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ITG Reports First Quarter 2013 Results

NEW YORK, May 2, 2013 /PRNewswire/ -- ITG (NYSE: ITG), an independent execution and research broker, today reported results for the quarter ended March 31, 2013.

First quarter 2013 highlights included:

  • GAAP net income of $8.6 million, or $0.22 per diluted share compared to GAAP net income of $5.5 million, or $0.14 per diluted share for the first quarter of 2012.  GAAP net income for the first quarter of 2013 included duplicate rent charges associated with the build-out of ITG's new headquarters of $1.3 million, or $0.02 per diluted share after taxes.  
  • Adjusted net income of $9.4 million, or $0.24 per diluted share, excluding the duplicate rent charges.  Both GAAP net income and adjusted net income include a tax credit of approximately $1.2 million, or $0.03 per diluted share after taxes.  This credit applied to the full 2012 year but was booked during the first quarter of 2013 due to retroactive changes in tax legislation.
  • Revenues of $132.1 million, compared to revenues of $136.4 million in the first quarter of 2012.
  • Expenses of $121.1 million compared to expenses of $127.9 million in the first quarter of 2012.  Adjusted expenses, net of the duplicate rent charges, were $119.8 million.
  • Average daily trading volume in the U.S. of 193 million shares, up from 190 million in the first quarter of 2012.  POSIT® average daily U.S. volume was 89 million shares compared to 96 million shares in the first quarter of 2012.  Total average daily volume traded through POSIT Alert® rose 25% compared with the first quarter of 2012.
  • In Europe, average daily value traded in POSIT was $482 million, compared with $490 million in the first quarter of 2012.  Total average daily value traded through POSIT Alert rose 108% in the first quarter of 2013 compared with the prior-year period. 
  • The repurchase of 748,100 shares of common stock under ITG's authorized share repurchase program for a total of $9.0 million.  Repurchases since the first quarter of 2010 have totaled $121.6 million for 9.3 million shares, resulting in a decrease in shares outstanding, net of new issuances, of 15%. 

Revenues from U.S. operations were $81.2 million in the first quarter of 2013 compared to $84.6 million in the first quarter of 2012.  ITG's U.S. operations posted GAAP net income of $4.5 million and adjusted net income of $5.3 million in the first quarter of 2013, compared to net income of $1.7 million in the first quarter of 2012.  Sell-side client volume represented 49% of total U.S. volumes, down from 52% in the fourth quarter of 2012.  The overall revenue capture rate per share in the U.S. rose to $0.0046, up from $0.0043 in the fourth quarter of 2012.  This marked the first sequential increase in average U.S. revenue capture since the first quarter of 2011.

ITG's International revenues were $50.8 million in the first quarter of 2013 compared to $51.8 million in the first quarter of 2012.  ITG's International operations posted net income of $4.1 million in the first quarter of 2013, compared to net income of $3.8 million in the first quarter of 2012.

"Stronger overall performance in our European business and improved operating efficiency drove significant improvements in profitability, demonstrating the leverage in our business," said Bob Gasser , ITG's Chief Executive Officer and President.  "We will continue to focus on expense discipline and the broadening of our client relationships to enhance shareholder returns."

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.

Conference Call

ITG has scheduled a conference call today at 11:00 am ET to discuss first quarter results.  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 can be downloaded from 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 10027488.  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 inNorth America, Europe, and Asia Pacific. For more information, please visitwww.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 2012 Annual Report on Form 10-K, and its Form 10-Qs 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, changes in tax policy or accounting rules, the actions of both current and potential new competitors, changes in commission pricing, the volatility of our stock price, 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, our ability to attract and retain talented employees and our ability to achieve cost savings from our cost reduction plans. 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
March 31,




2013


2012


Revenues:






Commissions and fees


$

103,008


$

105,264


Recurring


25,340


27,432


Other


3,702


3,679


Total revenues


132,050


136,375








Expenses:






Compensation and employee benefits


49,549


52,587


Transaction processing


21,532


22,223


Occupancy and equipment


16,541


14,649


Telecommunications and data processing services


14,098


15,067


Other general and administrative


18,776


22,677


Interest expense


602


678


Total expenses


121,098


127,881


Income before income tax expense


10,952


8,494


Income tax expense


2,330


3,036


Net income


$

8,622


$

5,458








Earnings per share:






Basic


$

0.23


$

0.14


Diluted


$

0.22


$

0.14








Basic weighted average number of common shares outstanding


37,378


39,112


Diluted weighted average number of common shares outstanding


38,615


40,303


 


 

INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES

Supplemental Financial Data (unaudited)

(In thousands)

 





Three months ended March 31,




2013


2012


Revenues by Geographic Region:






U.S. Operations


$

81,243


$

84,589


Canadian Operations


18,544


20,831


European Operations


20,950


20,127


Asia Pacific Operations


11,313


10,828


   Total Revenues


$

132,050


$

136,375







Three months ended March 31,




2013


2012


Revenues by Product Group:






Electronic Brokerage


$

69,648


$

72,180


Research Sales and Trading


25,413


26,426


Platforms


25,099


25,744


Analytics


11,670


11,597


Corporate (non-product)


220


428


   Total Revenues


$

132,050


$

136,375


                

INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Financial Condition

(In thousands, except share amounts)

 




March 31, 2013

December 31, 2012

Assets

(unaudited)


Cash and cash equivalents

$233,898

$245,875

Cash restricted or segregated under regulations and other

59,768

61,117

Deposits with clearing organizations

24,348

29,149

Securities owned, at fair value

11,515

10,086

Receivables from brokers, dealers and clearing organizations

2,112,042

1,107,119

Receivables from customers

1,362,041

546,825

Premises and equipment, net

65,607

54,989

Capitalized software, net

42,205

43,994

Other intangibles, net

34,152

35,227

Income taxes receivable

2

7,460

Deferred taxes

36,763

39,155

Other assets

19,022

15,763

Total assets

$4,001,363

$2,196,759

Liabilities and Stockholders' Equity



Liabilities:



Accounts payable and accrued expenses

$148,052

$165,062

Short-term bank loans

47,494

22,154

Payables to brokers, dealers and clearing organizations

2,412,090

1,337,459

Payables to customers

935,072

226,892

Securities sold, not yet purchased, at fair value

6,623

5,249

Income taxes payable

12,134

10,608

Deferred taxes

226

293

Term debt

35,574

19,272

Total liabilities

3,597,265

1,786,989

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; 52,105,402 and 52,037,011 shares issued at March 31, 2013 and December 31, 2012, respectively

521

520

Additional paid-in capital

234,375

245,002

Retained earnings

414,107

405,485

Common stock held in treasury, at cost; 14,893,575 and 14,677,872 shares at March 31, 2013 and December 31, 2012, respectively

(251,485)

(253,111)

Accumulated other comprehensive income (net of tax)

6,580

11,874

Total stockholders' equity

404,098

409,770

Total liabilities and stockholders' equity

$4,001,363

$2,196,759

 

INVESTMENT TECHNOLOGY GROUP, INC.
Reconciliation of US GAAP Results to Adjusted Results

In evaluating ITG's financial performance, management reviews results from operations which excludes non-operating or one-time charges.  Adjusted expenses and adjusted net income and related per share amounts are non-GAAP performance measures, but the Company believes that they 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.

The following are reconciliations of GAAP results to adjusted results for the period presented (in thousands except per share amounts):

 



Three Months Ended March 31, 2013




(unaudited)




Consolidated




U.S. Operations



Total revenues

$

132,050





$

81,243












Total expenses

121,098




75,503



   Less:








   Duplicate rent charges (1)

(1,331)




(1,331)



Adjusted operating expenses

119,767




74,172











Income before income tax benefit

10,952




5,740



  Effect of pro forma adjustment

1,331




1,331



Adjusted pre-tax operating income

12,283




7,071











Income tax expense

2,330




1,227



   Tax effect of pro forma adjustment

547




547



Adjusted operating income tax expense

2,877




1,774











Net income

8,622




4,513



    Net effect of pro forma adjustment

784




784



Adjusted operating net income

$

9,406




$

5,297










Diluted earnings per share

$

0.22




$

0.12



  Net effect of pro forma adjustment

0.02




0.02


Adjusted diluted operating earnings per share

$

0.24




$

0.14















Notes:













(1) During the fourth quarter of 2012, ITG began to build out and ready its new lower Manhattan headquarters while continuing to occupy its existing headquarters in midtown Manhattan and as a result, has since incurred duplicate rent charges.

SOURCE ITG

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