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Investment Technology Group Reports Third Quarter 2009 Results

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Investment Technology Group, Inc. (NYSE: ITG), a leading agency broker and financial technology firm, today announced that for the third quarter ended September 30, 2009, net income was $17.5 million, or $0.40 per diluted share, versus net income of $27.2 million and earnings of $0.62 per diluted share in the third quarter of 2008. ITG’s revenues for the third quarter of 2009 were $158.4 million versus $188.3 million for the third quarter of 2008. Pre-tax margins in the third quarter of 2009 were 17.7 percent compared to 24.2 percent in the third quarter of 2008.

“The third quarter saw mutual fund flows directed largely towards international funds and index funds, with flows to our core active domestic clients turning negative in August,” said Bob Gasser, ITG's Chief Executive Officer and President. "While this made for a challenging environment, we are confident that the market will see a recovery in these fund flows and that we will benefit from the strong operating leverage of our platform. We continue to manage costs aggressively while investing selectively in markets and products that hold promise for our top and bottom lines with the return of improved market conditions.”

ITG’s non-US revenues were $43.8 million in the third quarter of 2009 versus $47.2 million in the third quarter of 2008. Non-US operations posted net income of $0.2 million in the third quarter of 2009, compared to $0.6 million of net income in the third quarter of 2008.

“Our European business benefited from product parity with North America as well as declining transaction processing costs, and we are well positioned to benefit from additional market recovery. In Europe, ITG posted its second consecutive quarter of revenue growth and profitability," said Mr. Gasser. "While our core client business in Canada remains strong, revenues were pressured by declining market volumes and a rapidly changing market structure. In the Asia Pacific region, better stock price performance did not correlate with higher turnover across the region, yet we did grow our revenue and gain market share. We continue to invest heavily in people, products and relationships as we position the firm for a greater role in the Asia Pacific markets."

Year to Date results

For the nine months ended September 30, 2009, revenues were $482.1 million compared to $572.9 million in the prior year period. Net income was $50.6 million and diluted earnings per share were $1.15 in the first nine months of 2009 versus net income of $85.9 million and diluted earnings per share of $1.95 in the first nine months of 2008.

Conference Call

ITG has scheduled a conference call today at 11:00 a.m. ET to discuss third quarter results. Those wishing to listen to the call should dial 800-295-3991 and enter the pass code 79761413 at 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 web site at 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 and entering the pass code 48014893. The replay will be available starting approximately two hours after the completion of the conference call.

About ITG

Investment Technology Group, Inc., is a specialized agency brokerage and financial technology firm that partners with asset managers globally to provide innovative solutions spanning the investment continuum. A leader in electronic trading since launching POSIT® in 1987, ITG’s integrated approach now includes a range of products from portfolio management and pre-trade analysis to trade execution and post-trade evaluation. Asset managers rely on ITG’s independence, experience, and agility 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 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 2008 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, 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, 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, as well as general economic, business, credit and financial market conditions, internationally or nationally.

INVESTMENT TECHNOLOGY GROUP, INC.

Consolidated Statements of Income (unaudited)

(In thousands, except per share amounts)

   
Three Months Ended

September 30,

Nine Months Ended

September 30,

2009   2008 2009   2008
Revenues:
Commissions and fees (1) $ 132,069 $ 162,083 $ 407,113 $ 491,527
Recurring 22,145 21,958 65,290 65,888
Other 4,224 4,237 9,667 15,498
Total revenues 158,438 188,278 482,070 572,913
 
Expenses:
Compensation and employee benefits 56,758 64,640 175,833 194,038
Transaction processing 24,204 24,421 72,050 73,103
Occupancy and equipment 14,958 14,986 44,696 42,741
Telecommunications and data processing services 13,770 14,026 41,052 39,214
Other general and administrative 20,307 23,004 60,705 69,537
Interest expense 407 1,637 2,220 5,593
Total expenses 130,404 142,714 396,556 424,226
Income before income tax expense 28,034 45,564 85,514 148,687
Income tax expense 10,556 18,393 34,887 62,788
Net income $ 17,478 $ 27,171 $ 50,627 $ 85,899
 
Earnings per share:
Basic $ 0.40 $ 0.63 $ 1.16 $ 1.97
Diluted $ 0.40 $ 0.62 $ 1.15 $ 1.95
 
Basic weighted average number of common shares outstanding 43,627 43,463 43,479 43,598
Diluted weighted average number of common shares outstanding 44,126 43,869 43,859 44,122
 

(1) We have changed the income caption commissions revenues to commissions and fee revenues to better reflect the commission equivalent fees earned on spread based trades.

INVESTMENT TECHNOLOGY GROUP, INC.

Consolidated Statements of Financial Condition

(In thousands, except share amounts)

 

September 30, 2009

December 31, 2008

(unaudited)
Assets
Cash and cash equivalents $ 354,050 $ 352,960
Cash restricted or segregated under regulations and other 92,962 73,218
Deposits with clearing organizations 21,253 43,241
Securities owned, at fair value 6,736 6,399
Receivables from brokers, dealers and clearing organizations 590,138 328,528
Receivables from customers 857,125 300,158
Premises and equipment, net 40,577 48,321
Capitalized software, net 72,059 62,821
Goodwill 425,598 423,896
Other intangibles, net 29,047 31,094
Deferred taxes 6,455 2,591
Other assets 14,023 12,226
Total assets $ 2,510,023 $ 1,685,453
 
Liabilities and Stockholders’ Equity
Liabilities:
Accounts payable and accrued expenses $ 221,591 $ 221,582
Short-term bank loans 24,900
Payables to brokers, dealers and clearing organizations 854,382 232,527
Payables to customers 476,899 287,515
Securities sold, not yet purchased, at fair value 49 2,479
Income taxes payable 9,313 25,646
Deferred taxes 19,890 8,924
Long term debt 58,800 94,500
Total liabilities 1,640,924 898,073
 
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; 51,682,153 and 51,582,306 shares issued at September 30, 2009 and December 31, 2008, respectively, and 43,683,428 and 43,244,184 shares outstanding at September 30, 2009 and December 31, 2008, respectively 517 516
Additional paid-in capital 230,234 219,830
Retained earnings 816,946 766,319
Common stock held in treasury, at cost; 7,998,725 and 8,338,122 shares at September 30, 2009 and December 31, 2008, respectively (185,204 ) (193,206 )
Accumulated other comprehensive income (net of tax) 6,606 (6,079 )
Total stockholders’ equity 869,099 787,380
Total liabilities and stockholders’ equity $ 2,510,023 $ 1,685,453

Source: Investment Technology Group, Inc.

ITG:
J.T. Farley, 212-444-6259

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