Attached files
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| 8-K - 8-K - INVESTMENT TECHNOLOGY GROUP, INC. | a12-25965_18k.htm |
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
ITG Reports Third Quarter 2012 Results
Steady Rate Capture and Expense Discipline Offset by Global Volume Weakness
NEW YORK, November 1, 2012 — ITG (NYSE: ITG), an independent execution and research broker, today reported results for the quarter ended September 30, 2012.
Third quarter 2012 highlights included:
· Net income of $0.2 million, or $0.01 per diluted share compared to net income of $10.5 million, or $0.25 per diluted share for the third quarter of 2011. Net income for the third quarter of 2012 included a $1.3 million income tax benefit, or $0.03 per diluted share, from resolving a contingency in the U.S. The reserves related to this income tax contingency were not excluded from adjusted results when they were established in previous reporting periods.
· Revenues of $119.6 million, compared to $149.4 million in the third quarter of 2011.
· Expenses of $119.4 million compared to expenses of $132.2 million in the third quarter of 2011.
· Average daily trading volume in the U.S. of 172.3 million shares, down 18% from the third quarter of 2011. POSIT® average daily U.S. volume was 81.3 million shares, down 16% from the third quarter of 2011. Total combined NYSE and NASDAQ average daily trading volume was down 27% in the third quarter of 2012 compared with the prior year period. In Europe, average daily value traded in POSIT was $317 million, up 19% from the third quarter of 2011.
· The repurchase of 500,000 shares of common stock under ITG’s authorized share repurchase program for a total of $4.4 million. Repurchases since the first quarter of 2010 have totaled $106.8 million for 7.9 million shares, resulting in a decrease in shares outstanding, net of new issuances, of more than 13%.
Revenues from U.S. operations were $77.8 million in the third quarter of 2012 compared to $98.0 million in the third quarter of 2011. ITG’s U.S. operations posted net income of
$1.2 million in the third quarter of 2012, compared to net income of $6.9 million in the third quarter of 2011. Sell-side client volume represented 51% of total U.S. volumes, up from 50% in the second quarter of 2012. The overall revenue capture rate per share in the U.S. was $0.0044, unchanged since the fourth quarter of 2011.
ITG’s International revenues were $41.8 million in the third quarter of 2012 compared to $51.4 million in the third quarter of 2011. ITG’s International operations posted a net loss of $1.0 million in the third quarter of 2012, compared to net income of $3.6 million in the third quarter of 2011.
“We faced very trying conditions in the third quarter, with lower market volumes in the U.S. and in all our international regions,” said Bob Gasser, ITG’s Chief Executive Officer and President. “Despite that, we managed to maintain our U.S. average rate per share, even as the overall percentage of sell-side volume increased slightly, and we continue to focus on controlling expenses in this environment.”
Year-to-Date Results
For the first nine months of 2012, revenues were $382.9 million, GAAP net loss was $241.4 million, or $6.24 per diluted share, and adjusted net income was $7.6 million, or $0.19 per diluted share. For the first nine months of 2011, revenues were $442.1 million, GAAP net loss was $176.1 million, or $4.29 per diluted share, and adjusted net income was $25.9 million, or $0.62 per diluted share.
The discussion of year-to-date results above includes 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 third quarter results. Those wishing to listen to the call should dial 1-800-215-2410 (1-617-597-5410 outside the U.S.) and enter the passcode 79076050 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 website at investor.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 U.S.) and entering the passcode 24355464. The replay will be available starting approximately two hours after the completion of the conference call.
ABOUT ITG
ITG is an independent execution and research 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, 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 and our ability to attract and retain talented employees. 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 Operations (unaudited)
(In thousands, except per share amounts)
|
|
|
Three Months Ended |
|
Nine Months Ended |
| ||||||||
|
|
|
2012 |
|
2011 |
|
2012 |
|
2011 |
| ||||
|
Revenues: |
|
|
|
|
|
|
|
|
| ||||
|
Commissions and fees |
|
$ |
89,795 |
|
$ |
117,648 |
|
$ |
289,942 |
|
$ |
348,174 |
|
|
Recurring |
|
26,707 |
|
28,548 |
|
82,173 |
|
82,283 |
| ||||
|
Other |
|
3,115 |
|
3,223 |
|
10,787 |
|
11,657 |
| ||||
|
Total revenues |
|
119,617 |
|
149,419 |
|
382,902 |
|
442,114 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Expenses: |
|
|
|
|
|
|
|
|
| ||||
|
Compensation and employee benefits |
|
47,135 |
|
54,109 |
|
149,262 |
|
167,266 |
| ||||
|
Transaction processing |
|
19,336 |
|
24,840 |
|
61,208 |
|
70,970 |
| ||||
|
Occupancy and equipment |
|
16,033 |
|
14,904 |
|
45,745 |
|
44,909 |
| ||||
|
Telecommunications and data processing services |
|
15,034 |
|
14,559 |
|
44,813 |
|
44,500 |
| ||||
|
Other general and administrative |
|
21,220 |
|
23,181 |
|
67,494 |
|
68,103 |
| ||||
|
Goodwill impairment |
|
— |
|
— |
|
274,285 |
|
225,035 |
| ||||
|
Restructuring charges |
|
— |
|
— |
|
— |
|
17,678 |
| ||||
|
Acquisition related costs |
|
— |
|
— |
|
— |
|
2,523 |
| ||||
|
Interest expense |
|
678 |
|
636 |
|
1,980 |
|
1,400 |
| ||||
|
Total expenses |
|
119,436 |
|
132,229 |
|
644,787 |
|
642,384 |
| ||||
|
Income (loss) before income tax (benefit) expense |
|
181 |
|
17,190 |
|
(261,885 |
) |
(200,270 |
) | ||||
|
Income tax (benefit) expense |
|
(51 |
) |
6,713 |
|
(20,479 |
) |
(24,153 |
) | ||||
|
Net income (loss) |
|
$ |
232 |
|
$ |
10,477 |
|
$ |
(241,406 |
) |
$ |
(176,117 |
) |
|
|
|
|
|
|
|
|
|
|
| ||||
|
Earnings (loss) per share: |
|
|
|
|
|
|
|
|
| ||||
|
Basic |
|
$ |
0.01 |
|
$ |
0.26 |
|
$ |
(6.24 |
) |
$ |
(4.29 |
) |
|
Diluted |
|
$ |
0.01 |
|
$ |
0.25 |
|
$ |
(6.24 |
) |
$ |
(4.29 |
) |
|
|
|
|
|
|
|
|
|
|
| ||||
|
Basic weighted average number of common shares outstanding |
|
38,301 |
|
40,615 |
|
38,672 |
|
41,051 |
| ||||
|
Diluted weighted average number of common shares outstanding |
|
39,252 |
|
41,271 |
|
38,672 |
|
41,051 |
| ||||
INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Financial Condition
(In thousands, except share amounts)
|
|
|
September 30, |
|
December 31, |
| ||
|
|
|
(unaudited) |
|
|
| ||
|
Assets |
|
|
|
|
| ||
|
Cash and cash equivalents |
|
$ |
262,890 |
|
$ |
284,188 |
|
|
Cash restricted or segregated under regulations and other |
|
66,176 |
|
71,496 |
| ||
|
Deposits with clearing organizations |
|
23,461 |
|
25,538 |
| ||
|
Securities owned, at fair value |
|
8,718 |
|
5,277 |
| ||
|
Receivables from brokers, dealers and clearing organizations |
|
1,290,402 |
|
871,315 |
| ||
|
Receivables from customers |
|
543,936 |
|
472,509 |
| ||
|
Premises and equipment, net |
|
42,718 |
|
43,023 |
| ||
|
Capitalized software, net |
|
45,994 |
|
51,258 |
| ||
|
Goodwill |
|
— |
|
274,292 |
| ||
|
Other intangibles, net |
|
36,536 |
|
39,594 |
| ||
|
Income taxes receivable |
|
9,658 |
|
6,838 |
| ||
|
Deferred taxes |
|
36,156 |
|
16,493 |
| ||
|
Other assets |
|
17,951 |
|
16,248 |
| ||
|
Total assets |
|
$ |
2,384,596 |
|
$ |
2,178,069 |
|
|
|
|
|
|
|
| ||
|
Liabilities and Stockholders’ Equity |
|
|
|
|
| ||
|
Liabilities: |
|
|
|
|
| ||
|
Accounts payable and accrued expenses |
|
$ |
152,564 |
|
$ |
181,224 |
|
|
Short-term bank loans |
|
15,439 |
|
1,606 |
| ||
|
Payables to brokers, dealers and clearing organizations |
|
1,159,725 |
|
1,079,773 |
| ||
|
Payables to customers |
|
601,042 |
|
207,738 |
| ||
|
Securities sold, not yet purchased, at fair value |
|
4,730 |
|
438 |
| ||
|
Income taxes payable |
|
11,509 |
|
11,460 |
| ||
|
Deferred taxes |
|
368 |
|
719 |
| ||
|
Term debt |
|
20,571 |
|
23,997 |
| ||
|
Total liabilities |
|
1,965,948 |
|
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; 52,037,011 and 51,899,229 shares issued at September 30, 2012 and December 31, 2011, respectively |
|
520 |
|
519 |
| ||
|
Additional paid-in capital |
|
243,913 |
|
249,469 |
| ||
|
Retained earnings |
|
411,938 |
|
653,344 |
| ||
|
Common stock held in treasury, at cost; 14,078,344 and 12,679,948 shares at September 30, 2012 and December 31, 2011, respectively |
|
(249,555 |
) |
(240,559 |
) | ||
|
Accumulated other comprehensive income (net of tax) |
|
11,832 |
|
8,341 |
| ||
|
Total stockholders’ equity |
|
418,648 |
|
671,114 |
| ||
|
Total liabilities and stockholders’ equity |
|
$ |
2,384,596 |
|
$ |
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 excludes non-operating or one-time charges. Adjusted expenses and adjusted net income together with related per share amounts are non-GAAP performance measures, but the Company believes that they are useful to assist investors in gaining an understanding of the trends and operating results for ITG’s 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):
|
|
|
Nine Months Ended September 30, |
| ||||
|
|
|
2012 |
|
2011 |
| ||
|
|
|
(unaudited) |
|
(unaudited) |
| ||
|
Total revenues |
|
$ |
382,902 |
|
$ |
442,114 |
|
|
|
|
|
|
|
| ||
|
Total expenses |
|
644,787 |
|
642,384 |
| ||
|
Less: |
|
|
|
|
| ||
|
Goodwill and other asset impairment (1)(2) |
|
(274,285 |
) |
(225,035 |
) | ||
|
Restructuring charges (3) |
|
— |
|
(17,678 |
) | ||
|
Acquisition related costs (4) |
|
— |
|
(2,523 |
) | ||
|
Adjusted operating expenses |
|
370,502 |
|
397,148 |
| ||
|
|
|
|
|
|
| ||
|
Loss before income tax benefit |
|
(261,885 |
) |
(200,270 |
) | ||
|
Effect of pro forma adjustment |
|
274,285 |
|
245,236 |
| ||
|
Adjusted pre-tax operating income |
|
12,400 |
|
44,966 |
| ||
|
|
|
|
|
|
| ||
|
Income tax benefit |
|
(20,479 |
) |
(24,153 |
) | ||
|
Tax effect of pro forma adjustment |
|
25,322 |
|
43,260 |
| ||
|
Adjusted operating income tax expense |
|
4,843 |
|
19,107 |
| ||
|
|
|
|
|
|
| ||
|
Net loss |
|
(241,406 |
) |
(176,117 |
) | ||
|
Net effect of pro forma adjustment |
|
248,963 |
|
201,976 |
| ||
|
Adjusted operating net income |
|
$ |
7,557 |
|
$ |
25,859 |
|
|
|
|
|
|
|
| ||
|
Diluted loss per share |
|
$ |
(6.24 |
) |
$ |
(4.29 |
) |
|
Net effect of pro forma adjustment |
|
6.43 |
|
4.91 |
| ||
|
Adjusted diluted operating earnings per share |
|
$ |
0.19 |
|
$ |
0.62 |
|
Notes:
(1) In the second quarter of 2012, goodwill with a carrying value of $274.3 million was deemed impaired and its fair value was determined to be zero, resulting in impairment charges of $245.1 million, $28.5 million and $0.7 million in the U.S, European and Asia Pacific operating segments, respectively.
(2) In the second quarter of 2011, goodwill with a carrying value of $470.1 million in the U.S. operating segment was deemed impaired and its fair value was determined to be $245.1 million, resulting in an impairment charge of $225.0 million.
(3) During the second quarter of 2011, ITG decided to implement a restructuring plan to improve margins and enhance shareholder returns primarily focused on reducing costs in the workforce. The cost reduction plan resulted in a restructuring charge totaling $17.7 million. These costs included employee separation and related costs of $17.4 million and lease consolidation costs of $0.3 million.
(4) During the second quarter of 2011, ITG acquired Ross Smith Energy Group Ltd., a Calgary-based independent provider of research on the oil and gas industry. In connection with the acquisition, ITG incurred approximately $2.5 million of acquisition related costs, including legal fees, contract settlement costs and other professional fees.
###