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Investment Technology Group Reports Second Quarter 2010 Results

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Revenues and Pro Forma Operating Earnings Rise Over First Quarter 2010

NEW YORK, July 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 June 30, 2010. An increase in U.S. volumes drove revenues and pro forma operating earnings higher as compared to the first quarter of 2010.

Net income for the second quarter of 2010 was $7.5 million, or $0.17 per diluted share on revenues of $155.3 million. Excluding the impacts of a $5.4 million (pre- and post-tax) non-cash write-off of goodwill attributable to ITG's Australian operations and $2.3 million (pre- and post-tax) of restructuring charges, primarily related to the previously announced closing of ITG's onshore Japanese operations, pro forma operating net income was $15.3 million, or $0.35 per diluted share. For the second quarter of 2009, net income was $20.3 million, or $0.46 per diluted share, on revenues of $168.0 million.

On a sequential basis, while net income was lower than the $8.4 million earned during the first quarter of 2010, pro forma operating net income of $15.3 million exceeded the $11.9 million of pro forma operating net income earned during the first quarter. Revenues for the second quarter were 6% higher than the $146.7 million generated during the first quarter, boosted by an increase in U.S. trading volumes.

ITG's non-U.S. revenues were $47.2 million in the second quarter of 2010, a 3% increase over $46.0 million in the second quarter of 2009. Non-U.S. operations incurred a net loss of $6.8 million inclusive of the Australian goodwill write-off and the restructuring charge to close ITG's onshore Japanese operations. Excluding the impacts of these items, pro forma operating net income from non-U.S. operations was $1.1 million during the second quarter of 2010, compared to net income of $2.2 million during the second quarter of 2009.

"Despite what continues to be a challenging environment for our asset management clients, ITG derived strong benefit during the second quarter from our improved operating efficiency," said Bob Gasser, ITG's Chief Executive Officer and President. "Growth in our U.S. trading volumes and continued strong performance in Canada led to an improvement over the first quarter in pro forma operating earnings, demonstrating the leverage we've gained in our business model over the past several quarters. We will continue to focus on capital efficiency and operating discipline while going after a bigger piece of the client wallet through investments in new products and service offerings."

During the second quarter of 2010, ITG repurchased 903,900 shares of its common stock under its authorized share repurchase program, bringing year-to-date repurchases to 1.5 million shares. In July 2010, ITG's Board of Directors authorized the repurchase of an additional 4.0 million shares, bringing the total number of shares currently available for repurchase under ITG's share repurchase program to 4.6 million shares.

"We are very pleased with the Board's approval of this new authorization as it demonstrates confidence in the value of ITG's platform and franchise, as well as an ongoing commitment to increase stockholder value," said Steve Vigliotti, ITG's Chief Financial Officer.

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 second quarter results. Those wishing to listen to the call should dial 866-783-2139 (1-857-350-1598 outside the U.S.) and enter the passcode 45567619 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 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 12665032. 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.

The specific timing and amount of share repurchases will vary based on market conditions and other factors. The share repurchase program may be modified, expanded or terminated by the Board of Directors at any time.

ITG Contact:

J.T. Farley

(212) 444-6259

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



                                 Three
                                Months           Six Months
                                 Ended              Ended
                               June 30,           June 30,
                               --------           --------
                              2010          2009     2010       2009
                              ----          ----     ----       ----
    Revenues:
      Commissions and
       fees               $130,500      $144,111 $252,418   $275,044
      Recurring             22,761        21,983   44,732     43,145
      Other                  2,061         1,871    4,862      5,443
                             -----         -----    -----      -----
        Total revenues     155,322       167,965  302,012    323,632
                           -------       -------  -------    -------

    Expenses:
      Compensation and
       employee
       benefits             54,587        58,897  108,051    119,075
      Transaction
       processing           23,581        24,916   44,240     47,846
      Occupancy and
       equipment            14,969        14,900   30,166     29,738
       Telecommunications
       and data
       processing
       services             12,971        13,312   26,606     27,282
      Other general and
       administrative       21,928        21,357   50,085     40,398
      Goodwill
       impairment            5,375            -    5,375         -
      Restructuring
       charges               2,337            -    2,250         -
      Interest expense         206           601      430      1,813
                               ---           ---      ---      -----
        Total expenses     135,954       133,983  267,203    266,152
                           -------       -------  -------    -------
    Income before
     income tax
     expense                19,368        33,982   34,809     57,480
                            ------        ------   ------     ------
    Income tax
     expense                11,860        13,671   18,869     24,331
                            ------        ------   ------     ------
    Net income              $7,508       $20,311  $15,940    $33,149
                            ======       =======  =======    =======

    Earnings per
     share:
    Basic                    $0.17         $0.47    $0.37      $0.76
    Diluted                  $0.17         $0.46    $0.36      $0.76

    Basic weighted
     average number
     of common shares
     outstanding            43,226        43,470   43,525     43,404
    Diluted weighted
     average number
     of common shares
     outstanding            43,704        43,824   44,129     43,714



           INVESTMENT TECHNOLOGY GROUP, INC.
    Consolidated Statements of Financial Condition
          (In thousands, except share amounts)



                                              June           December
                                               30,                31,
                                                  2010               2009
                                                  ----               ----
                                         (unaudited)
    Assets
    Cash and cash equivalents                 $325,926           $330,879
    Cash restricted or
     segregated under
     regulations and other                      80,168             95,787
    Deposits with clearing
     organizations                              38,856             14,891
    Securities owned, at fair
     value                                       6,633              6,768
    Receivables from brokers,
     dealers and clearing
     organizations                             975,169            364,436
    Receivables from customers                 920,910            298,342
    Premises and equipment, net                 37,186             41,437
    Capitalized software, net                   63,842             68,913
    Goodwill                                   419,927            425,301
    Other intangibles, net                      25,842             27,263
    Income taxes receivable                      5,300             13,897
    Deferred taxes                               2,308              2,910
    Other assets                                24,540             12,279
                                                ------             ------
    Total assets                            $2,926,607         $1,703,103
                                            ==========         ==========

    Liabilities and
     Stockholders' Equity
    Liabilities:
    Accounts payable and accrued
     expenses                                 $163,479           $209,496
    Short-term bank loans                       29,918                  -
    Payables to brokers, dealers
     and clearing organizations              1,230,874            248,664
    Payables to customers                      572,395            299,200
    Securities sold, not yet
     purchased, at fair value                    3,974                 31
    Income taxes payable                        20,039             14,113
    Deferred taxes                              19,181             16,999
    Long term debt                              23,100             46,900
                                                ------             ------
      Total liabilities                      2,062,960            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;                                   517                517
       51,731,780 and 51,682,153
        shares issued at June 30,
        2010 and
       December 31, 2009,
        respectively
    Additional paid-in capital                 234,693            233,374
    Retained earnings                          825,093            809,153
    Common stock held in
     treasury, at cost;
     9,040,912 and 7,891,717                  (199,531)          (182,743)
        shares at June 30, 2010 and
         December 31, 2009,
         respectively
    Accumulated other
     comprehensive income (net
     of tax)                                     2,875              7,399
                                                 -----              -----
      Total stockholders' equity               863,647            867,700
                                               -------            -------
    Total liabilities and
     stockholders' equity                   $2,926,607         $1,703,103
                                            ==========         ==========



                           INVESTMENT TECHNOLOGY GROUP, INC.
          Reconciliation of U.S. GAAP Results to Pro Forma Operating Results


In evaluating ITG'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 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
                                                 June,
                                            ------------------
                                              2010           2009
                                              ----           ----
                                        (unaudited)    (unaudited)
                                        -----------    -----------
    Total revenues                        $155,322       $167,965
                                          --------       --------

    Total expenses                         135,954        133,983
       Less:
       Software write-down (1)                  -             -
       Goodwill impairment (2)              (5,375)            -
       Restructuring charges (3)            (2,337)            -
                                            ------           ---
    Pro forma operating expenses           128,242        133,983
                                           -------        -------

    Income before income tax
     expense                                19,368         33,982
      Effect of pro forma adjustment         7,712             -
                                             -----           ---
    Pro forma pre-tax operating
     income                                 27,080         33,982
                                            ------         ------

    Income tax expense                      11,860         13,671
       Tax effect of pro forma
        adjustment                             (72)            -
                                               ---           ---
    Pro forma operating income tax
     expense                                11,788         13,671
                                            ------         ------

    Net income                               7,508         20,311
        Net effect of pro forma
         adjustment                          7,784             -
                                             -----           ---
    Pro forma operating net income         $15,292        $20,311
                                           -------        -------

    Diluted earnings per share               $0.17          $0.46
      Net effect of pro forma
       adjustment                             0.18             -
    Pro forma diluted operating
     earnings per share                      $0.35          $0.46
                                             -----          -----

                                           Six Months Ended June,
                                           ----------------------
                                               2010              2009
                                               ----              ----
                                        (unaudited)       (unaudited)
                                        -----------       -----------
    Total revenues                         $302,012          $323,632
                                           --------          --------

    Total expenses                          267,203           266,152
       Less:
       Software write-down (1)               (6,091)               -
       Goodwill impairment (2)               (5,375)               -
       Restructuring charges (3)             (2,250)               -
                                             ------              ---
    Pro forma operating expenses            253,487           266,152
                                            -------           -------

    Income before income tax
     expense                                 34,809            57,480
      Effect of pro forma adjustment         13,716                -
                                             ------              ---
    Pro forma pre-tax operating
     income                                  48,525            57,480
                                             ------            ------

    Income tax expense                       18,869            24,331
       Tax effect of pro forma
        adjustment                            2,482                -
                                              -----              ---
    Pro forma operating income tax
     expense                                 21,351            24,331
                                             ------            ------

    Net income                               15,940            33,149
        Net effect of pro forma
         adjustment                          11,236                -
                                             ------              ---
    Pro forma operating net income          $27,174           $33,149
                                            -------           -------

    Diluted earnings per share                $0.36             $0.76
      Net effect of pro forma
       adjustment                              0.26                -
    Pro forma diluted operating
     earnings per share                       $0.62             $0.76
                                              -----             -----

    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
          capitalized in 2009 were not likely to be used and a further $6.1
          million
          pre-tax ($3.5 million after- tax) write-off was recorded.
          (2)  In the second quarter of 2010, ITG recorded an impairment
          charge of $5.4 million for the entire amount of goodwill
          attributable
          to its Australian operations, which is included within the Asia
          Pacific operating segment.
          (3)  In the second quarter of 2010, ITG committed to a restructuring
          plan in the Asia Pacific operating segment to close its onshore
          operations in Japan resulting in lower operating costs and reduced
          capital requirements.  Restructuring charges include employee
          severance, contract termination costs and non-cash write-offs of
          fixed assets and capitalized software, offset by reversals of
          accruals
          related to the fourth quarter 2009 restructuring.

SOURCE Investment Technology Group, Inc.

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