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ITG Reports First Quarter 2014 Results

Record European Quarter Drives EPS to More Than Four-Year High

NEW YORK, May 1, 2014 (GLOBE NEWSWIRE) -- ITG (NYSE:ITG), an independent execution and research broker, today reported results for the quarter ended March 31, 2014.

First quarter 2014 highlights included:

  • Net income of $13.6 million, or $0.37 per diluted share compared to net income of $8.6 million, or $0.22 per diluted share and adjusted net income of $9.4 million, or $0.24 per diluted share for the first quarter of 2013. Net income for the first quarter of 2013 included duplicate rent pre-tax charges associated with the build-out of ITG's new headquarters of $1.3 million, or $0.02 per diluted share after taxes.
     
  • Revenues of $137.6 million, compared to revenues of $132.1 million in the first quarter of 2013.
     
  • Expenses of $119.2 million, compared to expenses of $121.1 million and adjusted expenses of $119.8 million in the first quarter of 2013. 
     
  • Average daily trading volume in the U.S. of 164 million shares versus 193 million shares in the first quarter of 2013. POSIT® average daily U.S. volume was 67 million shares compared to 89 million shares in the first quarter of 2013. Total average daily volume traded through POSIT Alert® declined approximately 5% compared with the first quarter of 2013.
     
  • In Europe, average daily value traded in POSIT was $990 million, compared with $482 million in the first quarter of 2013. Total average daily value traded through POSIT Alert rose more than 200% in the first quarter of 2014 compared with the prior-year period. 
     
  • The repurchase of 743,800 shares of common stock under ITG's authorized share repurchase program for a total of $12.7 million. Repurchases since the first quarter of 2010 have totaled $153.6 million for a total of 11.3 million shares, resulting in a decrease in shares outstanding, net of issuances, of nearly 18%. 

Revenues from U.S. operations were $75.7 million in the first quarter of 2014 compared to $81.2 million in the first quarter of 2013. ITG's U.S. operations reported net income of $2.5 million in the first quarter of 2014, compared to net income of $4.5 million and adjusted net income of $5.3 million in the first quarter of 2013.   The overall revenue capture rate per share in the U.S. was $0.0047, unchanged from the fourth quarter of 2013 and up from $0.0046 in the first quarter of 2013. 

ITG's International revenues were $61.9 million in the first quarter of 2014 compared to $50.8 million in the first quarter of 2013. European revenues rose to a record $32.8 million, up 57% from the first quarter of 2013, while Canadian revenues were $19.3 million, up 4% versus the first quarter of 2013.  Asia Pacific revenues were $9.8 million, down 14% from the first quarter of 2013. ITG's International operations reported net income of $11.1 million in the first quarter of 2014 compared to net income of $4.1 million in the first quarter of 2013.

"Continued momentum in our European operations and improved Canadian revenues during the first quarter of 2014 helped drive our earnings per share to the highest level since the third quarter of 2009.  Our strategy of building out our platform globally without sacrificing expense discipline enabled us to deliver an annualized return on equity of 13%," said Bob Gasser, ITG's Chief Executive Officer and President. 

"We believe the current business environment has brought a renewed focus on the importance of execution quality and provides an opportunity for ITG to demonstrate the strength of our capabilities. This strength was evidenced by our solid showing in the most recent Greenwich Associates survey of U.S. Electronic trading," added Mr. Gasser.      

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 table 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 10043463. 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 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 2013 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 regulatory scrutiny, 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.

 
INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Income (unaudited)
(In thousands, except per share amounts)
 
  Three Months Ended
  March 31,
  2014 2013
Revenues:    
Commissions and fees $ 108,424 $ 103,008
Recurring 26,280 25,340
Other 2,905 3,702
Total revenues 137,609 132,050
     
Expenses:    
Compensation and employee benefits 51,177 49,549
Transaction processing 20,496 21,532
Occupancy and equipment 15,078 16,541
Telecommunications and data processing services 12,697 14,098
Other general and administrative 19,105 18,776
Interest expense 636 602
Total expenses 119,189 121,098
Income before income tax expense 18,420 10,952
Income tax expense 4,800 2,330
Net income $ 13,620 $ 8,622
     
Earnings per share:    
Basic $ 0.38 $ 0.23
Diluted $ 0.37 $ 0.22
     
Basic weighted average number of common shares outstanding 36,081 37,378
Diluted weighted average number of common shares outstanding 37,185 38,615
     
INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
Supplemental Financial Data (unaudited)
(In thousands)
 
  Three Months ended  
March 31,
Revenues by Geographic Region: 2014 2013
U.S. Operations $ 75,667 $ 81,243
Canadian Operations 19,336 18,544
European Operations 32,832 20,950
Asia Pacific Operations 9,774 11,313
Total Revenues $ 137,609 $ 132,050
   
  Three Months ended  
March 31,
  2014 2013
Revenues by Product Category:    
Electronic Brokerage $ 72,883 $ 69,648
Research, Sales and Trading 29,245 25,413
Platforms 23,733 25,099
Analytics 11,450 11,670
Corporate (non-product) 298 220
Total Revenues $ 137,609 $ 132,050
     

 

INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Financial Condition
(In thousands, except share amounts)
 
 
 
 
March 31, December 31,
  2014 2013
Assets (unaudited)  
Cash and cash equivalents $ 222,661 $ 261,897
Cash restricted or segregated under regulations and other 71,440 71,202
Deposits with clearing organizations 46,819 74,771
Securities owned, at fair value 8,583 7,436
Receivables from brokers, dealers and clearing organizations 1,265,104 1,018,342
Receivables from customers 1,229,605 591,004
Premises and equipment, net 63,611 66,171
Capitalized software, net 37,700 37,892
Other intangibles, net 29,968 31,201
Income taxes receivable 1,245 54
Deferred taxes 25,680 34,130
Other assets 22,720 15,787
Total assets $ 3,025,136 $ 2,209,887
     
Liabilities and Stockholders' Equity    
Liabilities:    
Accounts payable and accrued expenses $ 162,054 $ 175,931
Short-term bank loans 27,059 73,539
Payables to brokers, dealers and clearing organizations 1,616,294 1,025,268
Payables to customers 762,399 469,264
Securities sold, not yet purchased, at fair value 3,943 2,953
Income taxes payable 9,983 14,805
Deferred taxes 186 363
Term debt 27,212 30,332
Total liabilities 2,609,130 1,792,455
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; 52,191,351 and 52,158,374 shares issued at March 31, 2014 and December 31, 2013, respectively 522 522
Additional paid-in capital 230,806 240,057
Retained earnings 450,190 436,570
Common stock held in treasury, at cost; 16,195,036 and 16,005,500 shares at March 31, 2014 and December 31, 2013, respectively (272,083) (268,253)
Accumulated other comprehensive income (net of tax) 6,571 8,536
Total stockholders' equity 416,006 417,432
Total liabilities and stockholders' equity $ 3,025,136 $ 2,209,887

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 items. 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 periods 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 Mid-town Manhattan and as a result, incurred duplicate rent charges during the first quarter of 2013.

CONTACT: ITG Media/Investor Contact:
         J.T. Farley
         1-212-444-6259
         corpcomm@itg.com

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