Attached files
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| 8-K - 8-K - INVESTMENT TECHNOLOGY GROUP, INC. | a12-11265_18k.htm |
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
ITG Reports First Quarter 2012 Results
Strong International Performance Offsets Weak U.S. Volume Environment
NEW YORK, May 3, 2012 — ITG (NYSE: ITG), an independent execution and research broker, today reported results for the quarter ended March 31, 2012.
First quarter 2012 highlights included:
· GAAP net income of $5.5 million, or $0.14 per diluted share, compared to GAAP net income of $9.5 million, or $0.23 per diluted share in the first quarter of 2011. On a sequential basis, GAAP net income for the first quarter improved over the GAAP net loss of $3.7 million, or $0.09 per diluted share, and over the $2.7 million of adjusted net income, or $0.07 per diluted share during the fourth quarter of 2011.
· Revenues of $136.4 million, compared to $150.1 million in the first quarter of 2011 and $129.9 million in the fourth quarter of 2011.
· Expenses of $127.9 million compared to expenses of $132.9 million in the first quarter of 2011 as well as expenses of $136.3 million and adjusted expenses of $125.2 million in the fourth quarter of 2011.
· Average daily trading volume in the U.S. of 190 million shares, down 1% from the first quarter of 2011 and up 4% from the fourth quarter of 2011. POSIT® average daily U.S. volume was 96.1 million shares, up 15% from the first quarter of 2011 and up 11% from the fourth quarter of 2011.
· The repurchase of 820,000 shares of common stock under ITG’s authorized share repurchase program for a total of $9.1 million. Repurchases since the first
quarter of 2010 have totaled $98.3 million for 6.9 million shares, resulting in a decrease in shares outstanding, net of new issuances, of more than 11%.
Low levels of institutional trading activity continued to pressure the results of ITG’s U.S. operations during the first quarter of 2012. Sell-side client volume represented 48% of
total U.S. volumes, up from 44% in the fourth quarter of 2011. Revenues from U.S. operations were $84.6 million in the first quarter of 2012 compared to $100.5 million in the first quarter of 2011 and $83.1 million in the fourth quarter of 2011. ITG’s U.S. operations posted net income of $1.7 million in the first quarter of 2012 compared to net income of $7.8 million in the first quarter of 2011 as well as a GAAP net loss of $6.4 million and adjusted net income of $0.3 million in the fourth quarter of 2011.
ITG’s International revenues were $51.8 million in the first quarter of 2012 compared to $49.6 million in the first quarter of 2011 and $46.8 million in the fourth quarter of 2011. ITG’s International operations posted net income of $3.7 million compared to net income of $1.7 million in the first quarter of 2011 as well as GAAP net income of $2.7 million and adjusted net income of $2.4 million in the fourth quarter of 2011.
“While our strong international performance during the first quarter reflects the investments we’ve made in building out our global platform, the U.S. trading environment remains challenging,” said Bob Gasser, ITG’s Chief Executive Officer and President. “We cannot control the overall level of institutional trading activity but we continue to pursue selected growth opportunities while maintaining a focus on expense management and returning cash to stockholders.”
The discussion above includes adjusted expenses and adjusted net income and related per share amounts, which are non-GAAP financial measures that are described in the attached tables along with a reconciliation of these non-GAAP financial measures to GAAP results.
Conference Call
ITG has scheduled a conference call today at 11:00 am ET to discuss first quarter results. Those wishing to listen to the call should dial 1-866-356-4123 (1-617-597-5393 outside the US) and enter the passcode 63143062 at least 10 minutes prior to the start of the call to ensure connection. The webcast and accompanying slideshow presentation can be downloaded from ITG’s web site at www.itg.com. For those unable to listen to the live broadcast of the call, a replay will be available for one week by dialing 1-888-286-8010 (1-617-801-6888 outside the US) and entering the passcode 88631347. The replay will be available starting approximately two hours after the completion of the conference call.
ABOUT ITG
ITG is an independent research and execution broker that partners with global portfolio managers and traders to provide unique data-driven insights throughout the investment process. From investment decision through settlement, ITG helps clients understand market trends, improve performance, mitigate risk and navigate increasingly complex markets. ITG is headquartered in New York with offices in North America, Europe, and Asia Pacific. For more information, please visit www.itg.com.
In addition to historical information, this press release may contain “forward-looking” statements that reflect management’s expectations for the future. A variety of important factors could cause results to differ materially from such statements. Certain of these factors are noted throughout ITG’s 2011 Annual Report on Form 10-K, and its Form 10-Qs and include, but are not limited to, general economic, business, credit and financial market conditions, internationally and nationally, financial market volatility, fluctuations in market trading volumes, effects of inflation, adverse changes or volatility in interest rates, fluctuations in foreign exchange rates, evolving industry regulations, changes in tax policy or accounting rules, the actions of both current and potential new competitors, changes in commission pricing, potential impairment charges related to goodwill and other long-lived assets, the volatility of our stock price, rapid changes in technology, errors or malfunctions in our systems or technology, cash flows into or redemptions from equity mutual funds, ability to meet liquidity requirements related to the clearing of our customers’ trades, customer trading patterns, the success of our products and service offerings, our ability to continue to innovate and meet the demands of our customers for new or enhanced products, our ability to successfully integrate acquired companies, our ability to attract and retain talented employees and our ability to achieve cost savings from our cost reduction plans. The forward-looking statements included herein represent ITG’s views as of the date of this release. ITG undertakes no obligation to revise or update publicly any forward-looking statement for any reason unless required by law.
ITG Media/Investor Contact:
J.T. Farley
1-212-444-6259
corpcomm@itg.com
INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income (unaudited)
(In thousands, except per share amounts)
|
|
|
Three Months Ended |
| ||||
|
|
|
2012 |
|
2011 |
| ||
|
Revenues: |
|
|
|
|
| ||
|
Commissions and fees |
|
$ |
105,264 |
|
$ |
118,676 |
|
|
Recurring |
|
27,432 |
|
27,221 |
| ||
|
Other |
|
3,679 |
|
4,181 |
| ||
|
Total revenues |
|
136,375 |
|
150,078 |
| ||
|
|
|
|
|
|
| ||
|
Expenses: |
|
|
|
|
| ||
|
Compensation and employee benefits |
|
52,587 |
|
57,478 |
| ||
|
Transaction processing |
|
22,223 |
|
23,026 |
| ||
|
Occupancy and equipment |
|
14,649 |
|
14,942 |
| ||
|
Telecommunications and data processing services |
|
15,067 |
|
15,071 |
| ||
|
Other general and administrative |
|
22,677 |
|
22,160 |
| ||
|
Interest expense |
|
678 |
|
270 |
| ||
|
Total expenses |
|
127,881 |
|
132,947 |
| ||
|
Income before income tax expense |
|
8,494 |
|
17,131 |
| ||
|
Income tax expense |
|
3,036 |
|
7,582 |
| ||
|
Net income |
|
$ |
5,458 |
|
$ |
9,549 |
|
|
|
|
|
|
|
| ||
|
Earnings per share: |
|
|
|
|
| ||
|
Basic |
|
$ |
0.14 |
|
$ |
0.23 |
|
|
Diluted |
|
$ |
0.14 |
|
$ |
0.23 |
|
|
|
|
|
|
|
| ||
|
Basic weighted average number of common shares outstanding |
|
39,112 |
|
41,435 |
| ||
|
Diluted weighted average number of common shares outstanding |
|
40,303 |
|
42,180 |
| ||
INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Financial Condition
(In thousands, except share amounts)
|
|
|
March 31, |
|
December 31, |
| ||
|
|
|
(unaudited) |
|
|
| ||
|
Assets |
|
|
|
|
| ||
|
Cash and cash equivalents |
|
$ |
223,032 |
|
$ |
284,188 |
|
|
Cash restricted or segregated under regulations and other |
|
67,158 |
|
71,496 |
| ||
|
Deposits with clearing organizations |
|
30,137 |
|
25,538 |
| ||
|
Securities owned, at fair value |
|
6,385 |
|
5,277 |
| ||
|
Receivables from brokers, dealers and clearing organizations |
|
1,575,268 |
|
871,315 |
| ||
|
Receivables from customers |
|
1,465,403 |
|
472,509 |
| ||
|
Premises and equipment, net |
|
42,661 |
|
43,023 |
| ||
|
Capitalized software, net |
|
49,793 |
|
51,258 |
| ||
|
Goodwill |
|
274,283 |
|
274,292 |
| ||
|
Other intangibles, net |
|
38,467 |
|
39,594 |
| ||
|
Income taxes receivable |
|
6,322 |
|
6,838 |
| ||
|
Deferred taxes |
|
7,095 |
|
16,493 |
| ||
|
Other assets |
|
22,191 |
|
16,248 |
| ||
|
Total assets |
|
$ |
3,808,195 |
|
$ |
2,178,069 |
|
|
|
|
|
|
|
| ||
|
Liabilities and Stockholders’ Equity |
|
|
|
|
| ||
|
Liabilities: |
|
|
|
|
| ||
|
Accounts payable and accrued expenses |
|
$ |
143,086 |
|
$ |
181,224 |
|
|
Short-term bank loans |
|
86,536 |
|
1,606 |
| ||
|
Payables to brokers, dealers and clearing organizations |
|
1,893,413 |
|
1,079,773 |
| ||
|
Payables to customers |
|
989,646 |
|
207,738 |
| ||
|
Securities sold, not yet purchased, at fair value |
|
1,507 |
|
438 |
| ||
|
Income taxes payable |
|
5,029 |
|
11,460 |
| ||
|
Deferred taxes |
|
715 |
|
719 |
| ||
|
Term debt |
|
22,259 |
|
23,997 |
| ||
|
Total liabilities |
|
3,142,191 |
|
1,506,955 |
| ||
|
|
|
|
|
|
| ||
|
Commitments and contingencies |
|
|
|
|
| ||
|
|
|
|
|
|
| ||
|
Stockholders’ Equity: |
|
|
|
|
| ||
|
Preferred stock, $0.01 par value; 1,000,000 shares authorized; no shares issued or outstanding |
|
— |
|
— |
| ||
|
Common stock, $0.01 par value; 100,000,000 shares authorized; 51,961,710 and 51,899,229 shares issued at Mar. 31, 2012 and Dec. 31, 2011, respectively |
|
520 |
|
519 |
| ||
|
Additional paid-in capital |
|
237,357 |
|
249,469 |
| ||
|
Retained earnings |
|
658,802 |
|
653,344 |
| ||
|
Common stock held in treasury, at cost; 13,159,963 and 10,524,757 shares at Mar. 31, 2012 and Dec. 31, 2011, respectively |
|
(241,717 |
) |
(240,559 |
) | ||
|
Accumulated other comprehensive income (net of tax) |
|
11,042 |
|
8,341 |
| ||
|
Total stockholders’ equity |
|
666,004 |
|
671,114 |
| ||
|
Total liabilities and stockholders’ equity |
|
$ |
3,808,195 |
|
$ |
2,178,069 |
|
INVESTMENT TECHNOLOGY GROUP, INC.
Reconciliation of US GAAP Results to Adjusted Results
In evaluating ITG’s financial performance, management reviews results from operations which exclude non-operating or one-time charges. Adjusted expenses and adjusted net income and related per share amounts are non-GAAP performance measures, but ITG believes they are useful to assist investors in
gaining an understanding of the trends and operating results for its core businesses. These measures should be viewed in addition to, and not in lieu of, ITG’s reported results under GAAP.
The following is a reconciliation of GAAP results to adjusted results for the periods presented (in thousands except per share amounts):
|
|
|
Three Months Ended December 31, 2011 |
| |||||||
|
|
|
Consolidated |
|
U.S. |
|
International |
| |||
|
|
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
| |||
|
Total revenues |
|
$ |
129,923 |
|
$ |
83,119 |
|
$ |
46,804 |
|
|
|
|
|
|
|
|
|
| |||
|
Total expenses |
|
136,281 |
|
94,227 |
|
42,054 |
| |||
|
Less: |
|
|
|
|
|
|
| |||
|
Goodwill and other asset impairment (1) |
|
(4,282 |
) |
(4,282 |
) |
— |
| |||
|
Restructuring charges (2) |
|
(6,754 |
) |
(7,027 |
) |
273 |
| |||
|
Adjusted operating expenses |
|
125,245 |
|
82,918 |
|
42,327 |
| |||
|
|
|
|
|
|
|
|
| |||
|
(Loss) income before income tax (benefit) expense |
|
(6,358 |
) |
(11,108 |
) |
4,750 |
| |||
|
Effect of adjustments |
|
11,036 |
|
11,309 |
|
(273 |
) | |||
|
Adjusted pre-tax operating income |
|
4,678 |
|
201 |
|
4,477 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Income tax (benefit) expense |
|
(2,686 |
) |
(4,749 |
) |
2,063 |
| |||
|
Tax effect of adjustments |
|
4,636 |
|
4,636 |
|
— |
| |||
|
Adjusted operating income tax expense |
|
1,950 |
|
(113 |
) |
2,063 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Net (loss) income |
|
(3,672 |
) |
(6,359 |
) |
2,687 |
| |||
|
Net effect of adjustments |
|
6,400 |
|
6,673 |
|
(273 |
) | |||
|
Adjusted operating net income |
|
$ |
2,728 |
|
$ |
314 |
|
$ |
2,414 |
|
|
|
|
|
|
|
|
|
| |||
|
Diluted (loss) earnings per share |
|
$ |
(0.09 |
) |
$ |
(0.16 |
) |
$ |
0.07 |
|
|
Net effect of adjustments |
|
0.16 |
|
0.17 |
|
(0.01 |
) | |||
|
Adjusted diluted operating earnings per share |
|
$ |
0.07 |
|
$ |
0.01 |
|
$ |
0.06 |
|
Notes:
(1) During the fourth quarter of 2011, ITG determined that the carrying value of its investment in Disclosure Insight, Inc. was fully impaired, resulting in a write-off of $4.3 million.
(2) In the fourth quarter of 2011, ITG incurred additional restructuring charges of $6.8 million related to further workforce reductions ($1.8 million) and lease consolidation ($5.0 million).