Exhibit 99.1
ITG Reports Fourth Quarter 2014 Results
Earnings Growth Driven by Improved Profitability in North America
Full-Year 2014 Return on Average Equity Over 12%
NEW YORK, January 29, 2015 — ITG (NYSE: ITG), an independent execution and research broker, today reported results for the quarter ended December 31, 2014.
Fourth quarter 2014 highlights included:
· Net income of $13.0 million, or $0.36 per diluted share compared to net income of $9.7 million, or $0.26 per diluted share for the fourth quarter of 2013. Net income for the fourth quarter of 2014 included the impact of employee termination charges of $2.1 million, or $0.04 per diluted share after-tax, including $1.6 million in the U.S. and $0.5 million in Asia Pacific related to cost reduction measures. 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.
· Revenues of $149.0 million, compared to revenues of $131.9 million in the fourth quarter of 2013.
· Expenses of $131.2 million, compared to expenses of $121.3 million in the fourth quarter of 2013.
· Average daily trading volume in the U.S. of 190 million shares versus 148 million shares in the fourth quarter of 2013. POSIT® average daily U.S. volume was 90 million shares compared to 63 million shares in the fourth quarter of 2013. Total average daily volume traded through POSIT Alert® was 16 million shares compared to 14 million in the fourth quarter of 2013.
· In Europe, average daily value traded in POSIT was $946 million, compared with $731 million in the fourth quarter of 2013. Total average daily value traded through POSIT Alert rose 53% in the fourth quarter of 2014 compared with the prior-year period.
· An annualized return on average equity of 12.5%, compared with 9.3% in the fourth quarter of 2013. For the full year 2014, return on average equity was 12.2% compared to 7.6% for the full year 2013.
· The repurchase of 637,000 shares of common stock under ITG’s authorized share repurchase program for a total of $12.0 million. Repurchases since the first quarter of 2010 have totaled $189.0 million for a total of 13.3 million shares, resulting in a decrease in shares outstanding, net of issuances, of almost 22%.
Revenues from U.S. operations were $81.4 million in the fourth quarter of 2014 compared to $75.3 million in the fourth quarter of 2013. ITG’s U.S. operations reported net income of $3.0 million in the fourth quarter of 2014, up from $0.5 million in the fourth quarter of 2013. The overall revenue capture rate per share in the U.S. was $0.0044, down from $0.0047 in the fourth quarter of 2013. The decline in the overall average rate was due in large part to an increase in trading activity from lower-rate quantitative clients as well as a decline in the average commission rate paid by sell-side clients.
ITG’s International revenues were $67.6 million in the fourth quarter of 2014 compared to $56.6 million in the fourth quarter of 2013. European revenues were $32.0 million, up 21% from the fourth quarter of 2013. Canadian revenues were a record $22.9 million, up 22% versus the fourth quarter of 2013 while Asia Pacific revenues were $12.7 million, up 11% from the fourth quarter of 2013. ITG’s International operations reported net income of $10.0 million in the fourth quarter of 2014 versus net income of $9.2 million in the fourth quarter of 2013.
“In the fourth quarter, our North American results demonstrated the operating leverage we have built into our business as market volumes rebounded. We also saw solid performance in both Europe and Asia Pacific,” said Bob Gasser, ITG’s Chief Executive Officer and President. “The insights gained since our product group formation in 2012 are providing opportunities for greater efficiencies as we strive continuously to improve our operating model to grow profitability. This positions us well for the global trading environment and provides the flexibility to expand our model across asset classes,” added Mr. Gasser.
Full Year Results
For the full year 2014, revenues were $559.8 million and net income was $50.9 million, or $1.40 per diluted share. 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. Full year 2014 net income increased 64% versus 2013 net income and 37% versus 2013 adjusted net income.
The discussion of results above includes adjusted net income and related per share 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
A conference call to discuss the firm’s results will be held at 11:00 am ET on January 29, 2015. 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 will be available on 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 10058246. 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 2013 Annual Report on Form 10-K, and its Form 10-Qs (as amended, if applicable) 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 and regulatory scrutiny, changes in tax policy or accounting rules, the actions of both current and potential new competitors, changes in commission pricing, 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 and our ability to attract and retain talented employees. 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 |
| ||||||||
|
| 2014 |
| 2013 |
| 2014 |
| 2013 |
| ||||
Revenues: |
|
|
|
|
|
|
|
|
| ||||
Commissions and fees |
| $ | 118,395 |
| $ | 98,365 |
| $ | 436,172 |
| $ | 408,619 |
|
Recurring |
| 26,790 |
| 26,788 |
| 103,794 |
| 104,172 |
| ||||
Other |
| 3,781 |
| 6,747 |
| 19,848 |
| 18,010 |
| ||||
Total revenues |
| 148,966 |
| 131,900 |
| 559,814 |
| 530,801 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Expenses: |
|
|
|
|
|
|
|
|
| ||||
Compensation and employee benefits |
| 59,453 |
| 50,839 |
| 215,758 |
| 201,254 |
| ||||
Transaction processing |
| 24,234 |
| 19,971 |
| 86,400 |
| 83,792 |
| ||||
Occupancy and equipment |
| 14,811 |
| 15,940 |
| 59,811 |
| 69,022 |
| ||||
Telecommunications and data processing services |
| 12,893 |
| 13,142 |
| 51,187 |
| 53,607 |
| ||||
Other general and administrative |
| 19,248 |
| 20,544 |
| 79,349 |
| 77,431 |
| ||||
Restructuring charges |
| — |
| — |
| — |
| (75 | ) | ||||
Interest expense |
| 526 |
| 821 |
| 2,322 |
| 2,715 |
| ||||
Total expenses |
| 131,165 |
| 121,257 |
| 494,827 |
| 487,746 |
| ||||
Income before income tax expense |
| 17,801 |
| 10,643 |
| 64,987 |
| 43,055 |
| ||||
Income tax expense |
| 4,820 |
| 981 |
| 14,095 |
| 11,970 |
| ||||
Net income |
| $ | 12,981 |
| $ | 9,662 |
| $ | 50,892 |
| $ | 31,085 |
|
|
|
|
|
|
|
|
|
|
| ||||
Income per share: |
|
|
|
|
|
|
|
|
| ||||
Basic |
| $ | 0.38 |
| $ | 0.27 |
| $ | 1.44 |
| $ | 0.84 |
|
Diluted |
| $ | 0.36 |
| $ | 0.26 |
| $ | 1.40 |
| $ | 0.82 |
|
|
|
|
|
|
|
|
|
|
| ||||
Basic weighted average number of common shares outstanding |
| 34,521 |
| 36,287 |
| 35,349 |
| 36,788 |
| ||||
Diluted weighted average number of common shares outstanding |
| 35,640 |
| 37,685 |
| 36,365 |
| 38,114 |
| ||||
INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
Supplemental Financial Data (unaudited)
(In thousands)
|
| Three Months Ended |
| Year Ended |
| ||||||||
|
| 2014 |
| 2013 |
| 2014 |
| 2013 |
| ||||
Revenues by Geographic Region: |
|
|
|
|
|
|
|
|
| ||||
U.S. Operations |
| $ | 81,402 |
| $ | 75,349 |
| $ | 306,933 |
| $ | 318,036 |
|
Canadian Operations |
| 22,899 |
| 18,770 |
| 78,093 |
| 74,994 |
| ||||
European Operations |
| 31,958 |
| 26,384 |
| 127,563 |
| 91,791 |
| ||||
Asia Pacific Operations |
| 12,707 |
| 11,397 |
| 47,225 |
| 45,980 |
| ||||
Total Revenues |
| $ | 148,966 |
| $ | 131,900 |
| $ | 559,814 |
| $ | 530,801 |
|
|
| Three Months Ended |
| Year Ended |
| ||||||||
|
| 2014 |
| 2013 |
| 2014 |
| 2013 |
| ||||
Revenues by Product Group: |
|
|
|
|
|
|
|
|
| ||||
Electronic Brokerage |
| $ | 79,789 |
| $ | 69,233 |
| $ | 294,529 |
| $ | 279,830 |
|
Research, Sales and Trading |
| 32,016 |
| 27,147 |
| 122,042 |
| 107,383 |
| ||||
Platforms |
| 25,290 |
| 23,282 |
| 95,926 |
| 96,127 |
| ||||
Analytics |
| 11,599 |
| 11,557 |
| 46,012 |
| 46,004 |
| ||||
Corporate (non-product) |
| 272 |
| 681 |
| 1,305 |
| 1,457 |
| ||||
Total Revenues |
| $ | 148,966 |
| $ | 131,900 |
| $ | 559,814 |
| $ | 530,801 |
|
INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Financial Condition
(In thousands, except share amounts)
|
| December 31, |
| ||||
|
| 2014 |
| 2013 |
| ||
|
| (unaudited) |
|
|
| ||
Assets |
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 275,210 |
| $ | 261,897 |
|
Cash restricted or segregated under regulations and other |
| 69,738 |
| 71,202 |
| ||
Deposits with clearing organizations |
| 36,424 |
| 74,771 |
| ||
Securities owned, at fair value |
| 12,073 |
| 7,436 |
| ||
Receivables from brokers, dealers and clearing organizations |
| 646,330 |
| 866,271 |
| ||
Receivables from customers |
| 107,935 |
| 72,660 |
| ||
Premises and equipment, net |
| 60,306 |
| 66,171 |
| ||
Capitalized software, net |
| 38,333 |
| 37,892 |
| ||
Goodwill, net |
| 12,803 |
| — |
| ||
Intangibles, net |
| 31,595 |
| 31,201 |
| ||
Income taxes receivable |
| 105 |
| 54 |
| ||
Deferred taxes |
| 37,209 |
| 34,130 |
| ||
Other assets |
| 22,788 |
| 15,787 |
| ||
Total assets |
| $ | 1,350,849 |
| $ | 1,539,472 |
|
|
|
|
|
|
| ||
Liabilities and Stockholders’ Equity |
|
|
|
|
| ||
Liabilities: |
|
|
|
|
| ||
Accounts payable and accrued expenses |
| $ | 199,211 |
| $ | 175,931 |
|
Short-term bank loans |
| 78,360 |
| 73,539 |
| ||
Payables to brokers, dealers and clearing organizations |
| 600,041 |
| 575,943 |
| ||
Payables to customers |
| 11,132 |
| 248,174 |
| ||
Securities sold, not yet purchased, at fair value |
| 8,253 |
| 2,953 |
| ||
Income taxes payable |
| 19,772 |
| 14,805 |
| ||
Deferred taxes |
| 703 |
| 363 |
| ||
Term debt |
| 17,781 |
| 30,332 |
| ||
Total liabilities |
| 935,253 |
| 1,122,040 |
| ||
|
|
|
|
|
| ||
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; 52,229,962 and 52,158,374 shares issued at December 31, 2014 and 2013, respectively |
| 522 |
| 522 |
| ||
Additional paid-in capital |
| 240,135 |
| 240,057 |
| ||
Retained earnings |
| 487,462 |
| 436,570 |
| ||
Common stock held in treasury, at cost; 18,000,756 and 16,005,500 shares at December 31, 2014 and 2013, respectively |
| (306,629 | ) | (268,253 | ) | ||
Accumulated other comprehensive income (net of tax) |
| (5,894 | ) | 8,536 |
| ||
Total stockholders’ equity |
| 415,596 |
| 417,432 |
| ||
Total liabilities and stockholders’ equity |
| $ | 1,350,849 |
| $ | 1,539,472 |
|
Certain reclassifications to the prior year balances for receivables from brokers, dealers and clearing organizations, receivables from customers, payables to brokers, dealers and clearing organizations and payables to customers have been made to conform to the current period presentation to reflect the Company’s agent capacity for executing transactions on behalf of clients in the Europe and Asia-Pacific regions.
INVESTMENT TECHNOLOGY GROUP, INC.
Non-GAAP Financial Measures
In evaluating ITG’s financial performance, management reviews results from operations which excludes non-operating items. Adjusted net income, and related per share amounts, and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) are non-GAAP performance measures, but the Company believes 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.
Reconciliation of US GAAP Results to Adjusted Results
(In thousands, except share amounts)
|
| Year Ended |
| |
|
| (unaudited) |
| |
Total revenues |
| $ | 530,801 |
|
|
|
|
| |
Total expenses |
| 487,746 |
| |
Less: |
|
|
| |
Restructuring charges (1) |
| 75 |
| |
Duplicate rent charges (2) |
| (2,568 | ) | |
Office move (3) |
| (3,910 | ) | |
Adjusted operating expenses |
| 481,343 |
| |
|
|
|
| |
Income before income tax expense |
| 43,055 |
| |
Effect of adjustment |
| 6,403 |
| |
Adjusted pre-tax operating income |
| 49,458 |
| |
|
|
|
| |
Income tax expense |
| 11,970 |
| |
Tax effect of adjustment (4) |
| 405 |
| |
Adjusted operating income tax expense |
| 12,375 |
| |
|
|
|
| |
Net income |
| 31,085 |
| |
Net effect of adjustment |
| 5,998 |
| |
Adjusted operating net income |
| $ | 37,083 |
|
|
|
|
| |
Diluted income per share |
| $ | 0.82 |
|
Net effect of adjustment |
| 0.15 |
| |
Adjusted diluted operating earnings per share |
| $ | 0.97 |
|
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. 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.
(2) During 2013, ITG continued 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) 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.
Reconciliation of Adjusted Earnings
Before Interest, Taxes, Depreciation, and Amortization
(In thousands)
|
| Three Months Ended |
| Year Ended |
| ||||||||
|
| 2014 |
| 2013 |
| 2014 |
| 2013 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net Income (1)(2) |
| $ | 12,981 |
| $ | 9,662 |
| $ | 50,892 |
| $ | 31,085 |
|
Impact of adjustments, after-tax |
| — |
| — |
| — |
| 5,998 |
| ||||
Adjusted net income |
| 12,981 |
| 9,662 |
| 50,892 |
| 37,083 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Deduct: |
|
|
|
|
|
|
|
|
| ||||
Investment income |
| (265 | ) | (287 | ) | (1,104 | ) | (997 | ) | ||||
|
|
|
|
|
|
|
|
|
| ||||
Add Back: |
|
|
|
|
|
|
|
|
| ||||
Interest expense |
| 526 |
| 822 |
| 2,322 |
| 2,715 |
| ||||
Provision for income taxes |
| 4,820 |
| 981 |
| 14,095 |
| 11,970 |
| ||||
Tax effect of adjustments |
| — |
| — |
| — |
| 405 |
| ||||
Depreciation and Amortization |
| 11,495 |
| 13,324 |
| 49,384 |
| 53,606 |
| ||||
Adjusted earnings before interest, taxes, depreciation, and amortization |
| $ | 29,557 |
| $ | 24,502 |
| $ | 115,589 |
| $ | 104,782 |
|
Notes:
(1) Net income includes pre-tax charges for stock-based compensation of $6.3 million and $5.8 million for the three months ended December 31, 2014 and 2013, respectively.
(2) Net income includes pre-tax charges for stock-based compensation of $18.9 million and $20.9 million for the year ended December 31, 2014 and 2013, respectively.
###
