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 athttp://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 |
