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8-K - 8-K - Virtu KCG Holdings LLCd667969d8k.htm

Exhibit 99.1

KCG ANNOUNCES FOURTH QUARTER RESULTS

KCG reported a GAAP net loss of $17.4 million; the pre-tax loss from

continuing operations of $18.0 million included $36.5 million

in certain merger and integration costs

Based on progress to date in the integration, on an annualized run-rate basis

KCG achieved the upper range of the projected $90 to $110 million

in cost synergies by the end of 2013

During the quarter, KCG completed $300 million in principal debt repayments;

future savings of approximately $17 million in annual pre-tax interest expense

will be additive to cost synergies

JERSEY CITY, New Jersey – January 31, 2014 – KCG Holdings, Inc. (NYSE: KCG) today reported GAAP net loss of $17.4 million, or a loss of $0.15 per diluted share, for the fourth quarter of 2013.

The fourth quarter 2013 GAAP net loss includes net loss from continuing operations of $18.3 million, or a loss of $0.16 per diluted share. The fourth quarter pre-tax loss from continuing operations was $18.0 million which includes the writeoff of capitalized debt costs related to principal repayments of debt, costs associated with a reduction in the global workforce and merger-related expenses and writedowns totaling $36.5 million. Excluding these charges, on a non-GAAP basis, fourth quarter 2013 income from continuing operations before income taxes was $18.5 million. A reconciliation of GAAP to non-GAAP results is included in Exhibit 4.

KCG was formed July 1, 2013 as a result of the merger between Knight Capital Group, Inc. and GETCO Holding Company, LLC (“the Merger”). Financial results for the periods prior to the third quarter of 2013 contained herein solely represent the results of GETCO Holding Company, LLC as the accounting acquirer. Within this announcement, descriptions of the comparative financial results for the three months ended December 31, 2013 to the three months ended December 31, 2012, have been excluded as KCG does not believe the information provides for a meaningful comparison.

Select Financial Results

 

From Continuing Operations ($ in thousands except EPS)

   4Q13     3Q13  

Revenues

     322,048        467,819   

Trading revenues, net

     212,809        230,471   

Commissions and fees

     111,083        109,079   

Gain on investment in Knight Capital Group, Inc.

     —          127,972   

GAAP pre-tax (loss) income

     (18,025     119,854   

GAAP EPS

     (0.16     1.98   

Non-GAAP pre-tax income

     18,519        17,528   

Fourth Quarter Highlights

 

    KCG achieved the upper range of the previously projected $90 to $110 million in annualized cost synergies on an annualized run-rate basis

 

    KCG completed $300 million in principal repayments during the quarter on the Company’s $535 million first lien term loan; at the quarter close, cash and cash equivalents exceeded total outstanding debt

 

    KCG completed the sale of its subsidiary Urban Financial of America, LLC as part of a broad refocusing on core market making and trading services

 

    KCG consolidated its U.S. broker dealer subsidiaries into KCG Americas LLC, effective January 1, 2014


Daniel Coleman, Chief Executive Officer of KCG, said, “During the fourth quarter, KCG again delivered positive financial results on an operating basis. We continued efforts to bring the firm’s assets and resources into alignment and achieved the projected cost synergies from the merger well ahead of schedule, with additional savings yet to be realized. In addition, we began aggressively paying down debt. We’re intent on becoming the leading, independent, global, multi-asset class securities firm. And, while much work remains, we’re grateful for all that has been accomplished at such an early stage.”

Market Making

During the fourth quarter, the Market Making segment generated total revenues of $232.5 million and pre-tax income of $48.0 million, which included $5.3 million in compensation costs related to the reduction in force. Excluding these charges, non-GAAP pre-tax earnings from the Market Making segment was $53.2 million.

This segment encompasses direct-to-client and on-exchange market making across multiple asset classes and is an active participant in all major cash, options and futures markets in the U.S. and Europe. During the quarter, KCG was the industry leader in executing retail U.S. equity shares traded among market makers and the sequential rise in overall retail trading activity positively impacted revenue capture per dollar value traded. Weaker market conditions however in certain classes of global equities, fixed income and currencies, in terms of market volumes and related volatility, constrained the results for the quarter.

Select Trade Statistics: U.S. Equity Market Making

 

     4Q13      3Q13  

Average daily dollar volume traded ($ millions)

     26,566         25,365   

Average daily trades (thousands)

     3,909         3,809   

Average daily shares traded (millions)

     5,113         4,148   

NYSE and NASDAQ shares traded

     833         805   

OTC Bulletin Board and OTC Market shares traded

     4,280         3,343   

Average revenue capture per U.S. equity dollar value traded (bps)

     0.98         1.01   

Global Execution Services

During the fourth quarter, the Global Execution Services segment generated total revenues of $84.1 million and a pre-tax loss of $4.5 million, which included $7.1 million in compensation costs related to the reduction in force and asset writedown charges. Excluding these items, non-GAAP pre-tax earnings from the Global Execution Services segment was $2.6 million.

The Global Execution Services segment comprises agency execution services and trading venues. During the quarter, the positive turn in financial results was attributable in part to a marked improvement in institutional equity sales in the U.S. and U.K. as well as increased contributions from KCG Hotspot and KCG BondPoint. The results for the quarter were impacted to a degree by the rebuilding underway in KCG’s ETF business.

Select Trade Statistics: Agency Execution and Trading Venues

 

     4Q13      3Q13  

Average daily aggregate KCG EMS, Knight Direct and GETAlpha U.S. equity shares traded (millions)*

     256.1         269.7   

Average daily KCG Hotspot notional foreign exchange dollar value traded ($ billions)

     29.0         28.4   

Average daily KCG BondPoint fixed income par value traded

($ millions)

     133.0         129.1   

 

* KCG EMS, Knight Direct and GETAlpha average daily equities share volume includes U.S. exchange listed shares traded by the execution management system and algorithmic trading strategies.


Corporate and Other

The Corporate and Other segment includes strategic investments and corporate overhead expenses. During the fourth quarter, the Corporate and Other segment recorded total revenues of $5.5 million and a pre-tax loss of $61.5 million, which included approximately $24.2 million in writeoff of capitalized debt costs related to pay down of debt, asset writedown and lease losses, professional fees associated with the Merger and Knight’s August 1, 2012 technology issue and compensation costs related to a reduction in force.

Financial Condition

As of December 31, 2013, KCG had approximately $674.3 million in cash and cash equivalents. Total outstanding debt was approximately $657 million. The company had $1.5 billion in stockholders’ equity equivalent to a book value of $12.33 per share and tangible book value of $10.67 per share.

KCG’s headcount at December 31, 2013 was 1,229 full-time employees as compared to 1,304 full-time employees at September 30, 2013, excluding employees of Urban. As of July 1, 2013 KCG’s consolidated headcount was 1,397 full-time employees, excluding employees of Urban.

Integration Update

As a result of the rapid progress to date in the integration, KCG achieved the upper range of the projected cost synergies on an annualized run-rate basis from the merger by the end of 2013 primarily from reductions in compensation expense. KCG previously estimated cost synergies from the merger of $90 to $110 million per year when fully realized within three years of the merger close, which occurred July 1, 2013.

Subsequent Events

Subsequent to the fourth quarter of 2013, BATS Global Markets Inc. and Direct Edge Holdings LLC announced plans to pay certain dividends to shareholders contingent on the completion of their pending merger. As a shareholder in both BATS and Direct Edge, KCG expects to receive approximately $41.0 million from the aggregate dividends paid at the close of the merger, which is expected in the first quarter of 2014.

In addition, on January 22, 2014, KCG completed an additional $100 million principal repayment on the Company’s $535 million first lien term loan. KCG has completed a total of $400 million in principal repayments since entering into the loan on July 1, 2013, fully satisfying the amortization payment of $235 million due on July 1, 2014 and leaving a remaining outstanding balance of $135 million.

Conference Call

KCG will hold a conference call to discuss fourth quarter 2013 financial results starting at 9:00 a.m. Eastern Time today, January 31, 2014. To access the call, dial 888-811-5445 (domestic) or 816-581-1703 (international) and enter passcode 3553273. In addition, the call will be webcast at http://investors.kcg.com/phoenix.zhtml?c=105070&p=irol-EventDetails&EventId=5086915. Following the conclusion of the call, a replay will be available by dialing 888-203-1112 (domestic) or 719-457-0820 (international) and entering passcode 3553273.

Additional information for investors can be found at http://investors.kcg.com.

Non-GAAP Financial Presentations

KCG believes that certain non-GAAP financial presentations, when taken into consideration with the corresponding GAAP financial presentations, are important in understanding operating results. Selected financial information is included in the non-GAAP financial presentations for the


three months ended September 30, 2013 and three and twelve months ended December 31, 2013 and 2012. KCG believes the presentations provide a meaningful summary of results of operations for the three months ended September 30, 2013 and three and twelve month periods ended December 31, 2013 and 2012. Reconciliations of GAAP to non-GAAP results are included in the schedules in Exhibit 4.

About KCG

KCG is a leading independent securities firm offering investors and clients a range of services designed to address trading needs across asset classes, product types and time zones. The firm combines advanced technology with exceptional client service across market making, agency execution and venues. KCG has multiple access points to trade global equities, fixed income, currencies and commodities via voice or automated execution. www.kcg.com

Certain statements contained herein may constitute “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are typically identified by words such as “believe,” “expect,” “anticipate,” “intend,” “target,” “estimate,” “continue,” “positions,” “prospects” or “potential,” by future conditional verbs such as “will,” “would,” “should,” “could” or “may,” or by variations of such words or by similar expressions. These “forward-looking statements” are not historical facts and are based on current expectations, estimates and projections about KCG’s industry, management beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Any forward-looking statement contained herein speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise. Accordingly, readers are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict including, without limitation, risks associated with: (i) the strategic combination of Knight Capital Group, Inc. (“Knight”) and GETCO Holding Company, LLC (“GETCO”), including, among other things, (a) difficulties and delays in integrating the Knight and GETCO businesses or fully realizing cost savings and other benefits, (b) the inability to sustain revenue and earnings growth, and (c) customer and client reactions; (ii) the August 1, 2012 technology issue that resulted in Knight’s broker-dealer subsidiary sending numerous erroneous orders in NYSE-listed and NYSE Arca securities into the market and the impact to Knight’s capital structure and business as well as actions taken in response thereto and consequences thereof; (iii) the costs and risks associated with the sale of Knight’s institutional fixed income sales and trading business, the sale of KCG’s reverse mortgage origination and securitization business and the departure of the managers of KCG’s listed derivatives group; (iv) changes in market structure, legislative, regulatory or financial reporting rules, including the continuing legislative and regulatory scrutiny of high-frequency trading; (v) past or future changes to organizational structure and management; (vi) KCG’s ability to develop competitive new products and services in a timely manner and the acceptance of such products and services by KCG’s customers and potential customers; (vii) KCG’s ability to keep up with technological changes; (viii) KCG’s ability to effectively identify and manage market risk, operational and technology risk, legal risk, liquidity risk, reputational risk, counterparty and credit risk, international risk, regulatory risk, and compliance risk; (ix) the cost and other effects of material contingencies, including litigation contingencies, and any adverse judicial, administrative or arbitral rulings or proceedings; and (x) the effects of increased competition and KCG’s ability to maintain and expand market share. The list above is not exhaustive. Readers should carefully review the risks and uncertainties disclosed in KCG’s and Knight’s reports with the SEC, including, without limitation, those detailed under “Certain Factors Affecting Results of Operations” in KCG’s Quarterly Report on Form 10-Q for the period ended September 30, 2013, under “Risk Factors” in Knight’s Annual Report on Form 10-K for the year-ended December 31, 2012 and the Current Report on Form 8-K filed by KCG on November 12, 2013, and in other reports or documents KCG files with, or furnishes to, the SEC from time to time.

CONTACTS

 

Sophie Sohn    Jonathan Mairs
Communications & Marketing    Investor Relations
312-931-2299    201-356-1529
media@kcg.com    jmairs@kcg.com


KCG HOLDINGS, INC.   Exhibit 1

CONSOLIDATED STATEMENTS OF OPERATIONS(1)

(Unaudited)

 

     For the three months ended  
     December 31, 2013     September 30, 2013     December 31, 2012  
     (In thousands, except per share amounts)  

Revenues

      

Trading revenues, net

   $ 212,809      $ 230,471      $ 87,326   

Commissions and fees

     111,083        109,079        26,031   

Interest, net

     433        (177     (359

Investment (loss) income and other, net

     (2,277     128,446        12,995   
  

 

 

   

 

 

   

 

 

 

Total revenues

     322,048        467,819        125,993   
  

 

 

   

 

 

   

 

 

 

Expenses

      

Employee compensation and benefits

     112,209        129,631        46,460   

Execution and clearance fees

     78,483        81,023        41,134   

Communications and data processing

     37,512        44,046        23,243   

Depreciation and amortization

     19,566        20,091        7,758   

Interest

     18,270        23,870        663   

Payments for order flow

     18,243        16,431        836   

Occupancy and equipment rentals

     9,358        8,898        3,939   

Professional fees

     7,734        9,077        6,382   

Business development

     1,923        2,644        4   

Writedown of capitalized debt costs

     13,209        —          —     

Writedown of assets and lease loss accrual

     10,500        936        —     

Other

     13,066        11,318        4,071   
  

 

 

   

 

 

   

 

 

 

Total expenses

     340,073        347,965        134,490   
  

 

 

   

 

 

   

 

 

 

(Loss) income from continuing operations before income taxes

     (18,025     119,854        (8,497

Income tax expense (benefit)

     283        (107,767     (92
  

 

 

   

 

 

   

 

 

 

(Loss) income from continuing operations, net of tax

     (18,308     227,621        (8,405

Income (loss) from discontinued operations, net of tax

     864        (784     —     
  

 

 

   

 

 

   

 

 

 

Net (loss) income

   $ (17,444   $ 226,837      $ (8,405
  

 

 

   

 

 

   

 

 

 

Basic (loss) earnings per share from continuing operations

   $ (0.16   $ 1.99      $ (0.18
  

 

 

   

 

 

   

 

 

 

Diluted (loss) earnings per share from continuing operations

   $ (0.16   $ 1.98      $ (0.18
  

 

 

   

 

 

   

 

 

 

Basic earnings (loss) per share from discontinued operations

   $ 0.01      $ (0.01   $ 0.00   
  

 

 

   

 

 

   

 

 

 

Diluted earnings (loss) per share from discontinued operations

   $ 0.01      $ (0.01   $ 0.00   
  

 

 

   

 

 

   

 

 

 

Basic (loss) earnings per share

   $ (0.15   $ 1.99      $ (0.18
  

 

 

   

 

 

   

 

 

 

Diluted (loss) earnings per share

   $ (0.15   $ 1.98      $ (0.18
  

 

 

   

 

 

   

 

 

 

Shares used in computation of basic (loss) earnings per share

     114,272        114,113        47,088   
  

 

 

   

 

 

   

 

 

 

Shares used in computation of diluted (loss) earnings per share

     114,272        114,773        47,088   
  

 

 

   

 

 

   

 

 

 

 

(1)  Fourth and third quarter 2013 includes the results of KCG Holdings, Inc
     Fourth quarter 2012 reflect solely the results of GETCO Holding Company, LLC.


KCG HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS(1)

(Unaudited)

    

 

Exhibit 1

(Continued

  

 

     For the years ended  
     December 31, 2013     December 31, 2012  
     (In thousands, except per share amounts)  

Revenues

    

Trading revenues, net

   $ 628,304      $ 421,063   

Commissions and fees

     275,474        105,518   

Interest, net

     (537     (2,357

Investment income and other, net

     116,930        27,010   
  

 

 

   

 

 

 

Total revenues

     1,020,171        551,234   
  

 

 

   

 

 

 

Expenses

    

Employee compensation and benefits

     349,192        157,855   

Execution and clearance fees

     246,414        185,790   

Communications and data processing

     123,552        90,623   

Depreciation and amortization

     55,570        34,938   

Interest

     44,785        2,665   

Payments for order flow

     35,711        2,964   

Occupancy and equipment rentals

     24,812        12,804   

Professional fees

     46,662        14,072   

Business development

     4,609        23   

Writedown of capitalized debt costs

     13,209        —     

Writedown of assets and lease loss accrual

     14,748        —     

Other

     43,094        23,073   
  

 

 

   

 

 

 

Total expenses

     1,002,358        524,807   
  

 

 

   

 

 

 

Income from continuing operations before income taxes

     17,813        26,427   

Income tax (benefit) expense

     (102,195     10,276   
  

 

 

   

 

 

 

Income from continuing operations, net of tax

     120,008        16,151   

Income from discontinued operations, net of tax

     80        —     
  

 

 

   

 

 

 

Net income

   $ 120,088      $ 16,151   
  

 

 

   

 

 

 

Basic earnings per share from continuing operations

   $ 1.50      $ 0.33   
  

 

 

   

 

 

 

Diluted earnings per share from continuing operations

   $ 1.48      $ 0.33   
  

 

 

   

 

 

 

Basic earnings per share from discontinued operations

   $ 0.00      $ 0.00   
  

 

 

   

 

 

 

Diluted earnings per share from discontinued operations

   $ 0.00      $ 0.00   
  

 

 

   

 

 

 

Basic earnings per share

   $ 1.50      $ 0.33   
  

 

 

   

 

 

 

Diluted earnings per share

   $ 1.48      $ 0.33   
  

 

 

   

 

 

 

Shares used in computation of basic earnings per share

     80,143        48,970   
  

 

 

   

 

 

 

Shares used in computation of diluted earnings per share

     81,015        48,970   
  

 

 

   

 

 

 

 

(1)  Full year 2013 includes six months of results of KCG Holdings, Inc. plus six months of
     GETCO Holding Company, LLC. Full year 2012 reflect solely the results of GETCO Holding Company, LLC.


KCG HOLDINGS, INC.   Exhibit 2

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited)

 

     December 31, 2013     December 31, 2012(1)  
     (In thousands)  

ASSETS

    

Cash and cash equivalents

   $ 674,281      $ 427,631   

Cash and cash equivalents segregated under federal and other regulations

     183,082        —     

Financial instruments owned, at fair value:

    

Equities

     2,298,785        378,933   

Listed options

     339,798        92,305   

Debt securities

     83,256        183,637   
  

 

 

   

 

 

 

Total financial instruments owned, at fair value

     2,721,839        654,875   

Collateralized agreements:

    

Securities borrowed

     1,357,387        52,261   

Receivable from brokers, dealers and clearing organizations

     1,257,251        142,969   

Fixed assets and leasehold improvements, less accumulated depreciation and amortization

     146,668        83,341   

Investments

     122,047        248,438   

Goodwill

     16,259        4,645   

Intangible assets, less accumulated amortization

     186,932        46,123   

Deferred tax asset

     173,584        4,180   

Other assets

     151,885        23,073   
  

 

 

   

 

 

 

Total assets

   $ 6,991,215      $ 1,687,536   
  

 

 

   

 

 

 

LIABILITIES & EQUITY

    

Liabilities

    

Financial instruments sold, not yet purchased, at fair value:

    

Equities

   $ 1,851,006      $ 423,740   

Listed options

     252,282        69,757   

Debt securities

     57,198        19,056   

Other financial instruments

     5,014        —     
  

 

 

   

 

 

 

Total financial instruments sold, not yet purchased, at fair value

     2,165,500        512,553   

Collateralized financings:

    

Securities loaned

     733,230        —     

Financial instruments sold under agreements to repurchase

     640,950        —     
  

 

 

   

 

 

 

Total collateralized financings

     1,374,180        —     

Payable to brokers, dealers and clearing organizations

     474,108        24,185   

Payable to customers

     481,041        —     

Accrued compensation expense

     149,430        27,728   

Accrued expenses and other liabilities

     172,406        118,068   

Capital lease obligations

     10,039        24,191   

Debt

     657,259        15,000   
  

 

 

   

 

 

 

Total liabilities

     5,483,963        721,725   
  

 

 

   

 

 

 

Redeemable preferred member’s equity

     —          311,139   

Equity

    

Members’ equity

     —          654,672   

Class A Common Stock

     1,233        —     

Additional paid-in capital

     1,312,320        —     

Retained earnings

     209,393        —     

Treasury stock, at cost

     (11,324     —     

Accumulated other comprehensive loss

     (4,370     —     
  

 

 

   

 

 

 

Total equity

     1,507,252        654,672   
  

 

 

   

 

 

 

Total liabilities, redeemable preferred member’s equity and equity

   $ 6,991,215      $ 1,687,536   
  

 

 

   

 

 

 

 

(1)  GETCO Holding Company, LLC.


KCG HOLDINGS, INC.    Exhibit 3

PRE-TAX EARNINGS FROM CONTINUING OPERATIONS BY BUSINESS SEGMENT*

(In thousands)

(Unaudited)

 

     For the three months ended  
     December 31, 2013     September 30, 2013     December 31, 2012  

Market Making

      

Revenues

   $ 232,519      $ 240,110      $ 112,224   

Expenses

     184,569        192,257        115,313   
  

 

 

   

 

 

   

 

 

 

Pre-tax earnings (loss)

     47,951        47,853        (3,089
  

 

 

   

 

 

   

 

 

 

Global Execution Services

      

Revenues

     84,065        91,366        8,963   

Expenses

     88,557        107,720        12,454   
  

 

 

   

 

 

   

 

 

 

Pre-tax loss

     (4,491     (16,354     (3,491
  

 

 

   

 

 

   

 

 

 

Corporate and Other

      

Revenues

     5,464        136,343        4,806   

Expenses

     66,949        47,988        6,723   
  

 

 

   

 

 

   

 

 

 

Pre-tax (loss) earnings

     (61,485     88,355        (1,917
  

 

 

   

 

 

   

 

 

 

Consolidated

      

Revenues

     322,048        467,819        125,993   

Expenses

     340,073        347,965        134,490   
  

 

 

   

 

 

   

 

 

 

Pre-tax (loss) earnings

   $ (18,025   $ 119,854      $ (8,497
  

 

 

   

 

 

   

 

 

 

 

* Totals may not add due to rounding.

Fourth and third quarter 2013 includes the results of KCG Holdings, Inc

Fourth quarter 2012 reflect solely the results of GETCO Holding Company, LLC.


KCG HOLDINGS, INC.      Exhibit 3   

PRE-TAX EARNINGS FROM CONTINUING OPERATIONS BY BUSINESS SEGMENT*

(In thousands)

(Unaudited)

     (Continued)   

 

     For the years ended  
     December 31, 2013     December 31, 2012  

Market Making

    

Revenues

   $ 688,197      $ 495,427   

Expenses

     584,639        460,540   
  

 

 

   

 

 

 

Pre-tax earnings

     103,559        34,887   
  

 

 

   

 

 

 

Global Execution Services

    

Revenues

     197,766        36,211   

Expenses

     223,506        43,541   
  

 

 

   

 

 

 

Pre-tax loss

     (25,739     (7,330
  

 

 

   

 

 

 

Corporate and Other

    

Revenues

     134,208        19,596   

Expenses

     194,215        20,726   
  

 

 

   

 

 

 

Pre-tax loss

     (60,007     (1,130
  

 

 

   

 

 

 

Consolidated

    

Revenues

     1,020,171        551,234   

Expenses

     1,002,360        524,807   
  

 

 

   

 

 

 

Pre-tax earnings

   $ 17,813      $ 26,427   
  

 

 

   

 

 

 

 

* Totals may not add due to rounding.
   Full year 2013 includes six months of results of KCG Holdings, Inc. plus six months of GETCO Holding Company, LLC. Full year 2012 reflect solely the results of GETCO Holding Company, LLC.


KCG HOLDINGS, INC.   Exhibit 4

Regulation G Reconciliation of Non-GAAP financial measures (Continuing operations)(1)

(in thousands)

 

Three months ended December 31, 2013    Market Making     Global
Execution
Services
    Corporate and
Other
    Consolidated  

Reconciliation of GAAP Pre-Tax to Non-GAAP Pre-Tax:

        

GAAP Income (Loss) from continuing operations before income taxes

   $ 47,951      $ (4,491   $ (61,485   $ (18,025

Compensation and other expenses related to reduction in workforce

     5,254        5,447        708        11,409   

Professional and other fees related to Mergers and August 1st technology issue

     —          —          2,785        2,785   

Writedown of capitalized debt costs

     —          —          13,209        13,209   

Gain on strategic asset

     —          —          (1,359     (1,359

Writedown of assets and lease loss accrual

     —          1,681        8,819        10,500   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non GAAP Income (Loss) from continuing operations before income taxes

   $ 53,205      $ 2,637      $ (37,323   $ 18,519   
  

 

 

   

 

 

   

 

 

   

 

 

 
Three months ended September 30, 2013    Market Making     Global
Execution
Services
    Corporate and
Other
    Consolidated  

Reconciliation of GAAP Pre-Tax to Non-GAAP Pre-Tax:

        

GAAP Income (Loss) from continuing operations before income taxes

   $ 47,853      $ (16,354   $ 88,355      $ 119,854   

Gain on investment in Knight Capital Group, Inc.

     —          —          (127,972     (127,972

Compensation and other expenses related to reduction in workforce

     2,309        15,132        —          17,441   

Professional and other fees related to Mergers and August 1st technology issue

     —          —          7,269        7,269   

Writedown of assets and lease loss accrual

     108        —          828        936   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non GAAP Income (Loss) from continuing operations before income taxes

   $ 50,270      $ (1,222   $ (31,520   $ 17,528   
  

 

 

   

 

 

   

 

 

   

 

 

 
Three months ended December 31, 2012    Market Making     Global
Execution
Services
    Corporate and
Other
    Consolidated  

Reconciliation of GAAP Pre-Tax to Non-GAAP Pre-Tax:

        

GAAP Loss from continuing operations before income taxes

   $ (3,089   $ (3,491   $ (1,917   $ (8,497

Investment gain

     (9,133     —          (3,245     (12,378

Professional and other fees related to Mergers

     —          —          4,318        4,318   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non GAAP Loss from continuing operations before income taxes

   $ (12,222   $ (3,491   $ (844   $ (16,557
  

 

 

   

 

 

   

 

 

   

 

 

 

 

* Totals may not add due to rounding
(1)  Fourth and third quarter 2013 includes the results of KCG Holdings, Inc

Fourth quarter 2012 reflect solely the results of GETCO Holding Company, LLC.


KCG HOLDINGS, INC.      Exhibit 4   
Regulation G Reconciliation of Non-GAAP financial measures (Continuing operations)(1)      (Continued)   
(in thousands)   

 

Year ended December 31, 2013    Market Making     Global
Execution
Services
    Corporate and
Other
    Consolidated  

Reconciliation of GAAP Pre-Tax to Non-GAAP Pre-Tax:

        

GAAP Income (Loss) from continuing operations before income taxes

   $ 103,559      $ (25,739   $ (60,007   $ 17,813   

Gain on investment in Knight Capital Group, Inc.

     —          —          (127,972     (127,972

Professional and other fees related to Mergers and August 1st technology issue

     —          —          47,183        47,183   

Writedown of capitalized debt costs

     —          —          13,209        13,209   

Compensation and other expenses related to reduction in workforce

     11,518        21,444        708        33,670   

Unit based compensation acceleration due to Mergers

     —          —          22,031        22,031   

Strategic asset impairment

     —          —          7,825        7,825   

Writedown of assets and lease loss accrual

     108        1,681        13,344        15,133   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non GAAP Income (Loss) from continuing operations before income taxes

   $ 115,185      $ (2,614   $ (83,679   $ 28,892   
  

 

 

   

 

 

   

 

 

   

 

 

 
Year ended December 31, 2012    Market Making     Global
Execution
Services
    Corporate and
Other
    Consolidated  

Reconciliation of GAAP Pre-Tax to Non-GAAP Pre-Tax:

        

GAAP Income (Loss) from continuing operations before income taxes

   $ 34,887      $ (7,330   $ (1,130   $ 26,427   

Investment gain

     (9,133     —          (14,599     (23,732

Professional and other fees related to Mergers

     —          —          4,318        4,318   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non GAAP Income (Loss) from continuing operations before income taxes

   $ 25,754      $ (7,330   $ (11,411   $ 7,013   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

* Totals may not add due to rounding
(1)  Full year 2013 includes six months of results of KCG Holdings, Inc. plus six months of GETCO Holding Company, LLC. Full year 2012 reflect solely the results of GETCO Holding Company, LLC.