PRESS RELEASE

<<Back

Investment Technology Group Reports Third Quarter 2010 Results

PDF Version PDF format

Capital Management Initiatives Continue with the Repurchase of Nearly 945,000 Shares

NEW YORK, Oct 28, 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 September 30, 2010. Net income for the third quarter of 2010 was $6.2 million, or $0.14 per diluted share on revenues of $130.4 million. For the third quarter of 2009, net income was $17.5 million, or $0.40 per diluted share, on revenues of $158.4 million.

ITG's non-U.S. revenues were $42.3 million in the third quarter of 2010, a 3% decline from $43.8 million in the third quarter of 2009. Non-U.S. operations posted a net loss of $1.0 million in the third quarter of 2010, compared to income of $0.2 million in the third quarter of 2009.

"Diminished investor confidence and continued equity mutual fund outflows reduced U.S. trading volumes during the quarter by 25% sequentially, weighing on our third quarter results," said Bob Gasser, ITG's Chief Executive Officer and President. "In the face of these headwinds, we believe that the recent Majestic acquisition will enable us to serve an expanded range of clients at every institution we cover, from traders to analysts and portfolio managers, whilewe significantly expand our addressable market. As we work to integrate Majestic and introduce the new offering to our clients, we will maintain our operating discipline and our focus on increased capital efficiency."

ITG continued its focus on capital management initiatives through its share repurchase program. ITG repurchased 944,928 shares of its common stock under its authorized share repurchase program during the third quarter of 2010 at an average price of $14.55, bringing year-to-date repurchases to 2.4 million shares. ITG ended the third quarter with $339.5 million of cash and cash equivalents, up from $325.9 million at June 30, 2010.

Year-to-Date Results

For the nine months ended September 30, 2010, revenues were $432.4 million, net income was $22.1 million and diluted earnings per share was $0.51. Excluding non-operating items, pro forma operating net income was $33.4 million and pro forma diluted earnings per share were $0.77 in the first nine months of 2010. For the first nine months of 2009, revenues were $482.1 million, net income was $50.6 million and diluted earnings per share were $1.15. There were no pro forma adjustments in the first nine months of 2009.

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 to U.S. GAAP results.

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 800-901-5248 (1-617-786-4512 outside the U.S.) and enter the passcode 92915865 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 77178542. 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 research broker 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, execution services, analytical tools, and proprietary research insights grounded in 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.

Consolidated Statements of Income (unaudited)

(In thousands, except per share amounts)




ThreeMonthsEnded
September 30,


NineMonthsEnded
September30,




2010


2009


2010


2009


Revenues:










Commissions and fees


$105,948


$132,069


$358,366


$407,113


Recurring


21,912


22,145


66,644


65,290


Other


2,536


4,224


7,398


9,667


Total revenues


130,396


158,438


432,408


482,070












Expenses:










Compensation and employee benefits


50,627


56,758


158,678


175,833


Transaction processing


19,401


24,204


63,641


72,050


Occupancy and equipment


14,423


14,958


44,589


44,696


Telecom and data processing services


12,759


13,770


39,365


41,052


Other general and administrative


21,652


20,307


71,737


60,705


Goodwill impairment


--


--


5,375


--


Restructuring charges


--


--


2,250


--


Interest expense


158


407


588


2,220


Total expenses


119,020


130,404


386,223


396,556


Income before income tax expense


11,376


28,034


46,185


85,514


Income tax expense


5,166


10,556


24,035


34,887


Net income


$6,210


$17,478


$22,150


$50,627












Earnings per share:










Basic


$0.15


$0.40


$0.51


$1.16


Diluted


$0.14


$0.40


$0.51


$1.15












Basic weighted average number of common shares outstanding


42,407


43,627


43,148


43,479


Diluted weighted average number of common shares outstanding


42,941


44,126


43,776


43,859





INVESTMENT TECHNOLOGY GROUP,INC.

Consolidated Statements of Financial Condition

(In thousands, except share amounts)




September30,
2010


December31,
2009




(unaudited)




Assets






Cash and cash equivalents


$

339,473


$

330,879


Cash restricted or segregated under regulations and other


82,868


95,787


Deposits with clearing organizations


27,115


14,891


Securities owned, at fair value


7,107


6,768


Receivables from brokers, dealers and clearing organizations


1,022,026


364,436


Receivables from customers


733,777


298,342


Premises and equipment, net


34,032


41,437


Capitalized software, net


63,125


68,913


Goodwill


419,903


425,301


Other intangibles, net


25,150


27,263


Income taxes receivable


5,747


13,897


Deferred taxes


1,888


2,910


Other assets


21,889


12,279


Total assets


$

2,784,100


$

1,703,103








Liabilities and Stockholders' Equity






Liabilities:






Accounts payable and accrued expenses


$

164,909


$

209,496


Short-term bank loans



20,374



--


Payables to brokers, dealers and clearing organizations


993,320


248,664


Payables to customers


691,145


299,200


Securities sold, not yet purchased, at fair value


1,276


31


Income taxes payable


15,237


14,113


Deferred taxes


18,956


16,999


Long-term debt


11,200


46,900


Total liabilities


1,916,417


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; 51,790,608 and 51,682,153shares issued at September 30, 2010 and December31, 2009, respectively


518


517


Additional paid-in capital


239,176


233,374


Retained earnings


831,303


809,153


Common stock held in treasury, at cost; 9,946,635 and 7,891,717 shares at September30,2010andDecember31, 2009, respectively


(212,250)


(182,743)


Accumulated other comprehensive income (net of tax)


8,936


7,399


Total stockholders' equity


867,683


867,700


Total liabilities and stockholders' equity


$

2,784,100


$

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 ITG believes that they are useful to assist investors in gaining an understanding of the trends and operating results for ITG's core businesses. Pro forma earnings per share should be viewed in addition to, and not in lieu of, ITG'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 September 30,


Nine Months Ended September 30,


2010

2009


2010

2009


(unaudited)

(unaudited)


(unaudited)

(unaudited)

Total revenues

$130,396

$158,438


$432,408

$482,070







Total expenses

119,020

130,404


386,223

396,556

Less:






Software write-down (1)

--

--


(6,091)

--

Goodwill impairment (2)

--

--


(5,375)

--

Restructuring charges (3)

--

--


(2,250)

--

Pro forma operating expenses

119,020

130,404


372,507

396,556







Income before income tax expense

11,376

28,034


46,185

85,514

Effect of pro forma adjustment

--

--


13,716

--

Pro forma pre-tax operating income

11,376

28,034


59,901

85,514







Income tax expense

5,166

10,556


24,035

34,887

Tax effect of pro forma adjustment

--

--


2,482

--

Pro forma operating income tax expense

5,166

10,556


26,517

34,887







Net income

6,210

17,478


22,150

50,627

Net effect of pro forma adjustment

--

--


11,234

--

Pro forma operating net income

$6,210

$17,478


$33,384

$50,627







Diluted earnings per share

$0.14

$0.40


$0.51

$1.15

Net effect of pro forma adjustment

--

--


0.26

--

Pro forma diluted operating earnings per share

$0.14

$0.40


$0.77

$1.15


Notes:

(1) As part of a 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 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 on-shore 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.

Social stream