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Investment Technology Group Reports First Quarter 2010 Results

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Cost Reductions and Improved International Operations Stabilize Operating Earnings in a Challenging Environment

NEW YORK, April 29, 2010 /PRNewswire via COMTEX/ --Investment Technology Group, Inc. (NYSE: ITG), a leading agency broker and financial technology firm, today reported results for the quarter ended March 31, 2010. A reduction in U.S. expenses and improved international operations substantially reduced the impact of lower U.S. market volumes on operating earnings.

Net income for the first quarter of 2010 was $8.4 million, or $0.19 per diluted share on revenues of $146.7 million. Excluding the impact of a $6.1 million pre-tax ($3.5 million after tax) non-cash write-off of certain capitalized software initiatives, pro forma operating net income was $11.9 million, or $0.27 per diluted share. For the first quarter of 2009, net income was $12.8 million, or $0.29 per diluted share, on revenues of $155.7 million.

Due to the 2009 restructuring and other cost management initiatives, U.S. expenses were down 7% compared to the first quarter of 2009 to $86.7 million. Excluding the impact of the $6.1 million write-off described above, these expenses were down 13% to $80.6 million.

ITG's non-U.S. revenues were $46.8 million in the first quarter of 2010, a 22% increase over $38.3 million in the first quarter of 2009. Net income from non-U.S. operations was $0.6 million during the first quarter of 2010, compared to a net loss of $2.1 million during the first quarter of 2009.

ITG also repurchased 566,000 shares of its common stock during the first quarter of 2010 at an average cost of $17.52 per share.

"As U.S. institutional equity volumes remain subdued, we continue to focus on managing costs and capital intensity, optimizing the firm's global footprint and segmenting our client relationships. This focus has allowed us to stabilize our profitability and gave us the flexibility to return value to stockholders through our share repurchase program," said Bob Gasser, ITG's Chief Executive Officer and President. "We are confident that when portfolio turnover and fund flows return to U.S. cash equities, we will see improvements to our bottom line from this enhanced operating leverage."

The discussion above includes pro forma operating 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.

Conference Call

ITG has scheduled a conference call today at 11:00 a.m. ET to discuss first quarter results. Those wishing to listen to the call should dial 866-831-6272 (1-617-213-8859 outside the U.S.) and enter the passcode 84983291at least 10 minutes prior to the start of the call to ensure connection. The conference call and webcast will also be accessible through ITG's website at http://www.itg.com/. For those unable to listen to the live broadcast of the call, a replay will be available for one week by dialing 888-286-8010 (1-617-801-6888 outside the U.S.) and entering the passcode 67206831. The replay will be available starting approximately two hours after the completion of the conference call.

About ITG

Investment Technology Group, Inc., is an independent agency broker and financial technology firm that partners with asset managers globally to improve performance throughout the investment process. A leader in electronic trading since launching the POSIT(R) crossing network in 1987, ITG takes a consultative approach in delivering the highest quality institutional liquidity and market-leading execution services, measurement tools, and proprietary data. Asset managers rely on ITG's independence, experience, and intellectual capital to help mitigate risk, improve performance, and navigate increasingly complex markets. The firm is headquartered in New York with offices in North America, Europe, and the Asia Pacific region. For more information on ITG, please visit http://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. These factors are noted throughout ITG's 2009 Annual Report, on its Form 10-K, and on its Form 10-Qs and include, but are not limited to, the actions of both current and potential new competitors, fluctuations in market trading volumes, financial market volatility, changes in commission pricing, potential impairment charges related to goodwill and other long-lived assets, evolving industry regulations, errors or malfunctions in our systems or technology, rapid changes in technology, cash flows into or redemptions from equity funds, effects of inflation, 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 companies we have acquired, changes in tax policy or accounting rules, fluctuations in foreign exchange rates, adverse changes or volatility in interest rates, our ability to attract and retain talented employees, as well as general economic, business, credit and financial market conditions, internationally or nationally. 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 Contact:
    J.T. Farley
    (212) 444-6259

    INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
       Consolidated Statements of Income (unaudited)
         (In thousands, except per share amounts)

                                                Three
                                                Months
                                                Ended
                                              March 31,
                                              ---------
                                             2010            2009
                                             ----            ----
    Revenues:
      Commissions and fees               $121,918        $130,932
      Recurring                            21,971          21,162
      Other                                 2,801           3,573
                                            -----           -----
        Total revenues                    146,690         155,667
                                          -------         -------
    Expenses:
      Compensation and employee
       benefits                            53,464          60,178
      Transaction processing               20,659          22,930
      Occupancy and equipment              15,197          14,838
      Telecommunications and data
       processing services                 13,635          13,970
      Other general and
       administrative                      28,070          19,041
      Interest expense                        224           1,212
                                              ---           -----
        Total expenses                    131,249         132,169
                                          -------         -------
    Income before income tax
     expense                               15,441          23,498
    Income tax expense                      7,009          10,660
                                            -----          ------
    Net income                             $8,432         $12,838
                                           ======         =======
    Earnings per share:
    Basic                                   $0.19           $0.30
                                            =====           =====
    Diluted                                 $0.19           $0.29
                                            =====           =====
    Basic weighted average
     number of common shares
     outstanding                           43,827          43,337
    Diluted weighted average
     number of common shares
     outstanding                           44,415          43,606

    INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
      Consolidated Statements of Financial Condition
            (In thousands, except share amounts)
                                           March           December
                                             31,                31,
                                                2010               2009
                                                ----               ----
                                       (unaudited)
    Assets
    Cash and cash equivalents               $322,024           $330,879
    Cash restricted or segregated
     under regulations and other              92,627             95,787
    Deposits with clearing
     organizations                            19,451             14,891
    Securities owned, at fair
     value                                     7,147              6,768
    Receivables from brokers,
     dealers and clearing
     organizations                           976,731            364,436
    Receivables from customers             1,059,125            298,342
    Premises and equipment, net               41,469             41,437
    Capitalized software, net                 64,139             68,913
    Goodwill                                 425,346            425,301
    Other intangibles, net                    26,530             27,263
    Income taxes receivable                    7,682             13,897
    Deferred taxes                             2,515              2,910
    Other assets                              15,355             12,279
                                              ------             ------
    Total assets                          $3,060,141         $1,703,103
                                          ==========         ==========
    Liabilities and Stockholders'
     Equity
    Liabilities:
    Accounts payable and accrued
     expenses                               $167,590           $209,496
    Payables to brokers, dealers
     and clearing organizations              953,207            248,664
    Payables to customers                  1,004,814            299,200
    Securities sold, not yet
     purchased, at fair value                     87                 31
    Income taxes payable                      11,900             14,113
    Deferred taxes                            17,433             16,999
    Long term debt                            35,000             46,900
                                              ------             ------
      Total liabilities                    2,190,031            835,403
                                           ---------            -------
    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; 51,731,780 and
     51,682,153 shares issued at
     March 31, 2010 and December
     31, 2009, respectively                    517              517
    Additional paid-in capital               231,059            233,374
    Retained earnings                        817,585            809,153
    Common stock held in
     treasury, at cost; 8,196,381
     and 7,891,717 shares at
     March 31, 2010 and December
     31, 2009, respectively               (185,834)        (182,743)
    Accumulated other
     comprehensive income (net of
     tax)                                      6,783              7,399
                                               -----              -----
      Total stockholders' equity             870,110            867,700
                                             -------            -------
    Total liabilities and
     stockholders' equity                 $3,060,141         $1,703,103
                                          ==========         ==========

INVESTMENT TECHNOLOGY GROUP, INC.

Reconciliation of U.S. GAAP Results to Pro Forma Operating Results

In evaluating the Company's financial performance, management reviews results from operations which excludes non-operating or one-time charges. Pro forma operating net income and pro forma diluted operating earnings per share are non-GAAP (generally accepted accounting principles) performance measures, but the Company believes that they are useful to assist investors in gaining an understanding of the trends and operating results for the Company's core businesses. These measures should be viewed in addition to, and not in lieu of, the Company's reported results under U.S. GAAP.

The following is a reconciliation of U.S. GAAP results to pro forma results for the periods presented (in thousands except per share amounts):

                                                  Three Months Ended
                                                      March 31,
                                                  ------------------
                                                   2010            2009
                                                   ----            ----
                                             (unaudited)      (unaudited)
                                             -----------      -----------
    Total revenues                             $146,690        $155,667
    Total expenses                              131,249         132,169
       Less:
       Write-off of capitalized software (1)     (6,091)             -
                                                 ------            ---
    Pro forma operating expenses                125,158         132,169
                                                -------         -------
    Income before income tax expense             15,441          23,498
      Effect of pro forma adjustment              6,091              -
                                                  -----            ---
    Pro forma pre-tax operating income           21,532          23,498
                                                 ------          ------
    Income tax expense                            7,009          10,660
       Tax effect of pro forma adjustment         2,589              -
                                                  -----            ---
    Pro forma operating income tax expense        9,598          10,660
                                                  -----          ------
    Net income                                    8,432          12,838
       Net effect of pro forma adjustment         3,502              -
                                                  -----            ---
    Pro forma operating net income              $11,934         $12,838
                                                -------         -------
    Diluted earnings per share                    $0.19           $0.29
       Net effect of pro forma adjustment          0.08              -
    Pro forma diluted operating earnings per
     share                                        $0.27           $0.29
                                                  -----           -----

    Notes:
    ------
       (1)As part of the fourth quarter 2009 restructuring, ITG made certain
       changes to its product priorities and wrote off $2.4 million of
       capitalized development initiatives that were not yet deployed. As
       ITG's product development plan continued to evolve in the first
       quarter of 2010, it was determined that additional amounts
       previously capitalized were not likely to be used and a further $6.1
       million was written off.

SOURCE Investment Technology Group, Inc.

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