Exhibit 99.1
ITG Reports Third Quarter 2015 Results
Declares Quarterly Dividend of $0.07 per share
NEW YORK, November 5, 2015 — ITG (NYSE: ITG), an independent execution broker and research provider, today reported results for the quarter ended September 30, 2015.
Third quarter 2015 highlights included:
· GAAP net income of $2.7 million, or $0.08 per diluted share compared to GAAP net income of $11.4 million, or $0.32 per diluted share for the third quarter of 2014. GAAP net income for the third quarter of 2015 includes legal and other fees related to the August 2015 final SEC settlement of $2.6 million pre-tax and $1.5 million after taxes, or $0.04 per diluted share.
· Adjusted net income of $4.2 million, or $0.12 per diluted share, excluding the fees related to the SEC settlement. Both GAAP net income and adjusted net income in the third quarter of 2015 include a net reduction to compensation expense related to the reversal of stock and cash compensation associated with the management changes announced in August totaling $2.1 million pre-tax and $1.2 million after taxes, or $0.03 per diluted share. There were no non-GAAP adjustments to earnings in the third quarter of 2014, however there was a net tax benefit of $2.4 million, or $0.07 per diluted share, from resolving a multi-year contingency in the U.S.
· Revenues of $120.4 million, compared to revenues of $134.8 million in the third quarter of 2014.
· Expenses of $117.2 million compared to expenses of $122.7 million in the third quarter of 2014. Adjusted expenses, net of the legal and other fees related to the SEC settlement, were $114.7 million.
· Average daily trading volume in the U.S. of 152 million shares versus 147 million shares in the third quarter of 2014. POSIT® average daily U.S. volume was 67 million shares compared to 72 million shares in the third quarter of 2014. Total average daily volume traded through POSIT Alert® was 9 million shares, compared to 14 million shares in the third quarter of 2014.
· In Europe, average daily value traded in POSIT was $1.2 billion, compared with $1.0 billion in the third quarter of 2014. Total average daily value traded through POSIT Alert declined 21% in the third quarter of 2015 compared with the prior-year period.
· The repurchase of 460,000 shares of common stock under ITG’s authorized share repurchase program for a total of $7.2 million. Repurchases since the first quarter of 2010 have totaled $220.7 million for a total of 14.7 million shares, resulting in a decrease in shares outstanding, net of issuances, by more than 23%.
“Over the course of the quarter, we worked to address the concerns of our clients and to return to normal business conditions. I am proud of what everyone at ITG accomplished,” said ITG interim CEO Jarrett Lilien. “While much work remains to be done, we are pleased with our progress, particularly the renewed momentum in POSIT Alert and the stability of our Platforms and Analytics businesses, and we are looking forward to pursuing a path of growth in 2016.”
Maureen O’Hara, Chair of ITG’s Board of Directors, commented, “We are pleased that Frank Troise, a proven leader in our industry, will join us as our new CEO. ITG’s Board and management team are all looking forward to working with him and welcoming him when he comes on board in January.”
Regional Segment Results
ITG’s North American revenues were $80.9 million in the third quarter of 2015 compared to $90.1 million in the third quarter of 2014. ITG reported net income of $2.4 million in North America in the third quarter of 2015, down from $7.9 million in the third quarter of 2014. U.S. revenues were $66.0 million, down 9% from the third quarter of 2014 while Canada revenues were down 16% to $14.9 million in the third quarter of 2015, including the impact of currency translation. The overall revenue capture rate per share in the U.S. was $0.0040, down from $0.0042 in the second quarter of 2015 and down from $0.0046 in the third quarter of 2014. The decline in the overall average rate was due in large part to the impact of a higher percentage of trading activity from sell-side clients.
ITG’s Europe and Asia Pacific revenues were $39.3 million in the third quarter of 2015 compared to $44.2 million in the third quarter of 2014, including the impact of currency translation. European revenues were $28.9 million, down 9% from the third quarter of
2014 while Asia Pacific revenues were $10.4 million, down 17% from the third quarter of 2014. ITG’s Europe and Asia Pacific operations reported net income of $3.6 million in the third quarter of 2015 compared to $6.8 million in the third quarter of 2014.
Corporate activity reduced GAAP net income by $3.3 million in the third quarter of 2015, including the after-tax impact of legal and other fees of $1.5 million related to the August 2015 final SEC settlement and the after-tax reduction to compensation associated with the management changes announced in August of $1.2 million. Corporate activity reduced GAAP net income by $3.3 million in the third quarter of 2014. Corporate activity includes investment income as well as costs not associated with operating ITG’s regional and product group business lines including, among others, the costs of being a public company, intangible amortization, interest expense, the costs of maintaining a global transfer pricing structure and certain non-operating items. Prior to the first quarter of 2015, the majority of these costs were presented in the U.S. segment.
Year-to-Date Results
For the first nine months of 2015, revenues were $410.6 million, GAAP net income was $9.2 million, or $0.26 per diluted share, and adjusted net income was $32.3 million, or $0.92 per diluted share. For the first nine months of 2014, revenues were $410.8 million and GAAP net income was $37.9 million, or $1.04 per diluted share. There were no adjustments to earnings in the first nine months of 2014.
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.
Quarterly Dividend
For the fourth quarter of 2015, the Board of Directors declared a quarterly cash dividend of $0.07 per share. The dividend is payable on December 11, 2015, to shareholders of record on November 20, 2015.
Conference Call
A conference call to discuss the firm’s results will be held at 11:00 am ET on November 5, 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 10073487. The replay will be available starting approximately one hour after the completion of the conference call.
ABOUT ITG
ITG is an independent execution broker and research provider 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 2014 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 increased regulatory scrutiny, customers’ reactions to the settlement in August 2015 with the Securities and Exchange Commission, the outcome of contingencies such as legal proceedings or governmental or regulatory investigations, the volatility of our stock price, 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
Condensed Consolidated Statements of Operations (unaudited)
(In thousands, except per share amounts)
| | Three Months Ended
September 30, | | Nine Months Ended
September 30, | |
| | 2015 | | 2014 | | 2015 | | 2014 | |
Revenues: | | | | | | | | | |
Commissions and fees | | $ | 89,934 | | $ | 102,900 | | $ | 319,720 | | $ | 317,777 | |
Recurring | | 26,659 | | 26,452 | | 80,038 | | 77,004 | |
Other | | 3,816 | | 5,421 | | 10,872 | | 16,067 | |
Total revenues | | 120,409 | | 134,773 | | 410,630 | | 410,848 | |
| | | | | | | | | |
Expenses: | | | | | | | | | |
Compensation and employee benefits | | 46,305 | | 52,408 | | 157,612 | | 156,305 | |
Transaction processing | | 21,621 | | 21,561 | | 71,381 | | 62,166 | |
Occupancy and equipment | | 14,229 | | 14,937 | | 43,071 | | 45,000 | |
Telecommunications and data processing services | | 12,779 | | 12,942 | | 38,562 | | 38,294 | |
Other general and administrative | | 21,856 | | 20,281 | | 82,021 | | 60,101 | |
Interest expense | | 429 | | 566 | | 1,402 | | 1,796 | |
Total expenses | | 117,219 | | 122,695 | | 394,049 | | 363,662 | |
Income before income tax expense | | 3,190 | | 12,078 | | 16,581 | | 47,186 | |
Income tax expense | | 480 | | 713 | | 7,348 | | 9,275 | |
Net income | | $ | 2,710 | | $ | 11,365 | | $ | 9,233 | | $ | 37,911 | |
| | | | | | | | | |
Income per share: | | | | | | | | | |
Basic | | $ | 0.08 | | $ | 0.32 | | $ | 0.27 | | $ | 1.06 | |
Diluted | | $ | 0.08 | | $ | 0.32 | | $ | 0.26 | | $ | 1.04 | |
| | | | | | | | | |
Basic weighted average number of common shares outstanding | | 33,859 | | 35,093 | | 34,066 | | 35,628 | |
Diluted weighted average number of common shares outstanding | | 34,547 | | 36,026 | | 34,976 | | 36,599 | |
INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
Supplemental Financial Data (unaudited)
(In thousands)
| | Three Months Ended
September 30, | | Nine Months Ended
September 30, | |
| | 2015 | | 2014 | | 2015 | | 2014 | |
Revenues by Geographic Region: | | | | | | | | | |
U.S. Operations | | $ | 66,039 | | $ | 72,315 | | $ | 221,967 | | $ | 225,188 | |
Canadian Operations | | 14,899 | | 17,830 | | 50,516 | | 54,842 | |
European Operations | | 28,899 | | 31,635 | | 99,079 | | 95,489 | |
Asia Pacific Operations | | 10,351 | | 12,535 | | 38,385 | | 34,295 | |
Corporate (non-product) | | 221 | | 458 | | 683 | | 1,034 | |
Total Revenues | | $ | 120,409 | | $ | 134,773 | | $ | 410,630 | | $ | 410,848 | |
| | Three Months Ended
September 30, | | Nine Months Ended
September 30, | |
| | 2015 | | 2014 | | 2015 | | 2014 | |
Revenues by Product Group: | | | | | | | | | |
Electronic Brokerage | | $ | 59,418 | | $ | 68,663 | | $ | 214,920 | | $ | 214,740 | |
Research, Sales and Trading | | 26,316 | | 30,470 | | 89,208 | | 90,026 | |
Platforms | | 22,837 | | 23,570 | | 71,460 | | 70,636 | |
Analytics | | 11,617 | | 11,612 | | 34,359 | | 34,413 | |
Corporate (non-product) | | 221 | | 458 | | 683 | | 1,033 | |
Total Revenues | | $ | 120,409 | | $ | 134,773 | | $ | 410,630 | | $ | 410,848 | |
INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Financial Condition
(In thousands, except share amounts)
| | September 30,
2015 | | December 31,
2014 | |
| | (unaudited) | | | |
Assets | | | | | |
Cash and cash equivalents | | $ | 166,605 | | $ | 275,210 | |
Cash restricted or segregated under regulations and other | | 35,067 | | 38,080 | |
Deposits with clearing organizations | | 96,242 | | 72,527 | |
Securities owned, at fair value | | 7,941 | | 12,073 | |
Receivables from brokers, dealers and clearing organizations | | 1,131,187 | | 644,614 | |
Receivables from customers | | 64,095 | | 107,935 | |
Premises and equipment, net | | 52,991 | | 60,306 | |
Capitalized software, net | | 39,351 | | 38,333 | |
Goodwill | | 12,349 | | 12,803 | |
Intangibles, net | | 29,180 | | 31,595 | |
Income taxes receivable | | 923 | | 105 | |
Deferred taxes | | 33,976 | | 37,209 | |
Other assets | | 23,910 | | 20,059 | |
Total assets | | $ | 1,693,817 | | $ | 1,350,849 | |
Liabilities and Stockholders’ Equity | | | | | |
Liabilities: | | | | | |
Accounts payable and accrued expenses | | $ | 161,252 | | $ | 199,211 | |
Short-term bank loans | | 65,013 | | 78,360 | |
Payables to brokers, dealers and clearing organizations | | 1,009,867 | | 600,041 | |
Payables to customers | | 50,279 | | 11,132 | |
Securities sold, not yet purchased, at fair value | | 4,851 | | 8,253 | |
Income taxes payable | | 7,729 | | 19,772 | |
Deferred taxes | | — | | 703 | |
Term debt | | 10,414 | | 17,781 | |
Total liabilities | | 1,309,405 | | 935,253 | |
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; 52,300,885 and 52,229,962 shares issued at September 30, 2015 and December 31, 2014, respectively | | 523 | | 522 | |
Additional paid-in capital | | 238,379 | | 240,135 | |
Retained earnings | | 491,729 | | 487,462 | |
Common stock held in treasury, at cost; 18,718,888 and 18,000,756 shares at September 30, 2015 and December 31, 2014, respectively | | (327,892 | ) | (306,629 | ) |
Accumulated other comprehensive income (net of tax) | | (18,327 | ) | (5,894 | ) |
Total stockholders’ equity | | 384,412 | | 415,596 | |
Total liabilities and stockholders’ equity | | $ | 1,693,817 | | $ | 1,350,849 | |
INVESTMENT TECHNOLOGY GROUP, INC.
Reconciliation of US GAAP Results to Adjusted Results
(In thousands, except per share amounts)
In evaluating ITG’s financial performance, management reviews results from operations, which excludes non-operating items. Adjusted net income, and related per share amounts, adjusted expenses, adjusted pre-tax income, adjusted income tax expense, and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) are non-GAAP performance measures that 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.
| | Three Months
Ended
September 30, 2015 | | Nine Months
Ended
September 30, 2015 | |
Total revenues | | $ | 120,409 | | $ | 410,630 | |
| | | | | |
Total expenses | | 117,219 | | 394,049 | |
Less: | | | | | |
SEC settlement and related costs (1) | | (2,551 | ) | (25,198 | ) |
Adjusted expenses | | 114,668 | | 368,851 | |
| | | | | |
Income before income tax expense | | 3,190 | | 16,581 | |
Effect of adjustments | | 2,551 | | 25,198 | |
Adjusted pre-tax income | | 5,741 | | 41,779 | |
| | | | | |
Income tax expense | | 480 | | 7,348 | |
Tax effect of adjustments (1) | | 1,080 | | 2,157 | |
Adjusted income tax expense | | 1,560 | | 9,505 | |
| | | | | |
Net income | | 2,710 | | 9,233 | |
Net effect of adjustments | | 1,471 | | 23,041 | |
Adjusted net income | | $ | 4,181 | | $ | 32,274 | |
| | | | | |
Diluted earnings per share | | $ | 0.08 | | $ | 0.26 | |
Net effect of adjustments | | 0.04 | | 0.66 | |
Adjusted diluted earnings per share | | $ | 0.12 | | $ | 0.92 | |
Notes:
(1) In August 2015, the Company reached a final settlement with the SEC to pay an aggregate amount of $20.3 million. In the third quarter of 2015, the Company incurred $2.6 million in legal and related costs to finalize the settlement order. In the second quarter of 2015, the Company reserved $20.3 million for the settlement and incurred $2.3 million in legal and other related costs associated with this matter.
Reconciliation of Adjusted Earnings
Before Interest, Taxes, Depreciation, and Amortization
(In thousands)
| | Three Months Ended
September 30, | | Nine Months Ended
September 30, | |
| | 2015 | | 2014 | | 2015 | | 2014 | |
| | | | | | | | | |
Net Income (1)(2) | | $ | 2,710 | | $ | 11,365 | | $ | 9,233 | | $ | 37,911 | |
Impact of adjustments, after-tax | | 1,471 | | — | | 23,041 | | — | |
Adjusted net income | | 4,181 | | 11,365 | | 32,274 | | 37,911 | |
| | | | | | | | | |
Deduct: | | | | | | | | | |
Investment income | | (215 | ) | (279 | ) | (658 | ) | (838 | ) |
| | | | | | | | | |
Add Back: | | | | | | | | | |
Interest expense | | 429 | | 566 | | 1,402 | | 1,796 | |
Provision for income taxes | | 480 | | 713 | | 7,348 | | 9,275 | |
Tax effect of adjustments | | 1,080 | | — | | 2,157 | | — | |
Depreciation and Amortization | | 11,050 | | 12,024 | | 33,324 | | 37,889 | |
Adjusted earnings before interest, taxes, depreciation, and amortization | | $ | 17,005 | | $ | 24,389 | | $ | 75,847 | | $ | 86,033 | |
Notes:
(1) Net income includes pre-tax charges for non-cash stock-based compensation of $2.7 million and $3.6 million for the three months ended September 30, 2015 and 2014, respectively.
(2) Net income includes pre-tax charges for non-cash stock-based compensation of $12.2 million and $11.1 million for the nine months ended September 30, 2015 and 2014, respectively.
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