock

units made in connection with our initial public offering and (iii)

including additional income tax expense of $1.5 million for the first

quarter of 2006, because we estimate that had we converted to a corporation

on January 1, 2006 we would have incurred additional income tax expense for

the period from January 1, 2006 to February 7, 2006 equal to our net income

for the period from January 1, 2006 through February 7, 2006 of $3.6

million multiplied by the applicable federal and state tax rate for the

first quarter of 2006 of 42%.

We have also reported in this press release our basic and diluted earnings

per share for the fourth quarter of 2006 on a non-GAAP basis by:

— using $9.8 million as the numerator of our non-GAAP basic and diluted

earnings per share calculations, which amount is derived by beginning with

net income attributable to common shareholders of $8.7 million and

adjusting to exclude the after-tax non-cash expense associated with our

initial grant of restricted stock units of $1.1 million; and

— using as the denominator of our non-GAAP basic and diluted earnings

per share calculations the basic and diluted weighted average shares used,

respectively, as the denominator of our GAAP basic and diluted earnings per

share calculations.

We have also reported in this press release our basic and diluted earnings

per share for 2006 on a non-GAAP basis by:

— using $23.7 million as the numerator of the non-GAAP earnings per

share calculation, which amount is derived by beginning with net income

available to common stockholders of $33.3 million for full year 2006 and

adjusting to (i) exclude the effect of the $13.8 million one-time net

deferred tax benefit recognized in the first quarter of 2006 (but not

excluding subsequent adjustments to the related valuation allowance), (ii)

include the additional income tax expense of $1.5 million with respect to

the period from January 1, 2006 through February 7, 2006, (iii) exclude the

after-tax non-cash expense associated with our initial grant of restricted

stock units of $4.1 million for full year 2006 and (iv) exclude $1.6

million of preferred dividends and accretion with respect to the period

from January 1, 2006 through February 7, 2006; and

— increasing the weighted average shares used as the denominator of the

non-GAAP earnings per share calculation by 498,893, which is the amount by

which weighted average shares would have increased had the 4,914,440 shares

we issued in our initial public offering been outstanding for all of 2006.

Although we expect to grant restricted stock units and other share-based

compensation in the future, we do not expect to make any such substantial

grants outside of our regular compensation and hiring process, as we did

when we granted restricted stock units in connection with our initial

public offering. Also, in the future we do not expect that a similar

conversion-related deferred tax benefit will arise and we expect to be

subject to state and federal income tax, in each case, because we do not

expect to change our corporate form again.

Our management has utilized a non-GAAP calculation of net income and

non-GAAP calculations of basic and diluted earnings per share that are

adjusted in the manner described above as an additional device to aid in

understanding and analyzing our financial results in the fourth quarter and

full year 2006. Our management believes that these non-GAAP measures will

allow for a better evaluation of the operating performance of our business

and facilitate meaningful comparison of our results in the current period

to those in prior periods and future periods that did not and likely will

not include the adjusted items. Our reference to these measures should not,

however, be considered as a substitute for results that are presented in a

manner consistent with GAAP. These non-GAAP measures are provided to

enhance investors’ overall understanding of our current financial

performance and our prospects for the future. Specifically, our management

believes that the non-GAAP measures provide useful information to both

management and investors by excluding certain items that may not be

indicative of our core operating results and business outlook.

A limitation of utilizing these non-GAAP measures of net income and basic

and diluted earnings per share is that the GAAP accounting effects of these

events do in fact reflect the underlying financial results of our business

and these effects should not be ignored in evaluating and analyzing our

financial results. Therefore, management believes that both our GAAP

measures of net income and basic and diluted earnings per share and these

non-GAAP measures of our financial performance should be considered

together.

A reconciliation of our fourth quarter and full year 2006 GAAP net income

to our fourth quarter and full year 2006 non-GAAP net income is set forth

below.

For Three Months For Twelve Months

Ended Ended

December 31, 2006 December 31, 2006

(In millions)

Net income $ 8.7 $ 34.9

Exclusion of the effect of

recording net deferred tax benefit — (13.8)

Inclusion of additional income tax

expense — (1.5)

Exclusion of the after-tax non-cash

expense associated with initial grant

of restricted stock units 1.1 4.1

————— ————–

Non-GAAP net income excluding the

effect of recording net deferred tax

benefit, including additional income

tax expense and excluding after-tax

non-cash expense associated with

initial grant of restricted stock

units $ 9.8 $ 23.7

=============== ==============

We calculate earnings per share in accordance with FASB Statement No. 128,

Earnings per Share. Basic earnings per share is calculated by dividing net

income attributable to common shareholders by the weighted average number

of common shares outstanding for the period. Common shares outstanding for

the fourth quarter of 2006 and for full year 2006 are comprised of the

weighted average of (i) the 17,347,270 shares issued in conjunction with

our reorganization from a limited liability company to a corporation, as if

such issuance had occurred on January 1, 2006, (ii) the 4,914,440 shares

issued in our initial public offering on February 7, 2006 (iii) the

3,581,902 shares issued in our follow-on offering on May 23, 2006 and (iv)

the following acquisitions of shares: 12,533 shares on August 25, 2006,

74,400 shares on October 17, 2006 and 2,512 shares on December 6, 2006.

Diluted earnings per share includes the determinants of basic earnings per

share plus all dilutive potential common shares that were outstanding

during the period. We use the treasury stock method to reflect the

potential dilutive effect of outstanding unvested restricted stock units,

an outstanding warrant to purchase common stock and outstanding unexercised

stock options. With respect to the fourth quarter and full year 2006,

outstanding unexercised stock options were anti-dilutive and not considered

in the determination of diluted earnings per share.

The following table sets forth our GAAP basic and diluted weighted average

shares outstanding and our GAAP basic and diluted earnings per share for

the fourth quarter and full year 2006, as well as our non-GAAP basic and

diluted weighted average shares outstanding and non-GAAP earnings per share

for the fourth quarter and full year 2006, in each case after applying the

adjustments described above:

For Three For Twelve

Months Ended Months Ended

December 31, December 31,

2006 2006

Weighted average shares used in

computation of earnings per share:

Basic (in thousands) 25,770 23,980

Diluted (in thousands) 26,528 24,945

Earnings per share:

Basic $ 0.34 $ 1.39

Diluted $ 0.33 $ 1.34

Non-GAAP adjusted weighted average shares

used in computation of non-GAAP earnings

per share:

Basic (in thousands) 25,770 24,479

Diluted (in thousands) 26,528 25,444

Non-GAAP earnings per share excluding the

effect of recording net deferred tax

benefit, including additional income tax

expense, excluding after-tax non-cash

expense associated with initial grant of

restricted stock units and excluding

preferred dividends and accretion from

January 1, 2006 through February 7, 2006:

Basic $ 0.38 $ 0.97

Diluted $ 0.37 $ 0.93

Further information regarding these non-GAAP financial measures will be

included in our Annual Report on Form 10-K for the full year ended December

31, 2006, and has been included for previous quarters in our Quarterly

Reports on Form 10-Q for the three month periods ended March 31, June 30

and September 30, 2006. Our Annual Reports on Form 10-K and our Quarterly

Reports on Form 10-Q are available to the public from the SEC’s internet

site at http://www.sec.gov and from our public internet site at

http://www.tweisel.com . You may also read and copy any Annual Report on

Form 10-K or Quarterly Report on Form 10-Q that we file with the SEC at the

SEC’s public reference room located at 100 F Street, N.E., Washington, D.C.

20549, U.S.A. Please call the SEC at 1-800-SEC-0330 for further information

on the public reference room.

2007 Annual Meeting of Shareholders

Thomas Weisel Partners Group, Inc. will hold its 2007 Annual Meeting of

Shareholders on Wednesday, May 23, 2007.

About Thomas Weisel Partners Group, Inc.

We are an investment bank, founded in 1998, focused principally on the

growth sectors of the economy. Our business is managed as a single

operating segment and we generate revenues from three principal sources:

investment banking, brokerage and asset management. Our investment banking

group is comprised of two disciplines: corporate finance and strategic

advisory. Our brokerage group provides equity and convertible debt

securities sales and trading services to institutional investors, and

offers brokerage, advisory and cash management services to high-net-worth

individuals and corporate clients.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements, which are subject

to risks, uncertainties and assumptions about us. In some cases, you can

identify these statements by forward-looking words such as “may,” “might,”

“will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,”

“predict,” “optimistic,” “potential,” “future” or “continue,” the negative

of these terms and other comparable terminology. These statements are only

predictions based on our current expectations about future events. There

are important factors that could cause our actual results, level of

activity, performance or achievements or other events or circumstances to

differ materially from the results, level of activity, performance or

achievements expressed or implied by these forward-looking statements.

These factors include, but are not limited to, those discussed in Item 1A –

“Risk Factors” in our Annual Report on Form 10-K for the year ended

December 31, 2005 and in our Quarterly Reports on Form 10-Q filed with the

SEC thereafter. We do not assume responsibility for the accuracy or

completeness of any forward-looking statement and you should not rely on

forward-looking statements as predictions of future events. We are under

no duty to update any of these forward-looking statements to conform them

to actual results or revised expectations.

Quarterly Earnings Conference Call

Thomas Weisel Partners Group, Inc. will host its fourth quarter and full

year 2006 conference call on Wednesday, February 14, 2007 at 5:00 p.m. EST

(2:00 p.m. PST). The conference call may include forward-looking

statements, including guidance as to future results.

All interested parties are invited to listen to Thomas Weisel Partners’

Chairman and Chief Executive Officer, Thomas W. Weisel, and Chief

Administrative Officer, David Baylor, by dialing 800/289-0529 (domestic) or

913/981-5523 (international). The confirmation code for both the domestic

and international lines is: 6047001.

A live web cast of the call, as well as the company’s results, will be

available through the investor relations/webcasts section of our website,

www.tweisel.com .

To listen to the live call, please go to the website at least 15 minutes

early to register, download, and install any necessary audio software.

For those who cannot listen to the live broadcast, a replay will be

available on this site one hour after the call through February 28, 2007.

THOMAS WEISEL PARTNERS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

Three Months Ended Twelve Months Ended

December 31, December 31,

——————– ——————–

2006 2005 2006 2005

——— ——— ——— ———

Revenues:

Brokerage $ 28,964 $ 34,242 $ 123,809 $ 138,497

Investment banking 37,258 27,982 124,136 75,300

Asset management 9,293 10,906 25,752 36,693

Interest income 4,054 2,071 13,525 5,510

——— ——— ——— ———

Total revenues 79,569 75,201 287,222 256,000

Interest expense (3,083) (1,547) (10,905) (5,114)

——— ——— ——— ———

Net revenues 76,486 73,654 276,317 250,886

——— ——— ——— ———

Expenses excluding interest:

Compensation and benefits 41,212 37,074 152,195 154,163

Brokerage execution,

clearance and account

administration 5,096 6,621 22,621 26,873

Communications and data

processing 4,125 4,255 16,650 17,457

Depreciation and amortization 1,951 2,188 8,549 9,146

Marketing and promotion 3,036 2,071 11,545 11,898

Occupancy and equipment 4,139 4,805 17,926 15,884

Other expense 7,224 9,159 20,706 20,336

——— ——— ——— ———

Total expenses excluding

interest 66,783 66,173 250,192 255,757

——— ——— ——— ———

Income (loss) before taxes 9,703 7,481 26,125 (4,871)

Provision for taxes (tax

benefit) 963 382 (8,796) 2,187

——— ——— ——— ———

Net income (loss) 8,740 7,099 34,921 (7,058)

——— ——— ——— ———

Preferred dividends and

accretion:

Class D redeemable

convertible shares — (1,750) (710) (7,000)

Class D-1 redeemable

convertible shares — (938) (380) (3,750)

Accretion of Class C

redeemable preference stock — (1,423) (518) (4,904)

——— ——— ——— ———

Net income (loss) attributable

to common shareholders and to

class A, B and C

shareholders $ 8,740 $ 2,988 $ 33,313 $ (22,712)

========= ========= ========= =========

Earnings per share:

Basic earnings per share $ 0.34 $ 1.39

Diluted earnings per share $ 0.33 $ 1.34

Weighted average shares used in

computation of per share data:

Basic weighted average shares

outstanding 25,770 23,980

Diluted weighted average

shares outstanding 26,528 24,945

THOMAS WEISEL PARTNERS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED QUARTERLY STATEMENT OF OPERATIONS

(Unaudited)

Three Months Ended

————————————————

December September March December

31, 30, June 30, 31, 31,

2006 2006 2006 2006 2005

——– ——– ——– ——– ——–

(In thousands)

REVENUES:

Brokerage $ 28,964 $ 30,682 $ 29,776 $ 34,387 $ 34,242

Investment banking 37,258 22,228 28,156 36,494 27,982

Asset management 9,293 4,123 5,383 6,953 10,906

Interest income 4,054 4,197 3,062 2,212 2,071

——– ——– ——– ——– ——–

Total revenues 79,569 61,230 66,377 80,046 75,201

Interest expense (3,083) (3,110) (2,643) (2,069) (1,547)

——– ——– ——– ——– ——–

Net revenues 76,486 58,120 63,734 77,977 73,654

——– ——– ——– ——– ——–

EXPENSES EXCLUDING

INTEREST:

Compensation and

benefits 41,212 33,648 35,398 41,937 37,074

Brokerage execution,

clearance and account

administration 5,096 4,441 6,388 6,696 6,621

Communications and data

processing 4,125 3,958 4,218 4,349 4,255

Depreciation and

amortization 1,951 2,117 2,127 2,354 2,188

Marketing and promotion 3,036 2,817 2,759 2,933 2,071

Occupancy and equipment 4,139 5,524 3,603 4,660 4,805

Other expense 7,224 4,182 4,730 4,570 9,159

——– ——– ——– ——– ——–

Total expenses

excluding interest 66,783 56,687 59,223 67,499 66,173

——– ——– ——– ——– ——–

INCOME (LOSS) BEFORE TAX 9,703 1,433 4,511 10,478 7,481

Provision for taxes (tax

benefit) 963 (119) 1,191 (10,831) 382

——– ——– ——– ——– ——–

NET INCOME (LOSS) 8,740 1,552 3,320 21,309 7,099

——– ——– ——– ——– ——–

Less: Preferred Dividends

and Accretion — — — (1,608) (4,111)

——– ——– ——– ——– ——–

NET INCOME (LOSS)

ATTRIBUTABLE TO COMMON

SHAREHOLDERS AND TO

CLASS A, B AND C

SHAREHOLDERS $ 8,740 $ 1,552 $ 3,320 $ 19,701 $ 2,988

======== ======== ======== ======== ========

Investor Relations Contact:

Deborah Lightfoot

415-364-2500

Email Contact

Media Contact:

Amanda Gaines-Cooke

415-364-2500

Email Contact