Exhibit 99.1
ITG Reports First Quarter 2016 Results
Market Share Recovery Continues Across Operating Regions
NEW YORK, May 5, 2016 — ITG (NYSE: ITG), a leading independent broker and financial technology provider, today reported results for the quarter ended March 31, 2016.
First quarter 2016 highlights included:
· GAAP net loss of $2.5 million, or $0.08 per diluted share compared to GAAP net income of $16.7 million, or $0.47 per diluted share for the first quarter of 2015. GAAP results for the first quarter of 2016 include (i) the amount expensed during the first quarter of 2016 of $2.8 million pre-tax, or $0.08 per diluted share after taxes, for upfront cash and stock awards granted to ITG’s new CEO; and (ii) charges of $2.8 million pre-tax, or $0.05 per diluted share after taxes, in reserves and associated legal fees related to the arbitration with ITG’s former CEO.
· Adjusted net income of $1.8 million, or $0.05 per share, excluding the charges related to the upfront compensation expense for ITG’s new CEO and the arbitration. There were no non-GAAP adjustments to earnings in the first quarter of 2015.
· Revenues of $124.7 million, compared to revenues of $149.7 million in the first quarter of 2015.
· GAAP expenses of $128.3 million and adjusted expenses of $122.7 million compared to GAAP expenses of $127.4 million in the first quarter of 2015.
· Average daily trading volume in the U.S. of 162 million shares versus 125 million shares in the fourth quarter of 2015 and 191 million shares in the first quarter of 2015. POSIT® average daily U.S. volume was 65 million shares compared to 49 million shares in the fourth quarter of 2015 and 93 million shares in the first quarter of 2015. Total average daily U.S. volume traded through POSIT Alert® was 13 million shares, compared to 8 million shares in the fourth quarter of 2015 and 17 million shares in the first quarter of 2015.
· In Europe, average daily value traded in POSIT was $1.37 billion, up from $1.24 billion in the fourth quarter of 2015 and $1.30 billion in the first quarter of 2015.
Total average daily value traded through POSIT Alert in Europe was down 2% compared to the fourth quarter of 2015 and down 23% compared to the first quarter of 2015.
· The repurchase of 588,000 shares of common stock for a total of $9.6 million under ITG’s authorized share repurchase program. Repurchases since the first quarter of 2010 have totaled $240.7 million for a total of 15.9 million shares, resulting in a decrease in shares outstanding, net of issuances, by more than 24%.
Commenting on the results, ITG Chief Executive Officer and President, Frank Troise, said, “We are regaining business momentum, as shown by the sequential revenue improvements in all four of our operating regions, although work still needs to be done to engage more deeply with our clients. As we conclude our end-to-end business review in the coming months we will look to make targeted investments to establish our place as the best-in-class provider of execution, liquidity, workflow and measurement solutions to the institutional trading community.”
Regional Segment Results
ITG’s North American revenues were $82.4 million in the first quarter of 2016 compared to $75.8 million in the fourth quarter of 2015 and $99.4 million in the first quarter of 2015. ITG reported net income of $3.2 million in North America in the first quarter of 2016, compared to a net loss of $2.0 million in the fourth quarter of 2015 and net income of $8.9 million in the first quarter of 2015. U.S. revenues were $66.3 million, up from $63.3 million in the fourth quarter of 2015 and down from $80.5 million in the first quarter of 2015, including the impact of the sale of the energy research business in the fourth quarter of 2015. Canada revenues were $16.1 million, up from $12.5 million in the fourth quarter of 2015 but down from $18.9 million in the first quarter of 2015, including the impact of currency translation.
ITG’s Europe and Asia Pacific revenues were $41.9 million in the first quarter of 2016 compared to $40.4 million in the fourth quarter of 2015 and $50.1 million in the first quarter of 2015, including the impact of currency translation. European revenues were $31.1 million, up from $30.7 million in the fourth quarter of 2015 and down from $36.6 million in the first quarter of 2015. Asia Pacific revenues were $10.8 million, up from $9.8 million in the fourth quarter of 2015 but down from $13.5 million in the first quarter of 2015. ITG’s Europe and Asia Pacific operations reported net income of $4.1 million in
the first quarter of 2016 compared to $2.5 million in the fourth quarter of 2015 and $10.5 million in the first quarter of 2015.
Corporate activity reduced GAAP net income by $9.7 million in the first quarter of 2016, including the after-tax impact of the amount expensed during the first quarter of 2016 for the upfront cash and stock awards to ITG’s new CEO, a significant portion of which replaced compensation he forfeited at his former employer, and the reserves and associated legal fees related to the arbitration with ITG’s former CEO. Corporate activity reduced net income by $2.7 million in the first quarter of 2015. Corporate activity includes investment income and non-operating gains, 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, foreign exchange gains and losses and certain non-operating items.
The discussion of results above includes adjusted expenses, 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 May 5, 2016. Those wishing to listen to the call should dial 1-844-881-0134 (1-412-317-6722 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 10084196. The replay will be available starting approximately one hour after the completion of the conference call.
ABOUT ITG
ITG is an independent broker and financial technology firm that improves the efficiency and execution quality of institutional trading. ITG helps clients understand market trends, mitigate risk and navigate increasingly complex markets. A leader in electronic trading since launching the POSIT crossing network in 1987, ITG takes a consultative approach in delivering the highest quality execution and liquidity solutions along with analytical
tools and research. The firm is headquartered in New York with offices in North America, Europe, and the Asia Pacific region. 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 2015 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 domestically, 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 protect our intellectual property, our ability to execute on strategic transactions or initiatives, our ability to attract and retain talented employees, and our ability to pay dividends or repurchase our common stock in the future. 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 Operations (unaudited)
(In thousands, except per share amounts)
|
| Three Months Ended |
| ||||
|
| 2016 |
| 2015 |
| ||
Revenues: |
|
|
|
|
| ||
Commissions and fees |
| $ | 98,960 |
| $ | 118,926 |
|
Recurring |
| 22,195 |
| 26,932 |
| ||
Other |
| 3,513 |
| 3,869 |
| ||
Total revenues |
| 124,668 |
| 149,727 |
| ||
|
|
|
|
|
| ||
Expenses: |
|
|
|
|
| ||
Compensation and employee benefits |
| 52,464 |
| 57,408 |
| ||
Transaction processing |
| 22,834 |
| 24,573 |
| ||
Occupancy and equipment |
| 13,978 |
| 14,372 |
| ||
Telecommunications and data processing services |
| 14,773 |
| 12,772 |
| ||
Other general and administrative |
| 23,722 |
| 17,757 |
| ||
Interest expense |
| 535 |
| 505 |
| ||
Total expenses |
| 128,306 |
| 127,387 |
| ||
(Loss) income before income tax (benefit) expense |
| (3,638 | ) | 22,340 |
| ||
Income tax (benefit) expense |
| (1,132 | ) | 5,607 |
| ||
Net (loss) income |
| $ | (2,506 | ) | $ | 16,733 |
|
|
|
|
|
|
| ||
(Loss) income per share: |
|
|
|
|
| ||
Basic |
| $ | (0.08 | ) | $ | 0.49 |
|
Diluted |
| $ | (0.08 | ) | $ | 0.47 |
|
|
|
|
|
|
| ||
Basic weighted average number of common shares outstanding |
| 33,106 |
| 34,268 |
| ||
Diluted weighted average number of common shares outstanding |
| 33,106 |
| 35,451 |
| ||
INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
Supplemental Financial Data (unaudited)
(In thousands)
|
| Three months ended March 31, |
| ||||
|
| 2016 |
| 2015 |
| ||
Revenues by Geographic Region: |
|
|
|
|
| ||
U.S Operations |
| $ | 66,329 |
| $ | 80,454 |
|
Canadian Operations |
| 16,096 |
| 18,913 |
| ||
European Operations |
| 31,139 |
| 36,605 |
| ||
Asia Pacific Operations |
| 10,757 |
| 13,522 |
| ||
Corporate (non-product) |
| 347 |
| 233 |
| ||
Total Revenues |
| $ | 124,668 |
| $ | 149,727 |
|
|
| Three months ended March 31, |
| ||||
|
| 2016 |
| 2015 |
| ||
Revenues by Product Group: |
|
|
|
|
| ||
Electronic Brokerage |
| $ | 64,261 |
| $ | 80,454 |
|
Research Sales and Trading |
| 25,532 |
| 32,513 |
| ||
Trading Platforms |
| 23,593 |
| 25,073 |
| ||
Analytics |
| 10,935 |
| 11,454 |
| ||
Corporate (non-product) |
| 347 |
| 233 |
| ||
Total Revenues |
| $ | 124,668 |
| $ | 149,727 |
|
INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Financial Condition (unaudited)
(In thousands, except share amounts)
|
| March 31, |
| December 31, |
| ||
Assets |
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 274,388 |
| $ | 330,653 |
|
Cash restricted or segregated under regulations and other |
| 38,104 |
| 37,852 |
| ||
Deposits with clearing organizations |
| 79,618 |
| 70,860 |
| ||
Securities owned, at fair value |
| 6,157 |
| 5,598 |
| ||
Receivables from brokers, dealers and clearing organizations |
| 974,433 |
| 1,036,777 |
| ||
Receivables from customers |
| 70,151 |
| 49,176 |
| ||
Premises and equipment, net |
| 54,511 |
| 55,496 |
| ||
Capitalized software, net |
| 39,837 |
| 39,379 |
| ||
Goodwill, net |
| 11,563 |
| 11,933 |
| ||
Intangibles, net |
| 23,980 |
| 24,611 |
| ||
Income taxes receivable |
| 3,865 |
| 128 |
| ||
Deferred taxes |
| 13,954 |
| 23,590 |
| ||
Other assets |
| 26,662 |
| 22,969 |
| ||
Total assets |
| $ | 1,617,223 |
| $ | 1,709,022 |
|
Liabilities and Stockholders’ Equity |
|
|
|
|
| ||
Liabilities: |
|
|
|
|
| ||
Accounts payable and accrued expenses |
| $ | 150,982 |
| $ | 169,530 |
|
Short-term bank loans |
| 81,820 |
| 81,934 |
| ||
Payables to brokers, dealers and clearing organizations |
| 897,523 |
| 960,559 |
| ||
Payables to customers |
| 21,026 |
| 9,957 |
| ||
Securities sold, not yet purchased, at fair value |
| 4,019 |
| 2,637 |
| ||
Income taxes payable |
| 5,762 |
| 17,017 |
| ||
Deferred taxes |
| — |
| — |
| ||
Term debt |
| 11,102 |
| 12,567 |
| ||
Total liabilities |
| 1,172,234 |
| 1,254,201 |
| ||
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; 52,360,184 and 52,300,885 shares issued at March 31, 2016 and December 31, 2015, respectively |
| 524 |
| 523 |
| ||
Additional paid-in capital |
| 230,678 |
| 239,090 |
| ||
Retained earnings |
| 566,750 |
| 571,626 |
| ||
Common stock held in treasury, at cost; 19,156,215 and 19,207,419 shares at March 31, 2016 and December 31, 2015, respectively |
| (335,287 | ) | (336,923 | ) | ||
Accumulated other comprehensive loss (net of tax) |
| (17,676 | ) | (19,495 | ) | ||
Total stockholders’ equity |
| 444,989 |
| 454,821 |
| ||
Total liabilities and stockholders’ equity |
| $ | 1,617,223 |
| $ | 1,709,022 |
|
INVESTMENT TECHNOLOGY GROUP, INC.
Non-GAAP Financial Measures
(In thousands, except per share amounts)
In evaluating ITG’s financial performance, management reviews results from operations, which excludes certain unique or 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 provides investors with greater transparency and supplemental data relating to our financial condition and results of operation, and therefore a more complete understanding of factors affecting our business than U.S. GAAP measures alone. These measures should be viewed in addition to, and not in lieu of, ITG’s reported results under GAAP.
|
| Three Months |
| |
Total expenses |
| $ | 128,306 |
|
Less: |
|
|
| |
CEO compensation (1) |
| 2,797 |
| |
Contingencies for legal proceedings (2) |
| 2,812 |
| |
Adjusted expenses |
| 122,697 |
| |
|
|
|
| |
Loss before income tax benefit |
| (3,638 | ) | |
Effect of adjustments |
| 5,609 |
| |
Adjusted pre-tax income |
| 1,971 |
| |
|
|
|
| |
Income tax benefit |
| (1,132 | ) | |
Tax effect of adjustments (1)(2) |
| 1,262 |
| |
Adjusted income tax expense |
| 130 |
| |
|
|
|
| |
Net loss |
| (2,506 | ) | |
Net effect of adjustments |
| 4,347 |
| |
Adjusted net income |
| $ | 1,841 |
|
|
|
|
| |
Diluted loss per share |
| $ | (0.08 | ) |
Net effect of adjustments |
| 0.13 |
| |
Adjusted earnings per diluted share |
| $ | 0.05 |
|
Notes:
(1) The Company’s new Chief Executive Officer was granted cash and stock awards upon the commencement of his employment in January 2016, a significant portion of which replaced awards he forfeited at his former employer. Due to U.S. tax regulations, only a small portion of the amount expensed for these awards during the three months ended March 31, 2016 was eligible for a tax deduction.
(2) During the three months ended March 31, 2016, the Company established a reserve of $2.5 million in accordance with ASC 450, Contingencies, for the pending arbitration case with the Company’s former Chief Executive Officer and incurred legal fees related to this matter of $0.3 million.
Reconciliation of Adjusted Earnings
Before Interest, Taxes, Depreciation, and Amortization
(In thousands)
|
| Three Months Ended |
| ||||
|
| 2016 |
| 2015 |
| ||
|
|
|
|
|
| ||
Net (Loss) Income (1) |
| $ | (2,506 | ) | $ | 16,733 |
|
Impact of adjustments, after-tax |
| 4,347 |
| — |
| ||
Adjusted net income |
| 1,841 |
| 16,733 |
| ||
Deduct: |
|
|
|
|
| ||
Investment income |
| (307 | ) | (222 | ) | ||
|
|
|
|
|
| ||
Add Back: |
|
|
|
|
| ||
Interest expense |
| 535 |
| 505 |
| ||
Provision for income taxes |
| (1,132 | ) | 5,607 |
| ||
Tax effect of adjustments |
| 1,262 |
| — |
| ||
Depreciation and Amortization |
| 10,781 |
| 11,161 |
| ||
Adjusted earnings before interest, taxes, depreciation, and amortization |
| $ | 12,980 |
| $ | 33,784 |
|
Notes:
(1) Net income includes pre-tax charges for non-cash stock-based compensation of $6.6 million (including $1.3 million for the upfront stock awards to the new Chief Executive Officer) and $4.9 million for the three months ended March 31, 2016 and 2015, respectively.
###
