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8-K - FORM 8-K - Virtu KCG Holdings LLCd116667d8k.htm
EX-99.2 - EX-99.2 - Virtu KCG Holdings LLCd116667dex992.htm

Exhibit 99.1

KCG ANNOUNCES CONSOLIDATED LOSS OF $0.05 PER DILUTED SHARE

FOR THE FOURTH QUARTER OF 2015

KCG reports consolidated revenues of $262.7 million

and pre-tax loss of $7.1 million for the quarter

KCG increases tangible book value to $14.89 per share

and book value to $16.00 per share

JERSEY CITY, New Jersey – January 29, 2016 – KCG Holdings, Inc. (NYSE: KCG) today reported a consolidated loss of $4.6 million, or $0.05 per diluted share, for the fourth quarter of 2015. The fourth quarter consolidated loss includes a net tax benefit of approximately $1.3 million or $0.01 per diluted share primarily related to federal tax credits.

KCG also reported a pre-tax loss of $7.1 million. Included in this pre-tax loss are $19.8 million of gains on the sales of investments, $17.4 million of writedowns primarily related to assets of businesses held for sale and $3.2 million of writedowns of investments. Excluding these items, on a non-GAAP basis, fourth quarter 2015 pre-tax loss was $6.2 million. A reconciliation of GAAP to non-GAAP results is included in Exhibit 4.

 

Select Financial Results    ($ in thousands, except EPS)  

From Continuing Operations

   4Q15      3Q15      4Q14  

GAAP Revenues

     262,661         377,036         346,139   

Non-GAAP revenues*

     246,134         377,036         344,023   

Trading revenues, net

     145,959         277,677         221,415   

Commissions and fees

     94,315         95,027         117,326   

GAAP pre-tax (loss) income

     (7,096      35,419         26,531   

GAAP EPS

     (0.05      0.24         0.23   

Non-GAAP pre-tax (loss) income*

     (6,220      69,448         30,532   

 

* See Exhibit 4 for a reconciliation of GAAP to non-GAAP results

Fourth Quarter Highlights

 

    KCG Electronic Trading increased average daily U.S. equity share volume from the 25 largest U.S. asset managers 37 percent year over year

 

    KCG Acknowledge FI set a new quarterly record for average daily U.S. Treasury notional volume with a 51 percent rise year over year

 

    KCG BondPoint set a new quarterly record for average daily fixed income par value traded with a 15 percent increase year over year

 

    KCG completed the sales of investments including Aperture Group, the corporate parent of OptionsHouse

 

    KCG repurchased 2.3 million shares of KCG Class A Common Stock for $29.4 million and 2.6 million warrants for $4.4 million

Daniel Coleman, Chief Executive Officer of KCG, said, “KCG’s financial results for the fourth quarter of 2015 reflect a more difficult operating environment for market making due largely to macro market events as well as competitive pressures in U.S. equity wholesaling. In the fourth


quarter, we made progress in growing KCG Electronic Trading among the largest U.S. asset managers. In addition, we continued to execute on our program of returning excess capital to our stockholders when conditions warrant.”

Full Year 2015

In 2015, KCG continued to build an intermediary firm capable of directly addressing the urgent need for liquidity across the global securities markets through principal and agency-based trading. A renewed focus on strategic clients contributed to a market share gain in retail U.S. equity order flow from brokers as well as increased algorithmic U.S. equity share volume from asset managers year over year. In terms of cost control, KCG reduced non-GAAP, non-transaction-based expenses by $60.2 million or 7.6 percent from a year ago (Exhibit 4). Following a strategic review of assets, the firm sold KCG Hotspot in the first quarter of 2015. The firm allocated a significant portion of available free cash toward capital return, repurchasing 27.0 million shares of KCG Class A Common Stock for $371.7 million, equivalent to approximately 23 percent of all shares outstanding at the beginning of 2015. For the year, KCG increased tangible book value by $3.17 to $14.89 per share and book value by $2.97 to $16.00 per share.

Mr. Coleman commented, “As the year came to a close, KCG initiated a more fundamental reengineering of operations. Preparations are underway to achieve greater efficiencies from the front to the back office. In addition, we’re consolidating corporate headquarters in lower Manhattan to facilitate greater collaboration across teams. In the coming year, we’ll focus on that which we can control in terms of reducing costs, adding scale and continuing the capital return program as we work to achieve a double-digit return on equity in 2017.”

Market Making

The Market Making segment encompasses direct-to-client and non-client, exchange-based market making across multiple asset classes and is an active participant in all major cash, options and futures markets in the U.S., Europe and Asia. During the fourth quarter of 2015, the segment generated total revenues of $168.2 million and a pre-tax loss of $6.4 million. Excluding charges related to asset writedowns of $15.5 million, the segment generated non-GAAP pre-tax income of $9.1 million.

During the fourth quarter of 2015, average daily consolidated U.S. equity dollar volume along with U.S. equity futures and options contracts declined year over year. In addition, market-wide gross retail U.S. equity dollar volume decreased an estimated 21.8 percent from a year ago, which negatively affected KCG direct-to-client market making. Despite the operating environment, KCG gained market share of retail order flow from leading U.S. brokers year over year amid continued strong competition. The results for the segment were also affected by the deterioration in market volumes of U.S. Treasuries and foreign exchange from a year ago as well as macro events affecting Asian equities.

Mr. Coleman commented, “The decline in consolidated U.S. equity market volumes and volatility was exacerbated by continuing strong competition, tight spreads and the weakest quarterly gross retail dollar volume in a year and a half. Retail investors pulled money from the U.S. equity market in December and we saw evidence of institutional-size portfolio liquidations late in the quarter. In fixed income market making, KCG Acknowledge FI set a new quarterly record for average daily U.S. Treasury notional volume with a 51 percent rise year over year despite a decline in market volumes.”

In the third quarter of 2015, the segment generated total revenues of $299.8 million and pre-tax income of $85.4 million. Excluding expenses related to asset writedowns of $4.4 million, the segment generated non-GAAP pre-tax income of $89.8 million.

In the fourth quarter of 2014, the segment generated total revenues of $238.7 million and pre-tax income of $42.7 million.


Select Trade Statistics: U.S. Equity Market Making

 

     4Q15      3Q15      4Q14  

Average daily dollar volume traded ($ millions)

     28,842         31,517         31,621   

Average daily trades (thousands)

     3,667         4,025         4,036   

Average daily shares traded (millions)

     4,698         4,823         5,241   

NYSE and NASDAQ shares traded

     922         985         933   

OTC Bulletin Board and OTC Market shares traded

     3,775         3,838         4,308   

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

     0.77         1.27         0.93   

Global Execution Services

The Global Execution Services segment comprises agency execution services and trading venues. During the fourth quarter of 2015, the segment generated total revenues of $70.2 million and pre-tax loss of $1.1 million. Excluding a writedown of goodwill of $0.9 million, the segment generated a non-GAAP pre-tax loss of $0.2 million.

During the fourth quarter of 2015, institutional trading activity in U.S. equities and ETFs declined year over year given the uncertain market outlook. The sustained domestic equity mutual fund outflows during the course of the year presaged to an extent the change in investment sentiment. Despite the environment, KCG grew average daily algorithmic U.S. equity share volume from the 25 largest U.S. asset managers 37 percent from a year ago. In addition, KCG BondPoint grew average daily fixed income par value traded 15.1 percent from a year ago.

Mr. Coleman commented, “During the quarter, we continued to deepen relationships with the leading U.S. asset managers, which account for a disproportionate amount of institutional trading activity. KCG Electronic Trading offers algorithms that leverage the firm’s exceptional intellectual capital, trading models, technology and data to generate alpha on behalf of clients. During the quarter, KCG BondPoint produced a new quarterly record for fixed income trade volume by continually providing the leading U.S. brokers with effective price discovery, centralized liquidity, cost-efficient trade execution and best execution for the retail investor.”

In the third quarter of 2015, the segment generated total revenues of $69.7 million and a pre-tax loss of $1.1 million.

In the fourth quarter of 2014, which included the results of KCG Hotspot which was sold in the first quarter of 2015, the segment generated total revenues of $93.4 million and pre-tax income of $10.0 million. Excluding a gain of $2.1 million related to the completion of the sale of the FCM, the segment generated non-GAAP pre-tax income of $7.9 million.

Select Trade Statistics: Agency Execution and Trading Venues

 

     4Q15      3Q15      4Q14  

Average daily KCG algorithmic trading and order routing U.S. equities shares traded (millions)

     311.7         316.8         334.3   

Average daily KCG BondPoint fixed income par value traded ($ millions)

     150.7         130.5         130.8   

Corporate and Other

The Corporate and Other segment includes strategic investments and corporate overhead expenses. During the fourth quarter of 2015, the segment generated total revenues of $24.2 million and pre-tax income of $0.4 million. Excluding gains on sales and writedowns of investments of $19.8 million and $3.2 million, respectively and a $1.0 million writedown of an intangible asset, the segment generated a non-GAAP pre-tax loss of $15.1 million.


In the third quarter of 2015, the segment generated total revenues of $7.6 million and a pre-tax loss of $49.0 million. Excluding the writedown of assets and other real estate related charges of $29.7 million, the segment generated a non-GAAP pre-tax loss of $19.3 million in the third quarter.

In the fourth quarter of 2014, the segment generated total revenues of $14.0 million and a pre-tax loss of $26.1 million. Excluding lease loss expenses of $6.1 million, the segment generated a non-GAAP pre-tax loss of $20.0 million.

Financial Condition

As of December 31, 2015, KCG had $581.3 million in cash and cash equivalents. Total outstanding debt was $495.6 million. KCG had $1.44 billion in stockholders’ equity, equivalent to a book value of $16.00 per share and tangible book value, which includes the value of its assets of businesses held for sale, of $14.89 per share based on total shares outstanding of 90.2 million, including restricted stock units.

KCG’s headcount was 1,006 full-time employees at December 31, 2015 compared to 1,033 at September 30, 2015.

During the fourth quarter of 2015, KCG repurchased 2.3 million shares for approximately $29.4 million and 2.6 million warrants for $4.4 million under the Company’s stock repurchase program.

Management from time to time conducts a strategic review of its businesses and evaluates their potential value in the marketplace relative to their current and expected returns. As a result of such a review, KCG determined that certain of its businesses are no longer considered core to its strategy, and KCG is currently seeking the opportunity to exit or divest of these businesses. KCG believes that this current course of action does not represent a strategic shift that will have a major effect on its operations and financial results, but does meet the requirements to be considered held-for-sale at December 31, 2015. As part of this review, KCG determined that the carrying value of certain assets that are considered held for sale exceeded their fair value, and, as a result, recorded a charge totaling $16.3 million as it relates to such held-for-sale businesses. The fair value of such assets, of $24.7 million, are included within assets of businesses held-for-sale on the December 31, 2015 Statement of Financial Condition. In aggregate, these businesses accounted for less than 1.5% of consolidated revenues in 2015.

Conference Call

KCG will hold a conference call to discuss fourth quarter 2015 financial results starting at 9:00 a.m. Eastern Time today, January 29, 2016. To access the call, dial 800-967-0627 (domestic) or 913-312-0689 (international) and enter passcode 749088. In addition, the call will be webcast at http://edge.media-server.com/m/p/xge9rvfo. Following the conclusion of the call, a replay will be available by selecting a number based on country of origin from a list posted at: https://replaynumbers.conferencinghub.com/index.aspx?confid=749088&passcode=749088 and entering passcode 749088.

Additional information for investors, including a presentation of the fourth quarter financial results, 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 December 31, 2015, September 30, 2015 and December 31, 2014 and for the years ended December 31, 2015 and December 31, 2014. KCG believes the presentations provide a meaningful summary of revenues and results of operations for each of the three and twelve month periods. 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’s 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. 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 inability to manage trading strategy performance and sustain revenue and earnings growth; (ii) the sale of KCG Hotspot; (iii) changes in market structure, legislative, regulatory or financial reporting rules, including the increased focus by Congress, federal and state regulators, the SRO’s and the media on market structure issues, and in particular, the scrutiny of high frequency trading, alternative trading systems, market fragmentation, colocation, access to market data feeds, and remuneration arrangements such as payment for order flow and exchange fee structures; (iv) past or future changes to KCG’s organizational structure and management; (v) 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; (vi) KCG’s ability to keep up with technological changes; (vii) KCG’s ability to effectively identify and manage market risk, operational and technology risk, cybersecurity risk, legal risk, liquidity risk, reputational risk, counterparty and credit risk, international risk, regulatory risk, and compliance risk; (viii) the cost and other effects of material contingencies, including litigation contingencies, and any adverse judicial, administrative or arbitral rulings or proceedings; (ix) the effects of increased competition and KCG’s ability to maintain and expand market share; (x) the announced plan to relocate KCG’s global headquarters from Jersey City, NJ to New York, NY; and (xi) KCG’s ability to complete the sale or disposition of any or all of the assets or businesses that are classified as held for sale. The list above is not exhaustive. Because forward looking statements involve risks and uncertainties, the actual results and performance of KCG may materially differ from the results expressed or implied by such statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Unless otherwise required by law, KCG also disclaims any obligation to update its view of any such risks or uncertainties or to announce publicly the result of any revisions to the forward-looking statements made herein. Readers should carefully review the risks and uncertainties disclosed in KCG’s reports with the U.S. Securities and Exchange Commission (“SEC”), including those detailed under “Certain Factors Affecting Results of Operations” in the MD&A and in “Risk Factors” in Part I, Item 1A of KCG ‘s Annual Report on Form 10-K for the year ended December 31, 2014, and in Part II, Item 1A of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, and in other reports or documents KCG files with, or furnishes to, the SEC from time to time. This information should be read in conjunction with KCG’s Consolidated Financial Statements and the Notes thereto contained in the Quarterly Report on Form 10-Q for the quarter-ended September 30, 2015, 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   
(Unaudited)   

 

     For the three months ended  
     December 31, 2015     September 30, 2015     December 31, 2014  
     (In thousands, except per share amounts)  

Revenues

      

Trading revenues, net

   $ 145,959      $ 277,677      $ 221,415   

Commissions and fees

     94,315        95,027        117,326   

Interest, net

     (429     (1,080     (177

Investment income and other, net

     22,816        5,412        7,575   
  

 

 

   

 

 

   

 

 

 

Total revenues

     262,661        377,036        346,139   
  

 

 

   

 

 

   

 

 

 

Expenses

      

Employee compensation and benefits

     67,823        121,597        116,214   

Execution and clearance fees

     66,613        67,502        82,377   

Communications and data processing

     36,003        35,256        36,945   

Depreciation and amortization

     25,077        23,813        21,224   

Payments for order flow

     14,464        17,121        14,698   

Debt interest expense

     9,186        9,117        7,721   

Collateralized financing interest

     8,746        8,617        7,973   

Occupancy and equipment rentals

     7,842        7,472        8,514   

Professional fees

     5,774        4,406        5,695   

Business development

     1,751        1,846        2,308   

Writedown of assets and other real estate related charges

     17,404        34,029        6,117   

Other

     9,074        10,841        9,822   
  

 

 

   

 

 

   

 

 

 

Total expenses

     269,757        341,617        319,608   
  

 

 

   

 

 

   

 

 

 

(Loss) income from continuing operations before income taxes

     (7,096     35,419        26,531   

Income tax (benefit) expense

     (2,500     13,482        562   
  

 

 

   

 

 

   

 

 

 

(Loss) income from continuing operations, net of tax

     (4,596     21,937        25,969   

Loss from discontinued operations, net of tax

     —          —          165   
  

 

 

   

 

 

   

 

 

 

Net (loss) income

   $ (4,596   $ 21,937      $ 26,134   
  

 

 

   

 

 

   

 

 

 

Basic (loss) earnings per share from continuing operations

   $ (0.05   $ 0.24      $ 0.24   
  

 

 

   

 

 

   

 

 

 

Diluted (loss) earnings per share from continuing operations

   $ (0.05   $ 0.24      $ 0.23   
  

 

 

   

 

 

   

 

 

 

Basic loss per share from discontinued operations

   $ —        $ —        $ —     
  

 

 

   

 

 

   

 

 

 

Diluted loss per share from discontinued operations

   $ —        $ —        $ —     
  

 

 

   

 

 

   

 

 

 

Basic (loss) earnings per share

   $ (0.05   $ 0.24      $ 0.24   
  

 

 

   

 

 

   

 

 

 

Diluted (loss) earnings per share

   $ (0.05   $ 0.24      $ 0.23   
  

 

 

   

 

 

   

 

 

 

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

     89,184        91,134        109,654   
  

 

 

   

 

 

   

 

 

 

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

     89,184        92,079        112,224   
  

 

 

   

 

 

   

 

 

 


KCG HOLDINGS, INC.      Exhibit 1   
CONSOLIDATED STATEMENTS OF OPERATIONS      (Continued
(Unaudited)   

 

     For the years ended  
     December 31, 2015     December 31, 2014  
     (In thousands, except per share amounts)  

Revenues

    

Trading revenues, net

   $ 803,181        837,357   

Commissions and fees

     376,673        437,022   

Interest, net

     (2,128     621   

Investment income and other, net

     420,009        41,232   
  

 

 

   

 

 

 

Total revenues

     1,597,735        1,316,232   
  

 

 

   

 

 

 

Expenses

    

Employee compensation and benefits

     405,609        437,269   

Execution and clearance fees

     265,186        305,177   

Communications and data processing

     139,263        150,595   

Depreciation and amortization

     90,231        81,448   

Payments for order flow

     61,741        70,183   

Debt interest expense

     36,755        32,456   

Collateralized financing interest

     34,678        27,860   

Occupancy and equipment rentals

     30,128        32,707   

Professional fees

     27,055        25,596   

Business development

     8,479        9,763   

Debt extinguishment charges

     25,006        9,552   

Writedown of assets and other real estate related charges

     57,892        8,625   

Other

     38,375        39,814   
  

 

 

   

 

 

 

Total expenses

     1,220,398        1,231,045   
  

 

 

   

 

 

 

Income from continuing operations before income taxes

     377,337        85,187   

Income tax expense

     129,857        22,753   
  

 

 

   

 

 

 

Income from continuing operations, net of tax

     247,480        62,434   

Loss from discontinued operations, net of tax

     —          (1,332
  

 

 

   

 

 

 

Net Income

   $ 247,480      $ 61,102   
  

 

 

   

 

 

 

Basic earnings per share from continuing operations

   $ 2.46      $ 0.55   
  

 

 

   

 

 

 

Diluted earnings per share from continuing operations

   $ 2.40      $ 0.54   
  

 

 

   

 

 

 

Basic loss per share from discontinued operations

   $ —        $ (0.01
  

 

 

   

 

 

 

Diluted loss per share from discontinued operations

   $ —        $ (0.01
  

 

 

   

 

 

 

Basic earnings per share

   $ 2.46      $ 0.54   
  

 

 

   

 

 

 

Diluted earnings per share

   $ 2.40      $ 0.52   
  

 

 

   

 

 

 

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

     100,437        112,854   
  

 

 

   

 

 

 

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

     102,922        116,534   
  

 

 

   

 

 

 


KCG HOLDINGS, INC.      Exhibit 2   
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION   
(In thousands)   
(Unaudited)   

 

     December 31, 2015     December 31, 2014  

ASSETS

    

Cash and cash equivalents

   $ 581,313      $ 578,768   

Cash and cash equivalents segregated under federal and other regulations

     3,000        3,361   

Financial instruments owned, at fair value:

    

Equities

     2,129,208        2,479,910   

Listed options

     178,360        144,586   

Debt securities

     136,387        82,815   

Other financial instruments

     445        60   
  

 

 

   

 

 

 

Total financial instruments owned, at fair value

     2,444,400        2,707,371   

Collateralized agreements:

    

Securities borrowed

     1,636,284        1,632,062   

Receivable from brokers, dealers and clearing organizations

     681,211        1,188,833   

Fixed assets and leasehold improvements, less accumulated depreciation and amortization

     94,858        134,051   

Investments

     98,943        100,726   

Goodwill and Intangible assets, less accumulated amortization

     100,471        152,594   

Deferred tax asset, net

     151,703        154,759   

Income taxes receivable

     18,054        17,771   

Assets of businesses held for sale

     24,749        40,484   

Other assets

     215,943        119,874   
  

 

 

   

 

 

 

Total assets

   $ 6,050,929      $ 6,830,654   
  

 

 

   

 

 

 

LIABILITIES & EQUITY

    

Liabilities

    

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

    

Equities

   $ 1,856,171      $ 2,069,342   

Listed options

     151,893        115,362   

Debt securities

     105,340        101,003   
  

 

 

   

 

 

 

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

     2,113,404        2,285,707   

Collateralized financings:

    

Securities loaned

     463,377        707,744   

Financial instruments sold under agreements to repurchase

     954,902        933,576   
  

 

 

   

 

 

 

Total collateralized financings

     1,418,279        1,641,320   

Payable to brokers, dealers and clearing organizations

     273,805        676,089   

Payable to customers

     17,387        22,110   

Accrued compensation expense

     154,547        114,559   

Accrued expenses and other liabilities

     135,401        143,677   

Liabilities of businesses held for sale

     —          2,356   

Debt

     495,632        422,259   
  

 

 

   

 

 

 

Total liabilities

     4,608,455        5,308,077   
  

 

 

   

 

 

 

Equity

    

Class A Common Stock

     1,060        1,275   

Additional paid-in capital

     1,436,671        1,369,298   

Retained earnings

     190,496        272,780   

Treasury stock, at cost

     (186,103     (122,909

Accumulated other comprehensive income

     350        2,133   
  

 

 

   

 

 

 

Total equity

     1,442,474        1,522,577   
  

 

 

   

 

 

 

Total liabilities and equity

   $ 6,050,929      $ 6,830,654   
  

 

 

   

 

 

 


KCG HOLDINGS, INC.    Exhibit 3

PRE-TAX EARNINGS (LOSS) FROM CONTINUING OPERATIONS BY BUSINESS SEGMENT*

(In thousands)

(Unaudited)

 

     For the three months ended  
     December 31, 2015     September 30, 2015     December 31, 2014  

Market Making

      

Revenues

   $ 168,227      $ 299,755      $ 238,740   

Expenses

     174,609        214,336        196,030   
  

 

 

   

 

 

   

 

 

 

Pre-tax earnings (loss)

     (6,382     85,419        42,710   
  

 

 

   

 

 

   

 

 

 

Global Execution Services

      

Revenues

     70,221        69,713        93,369   

Expenses

     71,336        70,763        83,400   
  

 

 

   

 

 

   

 

 

 

Pre-tax earnings (loss)

     (1,115     (1,050     9,969   
  

 

 

   

 

 

   

 

 

 

Corporate and Other

      

Revenues

     24,213        7,568        14,030   

Expenses

     23,812        56,519        40,178   
  

 

 

   

 

 

   

 

 

 

Pre-tax earnings (loss)

     401        (48,951     (26,148
  

 

 

   

 

 

   

 

 

 

Consolidated

      

Revenues

     262,661        377,036        346,139   

Expenses

     269,757        341,617        319,608   
  

 

 

   

 

 

   

 

 

 

Pre-tax earnings (loss)

   $ (7,096   $ 35,419      $ 26,531   
  

 

 

   

 

 

   

 

 

 

 

* Totals may not add due to rounding.


KCG HOLDINGS, INC.    Exhibit 3 (Continued)

PRE-TAX EARNINGS (LOSS) FROM CONTINUING OPERATIONS BY BUSINESS SEGMENT*

(In thousands)

(Unaudited)

 

     For the twelve months ended  
     December 31, 2015     December 31, 2014  

Market Making

    

Revenues

   $ 884,858      $ 901,152   

Expenses

     762,080        754,439   
  

 

 

   

 

 

 

Pre-tax earnings

     122,778        146,713   
  

 

 

   

 

 

 

Global Execution Services

    

Revenues

     667,723        345,710   

Expenses

     298,766        334,654   
  

 

 

   

 

 

 

Pre-tax earnings

     368,957        11,056   
  

 

 

   

 

 

 

Corporate and Other

    

Revenues

     45,154        69,369   

Expenses

     159,552        141,951   
  

 

 

   

 

 

 

Pre-tax loss

     (114,398     (72,582
  

 

 

   

 

 

 

Consolidated

    

Revenues

     1,597,735        1,316,232   

Expenses

     1,220,398        1,231,045   
  

 

 

   

 

 

 

Pre-tax earnings

   $ 377,337      $ 85,187   
  

 

 

   

 

 

 

 

* Totals may not add due to rounding.


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

 

Three months ended December 31, 2015

   Market Making     Global Execution
Services
    Corporate and Other     Consolidated  

Reconciliation of GAAP Revenues to Non-GAAP Revenues:

        

GAAP Revenues

   $ 168,227      $ 70,221      $ 24,213      $ 262,661   

Gain on sales of investments

     —          —          (19,751     (19,751

Writedowns of investments

     —          —          3,224        3,224   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non- GAAP Revenues

   $ 168,227      $ 70,221      $ 7,686      $ 246,134   
  

 

 

   

 

 

   

 

 

   

 

 

 

Three months ended December 31, 2015

   Market Making     Global Execution
Services
    Corporate and Other     Consolidated  

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

        

GAAP (Loss) income from continuing operations before income taxes

   $ (6,382   $ (1,115   $ 401      $ (7,096

Gain on sales of investments

     —          —          (19,751     (19,751

Writedowns of investments

     —          —          3,224        3,224   

Writedown of goodwill and intangible assets

     15,266        907        1,014        17,187   

Writedown of assets

     216        —          —          216   
  

 

 

   

 

 

   

 

 

   

 

 

 

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

   $ 9,100      $ (208   $ (15,112   $ (6,220
  

 

 

   

 

 

   

 

 

   

 

 

 

Three months ended September 30, 2015

   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

   $ 85,419      $ (1,050   $ (48,951   $ 35,419   

Other real estate related charges

     —          —          28,825        28,825   

Writedown of assets

     4,379        —          825        5,204   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP Income (loss) from continuing operations before income taxes

   $ 89,798      $ (1,050   $ (19,301   $ 69,448   
  

 

 

   

 

 

   

 

 

   

 

 

 

Three months ended December 31, 2014

   Market Making     Global Execution
Services
    Corporate and Other     Consolidated  

Reconciliation of GAAP Revenues to Non-GAAP Revenues:

        

GAAP Revenues

   $ 238,740      $ 93,369      $ 14,030      $ 346,139   

Gain on sale of FCM

     —          (2,116     —          (2,116
  

 

 

   

 

 

   

 

 

   

 

 

 

Non- GAAP Revenues

   $ 238,740      $ 91,253      $ 14,030      $ 344,023   
  

 

 

   

 

 

   

 

 

   

 

 

 

Three months ended December 31, 2014

   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

   $ 42,710      $ 9,969      $ (26,148   $ 26,531   

Gain on sale of FCM

     —          (2,116     —          (2,116

Writedown of assets and lease loss accrual, net

     —          —          6,117        6,117   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP Income (loss) from continuing operations before income taxes

   $ 42,710      $ 7,853      $ (20,031   $ 30,532   
  

 

 

   

 

 

   

 

 

   

 

 

 


Year ended December 31, 2015

   Market Making      Global Execution
Services
    Corporate and Other     Consolidated  

Reconciliation of GAAP Revenues to Non-GAAP Revenues:

         

GAAP Revenues

   $ 884,858       $ 667,723      $ 45,154      $ 1,597,735   

Gain on sale of KCG Hotspot

     —           (385,026     —          (385,026

Gain on sales of investments

     —           —          (19,751     (19,751

Writedowns of investments

     —           —          3,224        3,224   
  

 

 

    

 

 

   

 

 

   

 

 

 

Non- GAAP Revenues

   $ 884,858       $ 282,697      $ 28,627      $ 1,196,182   
  

 

 

    

 

 

   

 

 

   

 

 

 

Year ended December 31, 2015

   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

   $ 122,778       $ 368,957      $ (114,398   $ 377,337   

Gain on sale of KCG Hotspot

     —           (385,026     —          (385,026

Gain on sales of investments

     —           —          (19,751     (19,751

Writedowns of investments

     —           —          3,224        3,224   

Other real estate related charges

     —           —          35,284        35,284   

Accelerated stock-based compensation

     19,844         8,202        803        28,849   

Writedown of goodwill and intangible assets

     15,266         907        1,014        17,187   

Debt make-whole premium

     —           —          16,500        16,500   

Writedown of capitalized debt costs

     —           —          8,506        8,506   

Professional fees related to the sale of KCG Hotspot

     —           6,736        —          6,736   

Writedown of assets

     4,595         —          825        5,420   

Compensation expense related to the sale of KCG Hotspot

     —           4,457        —          4,457   
  

 

 

    

 

 

   

 

 

   

 

 

 

Non-GAAP Income (loss) from continuing operations before income taxes

   $ 162,483       $ 4,233      $ (67,993   $ 98,723   
  

 

 

    

 

 

   

 

 

   

 

 

 

Year ended December 31, 2014

   Market Making      Global Execution
Services
    Corporate and Other     Consolidated  

Reconciliation of GAAP Revenues to Non-GAAP Revenues:

         

GAAP Revenues

   $ 901,152       $ 345,710      $ 69,369      $ 1,316,232   

Net gain related to tradeMONSTER combination with OptionsHouse

     —           —          (15,105     (15,105

Income resulting from the merger of BATS and Direct Edge, net

     —           —          (9,644     (9,644

Gain on sale of FCM

     —           (2,116     —          (2,116
  

 

 

    

 

 

   

 

 

   

 

 

 

Non- GAAP Revenues

   $ 901,152       $ 343,594      $ 44,620      $ 1,289,367   
  

 

 

    

 

 

   

 

 

   

 

 

 

Year ended December 31, 2014

   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

   $ 146,713       $ 11,056      $ (72,582   $ 85,187   

Net gain related to tradeMONSTER combination with OptionsHouse

     —           —          (15,105     (15,105

Income resulting from the merger of BATS and Direct Edge, net

     —           —          (9,644     (9,644

Gain on sale of FCM

     —           (2,116     —          (2,116

Compensation related to reduction in workforce and other employee separations

     3,169         5,463        4,958        13,590   

Writedown of capitalized debt costs

     —           —          9,552        9,552   

Writedown of assets and lease loss accrual, net

     811         —          7,814        8,625   
  

 

 

    

 

 

   

 

 

   

 

 

 

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

   $ 150,693       $ 14,403      $ (75,007   $ 90,089   
  

 

 

    

 

 

   

 

 

   

 

 

 


Year ended December 31, 2015

   GAAP      Adjustments for
non-GAAP
presentation
     Non-GAAP
expenses
 

Reconciliation of GAAP non transactional based expenses to Non GAAP non transactional based expenses**

        

Employee compensation and benefits

   $ 405,609       $ 33,306       $ 372,303   

Communications and data processing

     139,263         —           139,263   

Depreciation and amortization

     90,231         —           90,231   

Debt interest expense

     36,755         —           36,755   

Occupancy and equipment rentals

     30,128         —           30,128   

Professional fees

     27,055         6,736         20,319   

Business development

     8,479         —           8,479   

Debt extinguishment charges

     25,006         25,006         —     

Writedown of assets and other real estate related charges

     57,892         57,892         —     

Other

     38,375         —           38,375   
  

 

 

    

 

 

    

 

 

 

Total non-GAAP Expense

   $ 858,793       $ 122,940       $ 735,853   
  

 

 

    

 

 

    

 

 

 

Year ended December 31, 2014

   GAAP      Adjustments for
non-GAAP
presentation
     Non-GAAP
expenses
 

Reconciliation of GAAP non transactional based expenses to Non GAAP non transactional based expenses**

        

Employee compensation and benefits

   $ 437,269       $ 13,590       $ 423,679   

Communications and data processing

     150,595         —           150,595   

Depreciation and amortization

     81,448         —           81,448   

Occupancy and equipment rentals

     32,707         —           32,707   

Debt interest expense

     32,456         —           32,456   

Professional fees

     25,596         —           25,596   

Business development

     9,763         —           9,763   

Debt extinguishment charges

     9,552         9,552         —     

Writedown of assets and other real estate related charges

     8,625         8,625         —     

Other

     39,814         —           39,814   
  

 

 

    

 

 

    

 

 

 

Total non-GAAP Expense

   $ 827,825       $ 31,767       $ 796,058   
  

 

 

    

 

 

    

 

 

 

 

** Transactional based expenses refer to Execution and clearance fees, Payments for order flow and Collateralized financing interest
* Totals may not add due to rounding