KCG Holdings, Inc. (NYSE: KCG) Barclays Global Financial Services Conference September 11, 2013 Exhibit 99.1 |
© 2013 KCG Proprietary and Confidential Safe Harbor 2 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 pending sale of KCG’s reverse mortgage origination and securitization business and the departure of the managers of KCG’s listed derivatives group; (iv) the ability of KCG's broker-dealer subsidiary to recover all or a portion of the damages that are attributable to the manner in which NASDAQ OMX handled the Facebook IPO; (v) 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 risk, legal risk, liquidity risk, reputational risk, counterparty 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 June 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 August 9, 2013, and in other reports or documents KCG files with, or furnishes to, the SEC from time to time. For additional disclosures, please see https://www.kcg.com/legal/global-disclosures. |
© 2013 KCG Proprietary and Confidential KCG: Key Investment Highlights An established leader in the fiercely competitive, highly regulated and technologically advanced U.S. equity market Diversified revenues from principal and agency trading across asset classes and regions Well positioned to compete amid the gradual shift from analog to digital trading across the global securities markets Meaningful expected synergies and strong cash generation Currently trading at a discount to tangible book value 3 |
© 2013 KCG Proprietary and Confidential KCG At-A-Glance An independent, pure-play securities firm formed by the merger between GETCO and Knight. KCG engages in market making and trading to increase efficiencies for investors deploying capital across the markets. The firm works to create more efficient, resilient markets by applying advanced technologies to trading across asset classes and regions. Inception of trading on July 5 Shares outstanding of 121 million Trading range of $8.11 to $12.14 Pro forma TBV of $10.87 as of June 30 3Q13 earnings to be released on October 30 4 |
© 2013 KCG Proprietary and Confidential Strategic Rationale Maximize advantages available to non-banks in securities trading Leverage combined infrastructure, intellectual capital and liquidity to drive innovation, scale and performance Create meaningful synergies: Generate balanced revenues over time from principal and agency trading across asset classes and regions 5 Combine technology operations Eliminate back office redundancies Rationalize the platform by consolidating broker dealers and integrating self-clearing functions Optimize economics from trading on exchanges and ATS’s |
© 2013 KCG Proprietary and Confidential KCG Structure Market Making – Make markets in global equities, commodities, fixed income, futures, options and foreign exchange. Global Execution Services – Act primarily as an agency broker and operator of trading venues across global equities, foreign exchange, fixed income, futures and options. Corporate and Other – Strategic investments in financial services-related ventures, interest income and corporate overhead expenses 6 Market Making Global Execution Services Corporate and Other |
© 2013 KCG Proprietary and Confidential Market Making Direct market making on behalf of clients as well as providing market making liquidity on exchanges, ECNs and other venues. Primary offerings: Client Direct and Exchange Based Market Making The retail market leader in executing Rule 605-eligible U.S. equity orders A leading DMM at the NYSE Knight Link Rapid, off-exchange order execution GETDirect Market making on electronic fixed income platforms 7 † Source: Thomson Reuters Transaction Analytics KCG Retail U.S. Exchange-Listed Volume and Market Share† KCG Avg. Execution Quality of U.S. Exchange-Listed Stocks† |
© 2013 KCG Proprietary and Confidential Execution Services A range of execution-only trading services, designed to provide access to liquidity, preserve anonymity and minimize market impact. Primary offerings: Institutional sales trading KCG EMS Knight Direct GETAlpha 8 † Sources: KCG, BATS Global Markets, Thomson Reuters Autex 100 120 140 160 180 200 220 240 260 280 300 3.5% 4.1% 2012 1H13 KCG EMS / Algorithmic U.S. Equity Volume and % of Consolidated Tape† Access to deep, unique liquidity and trading expertise - Broker-neutral execution management system Execution algorithms Execution algorithms - - - |
© 2013 KCG Proprietary and Confidential Venues Robust platforms for electronic trading connecting an array of market participants to generate liquidity and efficiencies. Primary offerings: KCG Hotspot KCG BondPoint Knight Match GETMatched 9 † Sources: KCG, Thomson Reuters, EBS, TRACE - Institutional spot FX ECN Fixed income ECN ATS ranked # 6 in Rosenblatt’s Dark Liquidity Tracker in 1H13 ATS ranked # 11 in Rosenblatt’s Dark Liquidity Tracker in 1H13 - - - 0 5 10 15 20 25 30 35 40 9.55% 10.27% 2012 1H13 KCG Hotspot Volume and % of Spot FX Volume† $124.1 $136.4 25 50 75 100 125 150 175 2012 1H13 KCG BondPoint Retail Fixed Income Volume† |
© 2013 KCG Proprietary and Confidential Global Revenue Distribution The Americas: 84% Europe: 12% Asia: 4% Based on YTD revenues as of June 30, 2013, excluding Urban Financial Group 10 |
© 2013 KCG Proprietary and Confidential Pro Forma Adjusted Revenue and Expense Trends (in $ thousands) Full Year 2012 First Half 2013 Revenues 1,496,359 769,520 Expenses (% of revenues) (% of revenues) Employee compensation and benefits 543,679 36% 274,031 36% Execution and clearance fees 370,790 25% 183,661 24% Communications and data processing 178,110 12% 86,717 11% Depreciation and amortization 86,445 6% 39,973 5% Interest 79,605 5% 39,478 5% Payments for order flow 66,528 4% 45,209 6% Professional fees 27,111 2% 9,886 1% Occupancy and equipment rentals 36,440 2% 17,999 2% Other 62,583 4% 26,237 3% Pre-tax income 45,069 3% 46,328 6% Based on KCG Holdings, Inc. 8-K/A filed September 10, 2013; See Addendum for Reg G chart 11 |
© 2013 KCG Proprietary and Confidential Pro Forma Balance Sheet (in $ thousands) June 30, 2013 Cash and cash equivalents 726,302 Long-term debt 727,133 Stockholders' equity 1,509,247 - - - Debt-to-equity ratio † 0.64 - - - Book value $12.92 Tangible book value ** $10.87 † Debt-to-equity ratio incorporates the effect of the $235 million first lien term loan due within one year, which is included in accrued expenses and other liabilities ** Tangible book value is calculated by subtracting pro forma goodwill and intangible assets from equity Based on KCG Holdings, Inc. 8-K/A filed September 10, 2013 12 |
© 2013 KCG Proprietary and Confidential Integration Update Prior to the close: Post-Closing (In Progress): 13 GETCO recorded a restructuring expense Knight recorded a restructuring expense, completed an asset sale, discontinued certain offerings, and created a reserve for legal proceedings Execution of liquidity strategy across asset classes Combination of overlapping businesses and functions Consolidation of broker dealers Integration of clearing operations Closing the sale of Urban Financial Group |
© 2013 KCG Proprietary and Confidential KCG: Key Investment Highlights An established leader in the fiercely competitive, highly regulated and technologically advanced U.S. equity market Diversified revenues from principal and agency trading across asset classes and regions Well positioned to compete amid the gradual shift from analog to digital trading across the global securities markets Meaningful expected synergies and strong cash generation Currently trading at a discount to tangible book value 14 |
© 2013 KCG Proprietary and Confidential Addendum 15 |
© 2013 KCG Proprietary and Confidential Regulation G Reconciliation of Non-GAAP Financial Measures (Continuing Operations) Year ended December 31, 2012 GETCO Knight Ex-Urban Other Adjustments Debt Refinancing Purchase Price Adjustments KCG Pro Forma (in $ thousands) Reconciliation of pro forma GAAP to pro forma non-GAAP pre-tax: Pro forma GAAP income (loss) from continuing operations before taxes 26,427 (412,890) (36,005) 7,895 (34,871) (11,151) (460,595) August 1 trading loss, related costs and professional and other fees related to the merger 4,318 468,792 - (7,895) - - 465,215 Writedown of goodwill and intangible assets - 28,733 (1,381) - - - 27,351 Facebook IPO trading losses - 35,438 - - - - 35,438 Investment gain (25,092) (9,992) - - - - (35,084) Writedown of strategic investment 1,360 11,384 - - - - 12,744 Pro forma non-GAAP income (loss) from continuing operations before income taxes 7,013 121,465 (37,386) - (34,871) (11,151) 45,069 NOTES: Totals may not add due to rounding 16 |
© 2013 KCG Proprietary and Confidential Regulation G Reconciliation of Non-GAAP Financial Measures (Continuing Operations) Six months ended June 30, 2013 GETCO Knight Ex-Urban Other Adjustments Debt Refinancing Purchase Price Adjustments Other¹ KCG Pro Forma (in $ thousands) Reconciliation of pro forma GAAP to pro forma non-GAAP pre-tax: Pro forma GAAP income (loss) from continuing operations before taxes (76,916) (3,315) 244 45,026 (8,023) (5,544) - (48,528) 14,931 22,497 - - - - - 37,428 Professional and other fees related to the mergers and August 1 technology issue 37,129 31,423 - (45,026) - - - 23,526 Additional interest expense - - - - - - (6,794) (6,794) Strategic investments impairments 9,184 - - - - - - 9,184 Writedown of goodwill related to subsidiary Urban Financial Group - 17,787 (17,787) - - - - - Reserve for legal proceedings - 10,000 - - - - - 10,000 Compensation and other expenses related to reduction in workforce 8,517 12,995 - - - - - 21,512 Pro forma non-GAAP income (loss) from continuing operations before income taxes (7,155) 91,387 (17,543) - (8,023) (5,544) (6,794) 46,328 Totals may not add due to rounding 17 1 The unaudited pro forma income statements give effect to the mergers as if they had occurred on January 1, 2012. As part of that assumption, $235 million of the first lien term loan is payable in the first year. Therefore, the six months ended June 30, 2013 does not include interest expense on this portion of the loan. The non-GAAP income (loss) from continuing operations before income taxes adds back the expected interest expense on the $235 million loan for the six months ended June 30, 2013. - and stock-based comp expense due to the mergers Accelerated deferred comp, unit |
© 2013 KCG Proprietary and Confidential Regulation G Reconciliation of Non-GAAP Financial Measures (Continuing Operations) Year ended December 31, 2012 GETCO Knight Ex-Urban Other Adjustments Debt Refinancing Purchase Price Adjustments KCG Pro Forma (in $ thousands) Reconciliation of pro forma GAAP to pro forma non-GAAP revenue: Pro forma GAAP revenue 551,536 590,251 (116,096) 1,025,691 August 1 trading loss, related costs and professional and other fees related to the merger 457,570 457,570 Facebook IPO trading losses 35,438 35,438 Investment gain (25,092) (9,992) (35,084) Writedown of strategic investment 1,360 11,384 12,744 Pro forma non-GAAP revenue 527,804 1,084,651 (116,096) 1,496,359 NOTES: Totals may not add due to rounding 18 |
© 2013 KCG Proprietary and Confidential Regulation G Reconciliation of Non-GAAP Financial Measures (Continuing Operations) Six months ended June 30, 2013 GETCO Knight Ex-Urban Other Adjustments Debt Refinancing Purchase Price Adjustments KCG Pro Forma (in $ thousands) Reconciliation of pro forma GAAP to pro forma non-GAAP revenue: Pro forma GAAP revenue 230,969 599,690 (70,323) 760,336 Writedown of strategic investment 9,184 9,184 Pro forma non-GAAP revenue 240,153 599,690 (70,323) 769,520 NOTES: Totals may not add due to rounding 19 |
© 2013 KCG Proprietary and Confidential 20 |