EXHIBIT 99.1
ITG Reports Fourth Quarter 2013 Results
Record European Revenues Drive Earnings Growth
Full-year Profitability Up Sharply on International Growth and Improved Operating Efficiency
NEW YORK, January 30, 2014 — ITG (NYSE: ITG), an independent execution and research broker, today reported results for the quarter ended December 31, 2013.
Fourth quarter 2013 highlights included:
· Net income of $9.7 million, or $0.26 per diluted share compared to a net loss of $6.5 million, or $0.17 per diluted share and adjusted net income of $0.6 million, or $0.02 per diluted share for the fourth quarter of 2012. Net income for the fourth quarter of 2013 included a $0.9 million income tax benefit, or $0.02 per diluted share, from resolving a contingency in the U.K. The reserve related to this income tax contingency was not excluded from adjusted results when it was previously established.
· Revenues of $131.9 million, compared to revenues of $121.5 million in the fourth quarter of 2012.
· Expenses of $121.3 million, compared to expenses of $130.1 million and adjusted expenses of $119.2 million in the fourth quarter of 2012.
· Average daily trading volume in the U.S. of 148 million shares versus 181 million shares in the fourth quarter of 2012. POSIT® average daily U.S. volume was 63 million shares compared to 85 million shares in the fourth quarter of 2012. Total average daily volume traded through POSIT Alert® rose approximately 3% compared with the fourth quarter of 2012.
· In Europe, average daily value traded in POSIT was $731 million, compared with $364 million in the fourth quarter of 2012. Total average daily value traded through POSIT Alert rose more than 300% in the fourth quarter of 2013 compared with the prior-year period.
· The repurchase of 212,000 shares of common stock under ITG’s authorized share repurchase program for a total of $4.2 million. Repurchases since the first
quarter of 2010 have totaled $140.8 million for a total of 10.6 million shares, resulting in a decrease in shares outstanding, net of issuances, of more than 17%.
Revenues from U.S. operations were $75.3 million in the fourth quarter of 2013 compared to $77.1 million in the fourth quarter of 2012. ITG’s U.S. operations reported net income of $0.5 million in the fourth quarter of 2013, compared to a net loss of $5.8 million and an adjusted net loss of $1.1 million in the fourth quarter of 2012. Sell-side client volume represented 53% of total U.S. volumes, up from 51% in the third quarter of 2013 and 52% in the fourth quarter of 2012. The overall revenue capture rate per share in the U.S. fell to $0.0047 from $0.0049 in the third quarter of 2013, but was up from $0.0043 in the fourth quarter of 2012.
ITG’s International revenues were $56.6 million in the fourth quarter of 2013 compared to $44.5 million in the fourth quarter of 2012. European revenues rose to a record $26.4 million, up 57% from the fourth quarter of 2012, while Asia Pacific revenues were $11.4 million, up 19% over the fourth quarter of 2012. Canadian revenues were $18.8 million, up 4% versus the fourth quarter of 2012. ITG’s International operations reported net income of $9.2 million in the fourth quarter of 2013 compared to a net loss of $0.7 million and adjusted net income of $1.7 million in the fourth quarter of 2012.
Full Year Results
For the full year 2013, revenues were $530.8 million, net income was $31.1 million, or $0.82 per diluted share, and adjusted net income was $37.1 million, or $0.97 per diluted share. For the full year 2012, revenues were $504.4 million, net loss was $247.9 million, or $6.45 per diluted share, and adjusted net income was $8.2 million, or $0.21 per diluted share.
“A record European performance and improved revenues in our Canadian and Asia Pacific operations more than offset weaker U.S. volumes during the fourth quarter,” said Bob Gasser, ITG’s Chief Executive Officer and President. “In 2013 we reaped the benefits of targeted investments in international capabilities, particularly the rollout of global POSIT Alert. In addition, our focus on improving the performance of our product groups led to significant reductions in infrastructure costs. These efforts paid off, resulting in a 350% increase in our 2013 adjusted net income as compared to 2012. Given all of the measures we have taken over the past few years, we believe we are well positioned globally for the current market environment.”
The discussion of results above includes adjusted net income and related per share amounts, in addition to adjusted expense amounts, which are non-GAAP financial measures that are described in the attached tables along with a reconciliation of these non-GAAP financial measures to GAAP results.
Conference Call
ITG has scheduled a conference call today at 11:00 am ET to discuss fourth quarter results. Those wishing to listen to the call should dial 1-877-317-6789 (1-412-317-6789 outside the U.S.) at least 15 minutes prior to the start of the call to ensure connection. The webcast and accompanying slideshow presentation can be downloaded from ITG’s website at investor.itg.com. For those unable to listen to the live broadcast of the call, a replay will be available for one week by dialing 1-877-344-7529 (1-412-317-0088 outside the U.S.) and entering conference number 10039386. The replay will be available starting approximately one hour after the completion of the conference call.
ABOUT ITG
ITG is an independent execution and research broker that partners with global portfolio managers and traders to provide unique data-driven insights throughout the investment process. From investment decision through settlement, ITG helps clients understand market trends, improve performance, mitigate risk and navigate increasingly complex markets. ITG is headquartered in New York with offices in North America, Europe, and Asia Pacific. For more information, please visit www.itg.com.
In addition to historical information, this press release may contain “forward-looking” statements that reflect management’s expectations for the future. A variety of important factors could cause results to differ materially from such statements. Certain of these factors are noted throughout ITG’s 2012 Annual Report on Form 10-K, and its Form 10-Qs and include, but are not limited to, general economic, business, credit and financial market conditions, both internationally and nationally, financial market volatility, fluctuations in market trading volumes, effects of inflation, adverse changes or volatility in interest rates, fluctuations in foreign exchange rates, evolving industry regulations, changes in tax policy or accounting rules, the actions of both current and potential new competitors, changes in commission pricing, the volatility of our stock price, rapid changes in technology, errors or malfunctions in our systems or technology, cash flows into or redemptions from equity mutual funds, ability to meet liquidity requirements related to the clearing of our customers’ trades, customer trading patterns, the success of our products and service offerings, our ability to continue to innovate and meet the demands of our customers for new or enhanced products, our ability to successfully integrate acquired companies, our ability to attract and retain talented employees and our ability to achieve cost savings from our cost reduction plans. The forward-looking statements included herein represent ITG’s views as of the date of this release. ITG undertakes no obligation to revise or update publicly any forward-looking statement for any reason unless required by law.
ITG Media/Investor Contact:
J.T. Farley
1-212-444-6259
corpcomm@itg.com
INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Income (unaudited)
(In thousands, except per share amounts)
|
| Three Months Ended |
| Year Ended Ended |
| ||||||||
|
| 2013 |
| 2012 |
| 2013 |
| 2012 |
| ||||
Revenues: |
|
|
|
|
|
|
|
|
| ||||
Commissions and fees |
| $ | 98,365 |
| $ | 91,034 |
| $ | 408,619 |
| $ | 380,976 |
|
Recurring |
| 26,788 |
| 27,594 |
| 104,172 |
| 109,767 |
| ||||
Other |
| 6,747 |
| 2,906 |
| 18,010 |
| 13,693 |
| ||||
Total revenues |
| 131,900 |
| 121,534 |
| 530,801 |
| 504,436 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Expenses: |
|
|
|
|
|
|
|
|
| ||||
Compensation and employee benefits |
| 50,839 |
| 47,100 |
| 201,254 |
| 196,362 |
| ||||
Transaction processing |
| 19,971 |
| 19,965 |
| 83,792 |
| 81,173 |
| ||||
Occupancy and equipment |
| 15,940 |
| 16,892 |
| 69,022 |
| 62,637 |
| ||||
Telecommunications and data processing services |
| 13,142 |
| 15,037 |
| 53,607 |
| 59,850 |
| ||||
Other general and administrative |
| 20,544 |
| 21,049 |
| 77,431 |
| 88,543 |
| ||||
Restructuring charges |
| — |
| 9,499 |
| (75 | ) | 9,499 |
| ||||
Goodwill and other asset impairment |
| — |
| — |
| — |
| 274,285 |
| ||||
Interest expense |
| 821 |
| 562 |
| 2,715 |
| 2,542 |
| ||||
Total expenses |
| 121,257 |
| 130,104 |
| 487,746 |
| 774,891 |
| ||||
Income (loss) before income tax expense (benefit) |
| 10,643 |
| (8,570 | ) | 43,055 |
| (270,455 | ) | ||||
Income tax expense (benefit) |
| 981 |
| (2,117 | ) | 11,970 |
| (22,596 | ) | ||||
Net income (loss) |
| $ | 9,662 |
| $ | (6,453 | ) | $ | 31,085 |
| $ | (247,859 | ) |
|
|
|
|
|
|
|
|
|
| ||||
Income (loss) per share: |
|
|
|
|
|
|
|
|
| ||||
Basic |
| $ | 0.27 |
| $ | (0.17 | ) | $ | 0.84 |
| $ | (6.45 | ) |
Diluted |
| $ | 0.26 |
| $ | (0.17 | ) | $ | 0.82 |
| $ | (6.45 | ) |
|
|
|
|
|
|
|
|
|
| ||||
Basic weighted average number of common shares outstanding |
| 36,287 |
| 37,709 |
| 36,788 |
| 38,418 |
| ||||
Diluted weighted average number of common shares outstanding |
| 37,685 |
| 37,709 |
| 38,114 |
| 38,418 |
| ||||
INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
Supplemental Financial Data (unaudited)
(In thousands)
|
| Three Months Ended |
| Year Ended |
| ||||||||
|
| 2013 |
| 2012 |
| 2013 |
| 2012 |
| ||||
Revenues by Geographic Region: |
|
|
|
|
|
|
|
|
| ||||
U.S. Operations |
| $ | 75,349 |
| $ | 77,074 |
| $ | 318,036 |
| $ | 321,379 |
|
Canadian Operations |
| 18,770 |
| 18,036 |
| 74,994 |
| 76,913 |
| ||||
European Operations |
| 26,384 |
| 16,854 |
| 91,791 |
| 67,266 |
| ||||
Asia Pacific Operations |
| 11,397 |
| 9,570 |
| 45,980 |
| 38,878 |
| ||||
Total Revenues |
| $ | 131,900 |
| $ | 121,534 |
| $ | 530,801 |
| $ | 504,436 |
|
|
| Three Months Ended |
| Year Ended |
| ||||||||
|
| 2013 |
| 2012 |
| 2013 |
| 2012 |
| ||||
Revenues by Product Group: |
|
|
|
|
|
|
|
|
| ||||
Electronic Brokerage |
| $ | 69,233 |
| $ | 58,344 |
| $ | 279,830 |
| $ | 250,882 |
|
Research Sales and Trading |
| 27,147 |
| 27,404 |
| 107,383 |
| 106,427 |
| ||||
Platforms |
| 23,282 |
| 23,662 |
| 96,127 |
| 99,334 |
| ||||
Analytics |
| 11,557 |
| 11,856 |
| 46,004 |
| 46,508 |
| ||||
Corporate (non-product) |
| 681 |
| 268 |
| 1,457 |
| 1,285 |
| ||||
Total Revenues |
| $ | 131,900 |
| $ | 121,534 |
| $ | 530,801 |
| $ | 504,436 |
|
INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Financial Condition (unaudited)
(In thousands, except share amounts)
|
| December 31, |
| ||||
|
| 2013 |
| 2012 |
| ||
Assets |
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 261,897 |
| $ | 245,875 |
|
Cash restricted or segregated under regulations and other |
| 71,202 |
| 61,117 |
| ||
Deposits with clearing organizations |
| 74,771 |
| 29,149 |
| ||
Securities owned, at fair value |
| 7,436 |
| 10,086 |
| ||
Receivables from brokers, dealers and clearing organizations |
| 1,018,342 |
| 1,107,119 |
| ||
Receivables from customers |
| 591,004 |
| 546,825 |
| ||
Premises and equipment, net |
| 66,171 |
| 54,989 |
| ||
Capitalized software, net |
| 37,892 |
| 43,994 |
| ||
Other intangibles, net |
| 31,201 |
| 35,227 |
| ||
Income taxes receivable |
| 54 |
| 7,460 |
| ||
Deferred taxes |
| 33,193 |
| 39,155 |
| ||
Other assets |
| 15,787 |
| 15,763 |
| ||
Total assets |
| $ | 2,208,950 |
| $ | 2,196,759 |
|
Liabilities and Stockholders’ Equity |
|
|
|
|
| ||
Liabilities: |
|
|
|
|
| ||
Accounts payable and accrued expenses |
| $ | 175,931 |
| $ | 165,062 |
|
Short-term bank loans |
| 73,539 |
| 22,154 |
| ||
Payables to brokers, dealers and clearing organizations |
| 1,025,268 |
| 1,337,459 |
| ||
Payables to customers |
| 469,264 |
| 226,892 |
| ||
Securities sold, not yet purchased, at fair value |
| 2,953 |
| 5,249 |
| ||
Income taxes payable |
| 13,868 |
| 10,608 |
| ||
Deferred taxes |
| 363 |
| 293 |
| ||
Term debt |
| 30,332 |
| 19,272 |
| ||
Total liabilities |
| 1,791,518 |
| 1,786,989 |
| ||
Commitments and contingencies |
|
|
|
|
| ||
Stockholders’ Equity: |
|
|
|
|
| ||
Preferred stock, $0.01 par value; 1,000,000 shares authorized; no shares issued or outstanding |
| — |
| — |
| ||
Common stock, $0.01 par value; 100,000,000 shares authorized; 52,158,374 and 52,037,011 shares issued at December 31, 2013 and 2012, respectively |
| 522 |
| 520 |
| ||
Additional paid-in capital |
| 240,057 |
| 245,002 |
| ||
Retained earnings |
| 436,570 |
| 405,485 |
| ||
Common stock held in treasury, at cost; 16,005,500 and 14,677,872 shares at December 31, 2013 and 2012, respectively |
| (268,253 | ) | (253,111 | ) | ||
Accumulated other comprehensive income (net of tax) |
| 8,536 |
| 11,874 |
| ||
Total stockholders’ equity |
| 417,432 |
| 409,770 |
| ||
Total liabilities and stockholders’ equity |
| $ | 2,208,950 |
| $ | 2,196,759 |
|
INVESTMENT TECHNOLOGY GROUP, INC.
Reconciliation of US GAAP Results to Adjusted Results
In evaluating ITG’s financial performance, management reviews results from operations which excludes non-operating items. Adjusted expenses and adjusted net income and related per share amounts are non-GAAP performance measures, but the Company believes that they are useful to assist investors in gaining an understanding of the trends and operating results for ITG’s core businesses. These measures should be viewed in addition to, and not in lieu of, ITG’s reported results under GAAP.
The following are reconciliations of GAAP results to adjusted results for the periods presented (in thousands except per share amounts):
|
| Three Months Ended December 31, |
| Year Ended Ended December 31, |
| ||||||||
|
| 2013 |
| 2012 |
| 2013 |
| 2012 |
| ||||
|
| (unaudited) |
| (unaudited) |
| (unaudited) |
| (unaudited) |
| ||||
Total revenues |
| $ | 131,900 |
| $ | 121,534 |
| $ | 530,801 |
| $ | 504,436 |
|
|
|
|
|
|
|
|
|
|
| ||||
Total expenses |
| 121,257 |
| 130,104 |
| 487,746 |
| 774,891 |
| ||||
Less: |
|
|
|
|
|
|
|
|
| ||||
Restructuring charges (1) |
| — |
| (9,499 | ) | 75 |
| (9,499 | ) | ||||
Duplicate rent charges (2) |
| — |
| (1,378 | ) | (2,568 | ) | (1,378 | ) | ||||
Office move (3) |
| — |
| — |
| (3,910 | ) | — |
| ||||
Goodwill and other asset impairment (4) |
| — |
| — |
| — |
| (274,285 | ) | ||||
Adjusted operating expenses |
| 121,257 |
| 119,227 |
| 481,343 |
| 489,729 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Income (loss) before income tax expense (benefit) |
| 10,643 |
| (8,570 | ) | 43,055 |
| (270,455 | ) | ||||
Effect of adjustment |
| — |
| 10,877 |
| 6,403 |
| 285,162 |
| ||||
Adjusted pre-tax operating income |
| 10,643 |
| 2,307 |
| 49,458 |
| 14,707 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Income tax expense (benefit) |
| 981 |
| (2,117 | ) | 11,970 |
| (22,596 | ) | ||||
Tax effect of adjustment (5) |
| — |
| 3,806 |
| 405 |
| 29,128 |
| ||||
Adjusted operating income tax expense |
| 981 |
| 1,689 |
| 12,375 |
| 6,532 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net income (loss) |
| 9,662 |
| (6,453 | ) | 31,085 |
| (247,859 | ) | ||||
Net effect of adjustment |
| — |
| 7,071 |
| 5,998 |
| 256,034 |
| ||||
Adjusted operating net income |
| $ | 9,662 |
| $ | 618 |
| $ | 37,083 |
| $ | 8,175 |
|
|
|
|
|
|
|
|
|
|
| ||||
Diluted income (loss) per share |
| $ | 0.26 |
| $ | (0.17 | ) | $ | 0.82 |
| $ | (6.45 | ) |
Net effect of adjustment |
| — |
| 0.19 |
| 0.15 |
| 6.66 |
| ||||
Adjusted diluted operating earnings per share |
| $ | 0.26 |
| $ | 0.02 |
| $ | 0.97 |
| $ | 0.21 |
|
|
| US Operations |
| International Operations |
| ||||||||
|
| 2013 |
| 2012 |
| 2013 |
| 2012 |
| ||||
|
| (unaudited) |
| (unaudited) |
| (unaudited) |
| (unaudited) |
| ||||
Total revenues |
| $ | 75,349 |
| $ | 77,073 |
| $ | 56,551 |
| $ | 44,461 |
|
|
|
|
|
|
|
|
|
|
| ||||
Total expenses |
| 74,441 |
| 85,458 |
| 46,816 |
| 44,646 |
| ||||
Less: |
|
|
|
|
|
|
|
|
| ||||
Restructuring charges (1) (3) |
| — |
| (6,798 | ) | — |
| (2,701 | ) | ||||
Duplicate rent charges (2) |
| — |
| (1,378 | ) | — |
| — |
| ||||
Adjusted operating expenses |
| 74,441 |
| 77,282 |
| 46,816 |
| 41,945 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Income (loss) before income tax expense (benefit) |
| 908 |
| (8,385 | ) | 9,735 |
| (185 | ) | ||||
Effect of pro forma adjustment |
| — |
| 8,176 |
| — |
| 2,701 |
| ||||
Adjusted pre-tax operating income (loss) |
| 908 |
| (209 | ) | 9,735 |
| 2,516 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Income tax expense (benefit) |
| 450 |
| (2,623 | ) | 531 |
| 506 |
| ||||
Tax effect of pro forma adjustment |
| — |
| 3,505 |
| — |
| 301 |
| ||||
Adjusted operating income tax expense |
| 450 |
| 882 |
| 531 |
| 807 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net income (loss) |
| 458 |
| (5,762 | ) | 9,204 |
| (691 | ) | ||||
Net effect of pro forma adjustment |
| — |
| 4,671 |
| — |
| 2,400 |
| ||||
Adjusted operating net income (loss) |
| $ | 458 |
| $ | 1,091 |
| $ | 9,204 |
| $ | 1,709 |
|
|
|
|
|
|
|
|
|
|
| ||||
Diluted income (loss) per share |
| $ | 0.01 |
| $ | (0.15 | ) | $ | 0.25 |
| $ | (0.02 | ) |
Net effect of pro forma adjustment |
| — |
| 0.12 |
| — |
| 0.07 |
| ||||
Adjusted diluted operating earnings (loss) per share |
| $ | 0.01 |
| $ | (0.03 | ) | $ | 0.25 |
| $ | 0.05 |
|
Notes:
(1) In the second quarter of 2013, the Company incurred $1.6 million to implement a restructuring plan to close its technology research and development facility in Israel and migrate that function to an outsourced service provider model effective January 1, 2014. This plan primarily focused on reducing costs by limiting ITG’s geographic footprint while maintaining the necessary technological expertise via a consulting arrangement. The Company also reduced previously recorded 2012 and 2011 restructuring accruals of $1.6 million to reflect the sub-lease of previously-vacated office space and certain legal and other employee-related charges deemed unnecessary. During the fourth quarter of 2012, ITG implemented a restructuring plan to reduce operating costs by reducing workforce, market data and other general and administrative costs across ITG’s businesses. The charge consisted entirely of employee separation costs.
(2) During the fourth quarter of 2012, ITG began to build out and ready its new lower Manhattan headquarters while continuing to occupy its then-existing headquarters in midtown Manhattan and as a result incurred duplicate rent charges through June 2013.
(3) In the second quarter of 2013, ITG moved into its new headquarters and incurred a non-operating charge, which included a reserve for the remaining lease obligation for the previous midtown Manhattan headquarters.
(4) In the second quarter of 2012, goodwill with a carrying value of $274.3 million was deemed impaired and its fair value was determined to be zero, resulting in a full impairment charge.
(5) The restructuring plan referred to in (1) above triggered the recognition of a tax charge of $1.6 million in the second quarter of 2013 associated with the anticipated withdrawal of capital from Israel.
###
