itg_Current_Folio_8K

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 


 

FORM 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of report (Date of earliest event reported): August 8, 2018

 

INVESTMENT TECHNOLOGY GROUP, INC.

(Exact name of registrant as specified in its charter)

 

 

 

 

 

 

 

Delaware

 

001-32722

 

 

95-2848406

(State or Other Jurisdiction
of Incorporation)

 

(Commission
File Number)

 

 

(IRS Employer
Identification No.)

 

 

 

 

 

One Liberty Plaza, 165 Broadway
New York, New York

 

10006

(Address of Principal Executive Offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code:  (212) 588-4000

 

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

☐   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

 


 

 

Item 2.02 Results of Operations and Financial Condition.

 

On August 8, 2018, the Company issued a press release announcing financial results for the quarter ended June 30,  2018.  A copy of this press release is attached hereto as Exhibit 99.1.

 

The information contained in this Item 2.02 and in the accompanying exhibit shall not be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference to such filing. The information in this Item 2.02, including the exhibit hereto, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits

 

99.1Press release issued by Investment Technology Group, Inc. on August 8, 2018.

2


 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

 

 

INVESTMENT TECHNOLOGY GROUP, INC.

 

 

 

 

 

 

Date:    August 8, 2018

By:

/s/ Steven R. Vigliotti

 

 

Steven R. Vigliotti

 

 

Chief Financial Officer and Chief Administrative Officer and Duly Authorized Signatory of Registrant

 

 

 

 

 

3


itg_Ex99_1

Exhibit 99.1

 

ITG Software Solutions, Inc.png

ITG Reports Second Quarter 2018 Results

Announces Charge for Potential SEC Settlement Regarding U.S. POSIT Operational Features and Data Access

 

NEW YORK, August 8, 2018 – ITG (NYSE: ITG), a leading independent agency broker and financial technology provider, today reported results for the quarter ended June 30, 2018.

Second Quarter 2018 Highlights

-

GAAP net loss of $3.0 million, or $0.09 per diluted share, and adjusted net income of $9.2 million, or $0.27 per diluted share. This compares to GAAP net income of $4.6 million, or $0.14 per diluted share for the second quarter of 2017.

-

GAAP results for the second quarter of 2018 include a charge for the establishment of an accrual for the potential settlement of an SEC investigation into U.S. POSIT operational features and data access (see discussion below, “Potential Settlement with SEC”). The settlement charge of $12.0 million, together with related legal expenses of $0.2 million in the quarter, reduced after-tax earnings by $0.36 per share. There were no non-GAAP adjustments to results for the second quarter of 2017.

-

Revenues of $128.5 million, compared to revenues of $121.6 million in the second quarter of 2017. Revenues for the second quarter of 2018 were reduced on a net basis by $0.7 million following an accounting rule change implemented in January 2018, which defers the recognition of certain commission revenues until later in the year and accelerates certain software license fee revenues (see discussion below, “Accounting Rule Change”).

-

GAAP expenses of $128.7 million and adjusted expenses of $116.5 million, compared to GAAP expenses of $116.5 million in the second quarter of 2017. Adjusted expenses for the


 

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second quarter of 2018 exclude the charge for the settlement accrual and related fees listed above.

-

GAAP pre-tax loss of $0.2 million and adjusted pre-tax income of $12.0 million, compared to GAAP pre-tax income of $5.1 million in the second quarter of 2017.

-

Average daily trading volume in the U.S. was 133 million shares versus 148 million shares in the second quarter of 2017. POSIT® average daily U.S. volume was 47 million shares compared to 61 million shares in the second quarter of 2017.

-

Total average daily U.S. volume traded through POSIT Alert® was 14 million shares in the second quarter of 2018 and 17 million shares in the second quarter of 2017. 

-

In Europe, average daily value traded in POSIT was $0.9 billion compared to $1.1 billion in the second quarter of 2017, including the effects of currency translation. Total average daily value traded through POSIT Alert in Europe rose 42% compared to the second quarter of 2017.

-

Repurchases of approximately 103,000 shares of common stock at an average price of $21.09 per share, for approximately $2.2 million under ITG’s authorized share repurchase program. Repurchases since the first quarter of 2010 have totaled 17.8 million shares for $276 million, resulting in a decrease in shares outstanding, net of issuances, of approximately 25%. 

Potential Settlement with SEC

ITG is in discussions with the SEC staff regarding the potential settlement of an investigation into operational features of the POSIT alternative trading system (“ATS”) in the U.S. and access to U.S. POSIT data. Many of the issues on which the settlement is focused originated in 2010 or earlier.

-

Regarding operational features, the potential resolution is focused on: Technology used for POSIT from 2010 through mid-2014 that affected the ability of mainly clients engaged in


 

Picture 3

low-latency trading to interact with other POSIT order flow. It is also focused on a delay feature added to POSIT in 2014 as part of ITG’s Liquidity Guard anti-gaming technology, which is designed to prevent latency arbitrage.

 

-

Regarding access to POSIT data, the potential resolution is focused on the following discontinued access items: Overbroad internal access to U.S. POSIT data and the internal sharing of that data, the external distribution of certain reports on a delayed basis that included anonymized, aggregated U.S. POSIT data, and instances of sharing of anonymized U.S. POSIT execution information with clients.

 

-

ITG has taken meaningful remedial actions during the course of the SEC’s investigation, including imposing additional limitations on access to U.S. POSIT data as well as enhancing POSIT’s Form ATS and other disclosures.

 

-

The potential resolution of this investigation does not involve proprietary trading, unlike the separate settlement ITG reached with the SEC in 2015. It is focused on U.S. POSIT, not regional alternative trading systems or other ITG businesses.

 

-

Resolution of the matter is subject to further discussions with the SEC staff and requires approval by the Commission. See ITG’s Second Quarter 2018 Form 10-Q filing for additional details.

ITG President and Chief Executive Officer, Frank Troise, said, “As we move into the final quarters of our Strategic Operating Plan, we are seeing clear results, with adjusted net income in the second quarter of 2018 nearly double that of the second quarter of 2017. Our goal is to deliver client value as the best operator in our core business areas of execution, liquidity, analytics and workflow technology.”

Commenting on the settlement charges, Mr. Troise said “Across the firm, we are deeply committed to operating with the highest level of integrity. We are working towards a potential SEC settlement


 

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of these issues so we can focus on our agenda of technology-driven innovation and world-class client service.”

Second Quarter Regional Segment Results

North American revenues were $65.8 million in the second quarter of 2018 as compared to $68.7 million in the second quarter of 2017.

ITG reported net income of $0.9 million in North America in the second quarter of 2018 compared to net income of $0.1 million in the second quarter of 2017. 

U.S. revenues in the second quarter of 2018 were $48.0 million, compared to $52.8 million in the second quarter of 2017. Canada revenues in the second quarter of 2018 were $17.8 million, compared to $15.9 million in the second quarter of 2017.

Europe and Asia Pacific revenues were $62.3 million in the second quarter of 2018, up from $52.5 million in the second quarter of 2017.

ITG reported net income for its Europe and Asia Pacific operations of $12.7 million in the second quarter of 2018, up from $8.1 million in the second quarter of 2017.

 

European revenues were $42.9 million in the second quarter of 2018, up from $38.8 million in the second quarter of 2017.

Asia Pacific revenues were $19.4 million in the second quarter of 2018, up from $13.7 million in the second quarter of 2017.

Corporate activity reduced GAAP net income by $16.7 million in the second quarter of 2018, including the impact of the settlement charge and related fees. Corporate activity reduced GAAP net income by $3.6 million in the second quarter of 2017.

 


 

Picture 3

Corporate activity includes investment income and non-operating revenues and gains, as well as costs not associated with operating the businesses within ITG's regional segments including costs of being a public company, intangible amortization, interest expense, costs of maintaining a global transfer pricing structure, foreign exchange gains and losses and certain non-operating expenses.

Year-to-Date Results

For the first six months of 2018, revenues were $260.0 million, GAAP net income was $1.3

million, or $0.04 per diluted share, and adjusted net income was $18.9 million, or $0.55 per diluted share (see discussion below, “Non-GAAP Financial Measures”). For the first six months of 2017, revenues were $242.4 million and net income was $9.9 million, or $0.29 per diluted share. There were no non-GAAP adjustments to results for the first six months of 2017.

 

Accounting Rule Change

Beginning in January 2018, ITG implemented a new accounting rule and is recognizing global commission revenues attributed to analytics products under bundled arrangements over the course of the annual service period. This change resulted in the deferral of $3.8 million of commission revenues in the first quarter of 2018 and the deferral of $1.1 million in the second quarter of 2018. These deferrals are expected to be offset by increased recognition of bundled commission revenues in the second half of 2018. The new accounting rule also accelerated the recognition of software license fees, increasing revenues by $0.4 million in the first quarter of 2018 and $0.4 million in the second quarter of 2018.

 

Conference Call on 2Q18 Results

An investor conference call to discuss ITG’s results will be held today at 8:00 am ET. Those wishing to listen to the call should dial 1-844-881-0134  (1-412-317-6722 outside the U.S.) at least 15 minutes prior to the start of the call to ensure connection.

 

The webcast and accompanying slideshow presentation will be available at: investor.itg.com. A replay will be available for one week by dialing 1-877-344-7529  (1-412-317-0088 outside the U.S.) 


 

Picture 3

and entering replay number 10122130. The replay will be available starting approximately one hour after the completion of the conference call.

 

About ITG

 

Investment Technology Group (NYSE: ITG) is a global financial technology company that helps leading brokers and asset managers improve returns for investors around the world. We empower traders to reduce the end-to-end cost of implementing investments via liquidity, execution, analytics and workflow technology solutions. ITG has offices in Asia Pacific, Europe and North America and offers execution services in more than 50 countries. Please visit www.itg.com for more information. 

 

Non-GAAP Financial Measures

To supplement our financial information presented in accordance with accounting principles generally accepted in the U.S. (“GAAP”), management uses certain “non-GAAP financial measures” as such term is defined in Regulation G promulgated by the SEC. Generally, a non-GAAP financial measure is a numerical measure of a company’s operating performance, financial position or cash flows that excludes or includes amounts that are included in, or excluded from, the most directly comparable measure calculated and presented in accordance with GAAP. Management believes the presentation of these measures provides investors with greater transparency and supplemental data relating to our financial condition and results of operations, and therefore a more complete understanding of factors affecting our business than GAAP measures alone. In addition, management believes the presentation of these matters is useful to investors for period-to-period comparison of results as the items may reflect certain unique and/or non-operating items such as acquisitions, divestitures, restructuring charges, write-offs and impairments, charges associated with litigation or regulatory matters together with related expenses or items outside of management’s control.

 

Adjusted expenses, adjusted pre-tax income, adjusted income tax expense, adjusted net income and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), together with related per share amounts, are non-GAAP performance measures that we believe are useful to assist investors in gaining an understanding of the trends and operating results for our core business. These measures should be viewed in addition to, and not in lieu of, results reported under GAAP.

 

Reconciliations of adjusted expenses, adjusted pre-tax income, adjusted income tax expense, adjusted net income and adjusted EBITDA to expenses, (loss) income before income tax expense, income tax expense, net (loss) income and related per share amounts as determined in accordance with GAAP for the three and six months ended June 30, 2018, are provided in the accompanying supplemental tables at the end of this release.

 

Forward Looking Statements

 

In addition to historical information, this press release may contain "forward-looking" statements that reflect management’s expectations for the future. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “could,” “should,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “trend,” “potential” or “continue” and the negative of these terms and other comparable terminology. A variety of important factors could cause results to differ materially from such statements. 

 

Certain of these factors are noted throughout ITG’s 2017 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, political and financial market conditions, both internationally and domestically, 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 increased regulatory scrutiny, the outcome of contingencies such as legal proceedings or governmental or regulatory investigations and customer or shareholder reaction to, or further proceedings or sanctions based on, such matters, the volatility of our stock price, changes in tax policy or accounting rules, the ability of the Company to utilize its loss and tax credit carryforwards, 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, operational risks related to misconduct or errors by our employees or entities with which we do business, cash flows into or redemptions from equity mutual funds, ability to meet the capital and liquidity requirements of our securities business and the related 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


 

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customers for new or enhanced products, our ability to protect our intellectual property, our ability to execute on strategic initiatives or transactions, our ability to attract and retain talented employees, and our ability to pay dividends or repurchase our common stock in the future.

 

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


 

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INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30, 

 

June 30, 

 

    

2018

    

2017

    

2018

    

2017

 

 

(unaudited)

 

 

 

(unaudited)

 

 

 

Revenues:

 

 

  

 

 

  

 

 

  

 

 

  

Commissions and fees

 

$

106,451

 

$

100,564

 

$

216,020

 

$

200,444

Recurring

 

 

20,082

 

 

18,933

 

 

39,644

 

 

37,883

Other

 

 

1,944

 

 

2,084

 

 

4,297

 

 

4,089

Total revenues

 

 

128,477

 

 

121,581

 

 

259,961

 

 

242,416

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

  

 

 

  

 

 

  

 

 

  

Compensation and employee benefits

 

 

45,099

 

 

45,994

 

 

90,886

 

 

92,678

Transaction processing

 

 

25,969

 

 

25,482

 

 

53,049

 

 

50,338

Occupancy and equipment

 

 

15,055

 

 

14,680

 

 

29,830

 

 

30,302

Telecommunications and data processing services

 

 

12,988

 

 

12,129

 

 

25,591

 

 

24,156

Restructuring charges

 

 

 —

 

 

 —

 

 

7,165

 

 

 —

Other general and administrative

 

 

29,132

 

 

17,699

 

 

46,823

 

 

35,014

Interest expense

 

 

488

 

 

510

 

 

974

 

 

1,030

Total expenses

 

 

128,731

 

 

116,494

 

 

254,318

 

 

233,518

(Loss) income before income tax expense

 

 

(254)

 

 

5,087

 

 

5,643

 

 

8,898

Income tax expense (benefit)

 

 

2,781

 

 

444

 

 

4,301

 

 

(1,047)

Net (loss) income

 

$

(3,035)

 

$

4,643

 

$

1,342

 

$

9,945

(Loss) income per share:

 

 

  

 

 

  

 

 

  

 

 

  

Basic

 

$

(0.09)

 

$

0.14

 

$

0.04

 

$

0.30

Diluted

 

$

(0.09)

 

$

0.14

 

$

0.04

 

$

0.29

Basic weighted average number of common shares outstanding

 

 

33,035

 

 

33,125

 

 

32,963

 

 

33,037

Diluted weighted average number of common shares outstanding

 

 

33,035

 

 

34,222

 

 

33,986

 

 

34,180

 


 

Picture 3

INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES

Supplemental Financial Data

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30, 

 

June 30, 

 

    

2018

    

2017

    

2018

    

2017

 

 

(unaudited)

 

 

 

(unaudited)

 

 

 

Revenues by Geographic Region:

 

 

  

 

 

  

 

 

  

 

 

  

U.S. Operations

 

$

48,026

 

$

52,763

 

$

96,512

 

$

106,156

Canadian Operations

 

 

17,730

 

 

15,984

 

 

35,777

 

 

32,466

European Operations

 

 

42,911

 

 

38,739

 

 

87,741

 

 

75,451

Asia Pacific Operations

 

 

19,430

 

 

13,720

 

 

39,037

 

 

27,663

Corporate (non-product)

 

 

380

 

 

375

 

 

894

 

 

680

Total Revenues

 

$

128,477

 

$

121,581

 

$

259,961

 

$

242,416

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30, 

 

June 30, 

 

    

2018

    

2017

    

2018

    

2017

 

 

(unaudited)

 

 

 

(unaudited)

 

 

 

Revenues by Product Group:

 

 

  

 

 

  

 

 

  

 

 

  

Execution Services

 

$

89,959

 

$

86,797

 

$

184,315

 

$

173,084

Workflow Technology

 

 

27,112

 

 

23,352

 

 

53,687

 

 

46,452

Analytics

 

 

11,026

 

 

11,057

 

 

21,065

 

 

22,200

Corporate (non-product)

 

 

380

 

 

375

 

 

894

 

 

680

Total Revenues

 

$

128,477

 

$

121,581

 

$

259,961

 

$

242,416

 


 

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INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Financial Condition

(In thousands, except share amounts)

 

 

 

 

 

 

 

 

 

    

June 30, 

    

December 31, 

 

 

2018

 

2017

 

 

(unaudited)

 

 

 

Assets

 

 

  

 

 

  

Cash and cash equivalents

 

$

236,446

 

$

287,452

Cash restricted or segregated under regulations and other

 

 

18,263

 

 

18,599

Deposits with clearing organizations

 

 

80,373

 

 

57,388

Securities owned, at fair value

 

 

939

 

 

1,559

Receivables from brokers, dealers and clearing organizations

 

 

259,982

 

 

193,907

Receivables from customers

 

 

164,583

 

 

74,695

Premises and equipment, net

 

 

52,091

 

 

53,960

Capitalized software, net

 

 

41,462

 

 

41,259

Goodwill

 

 

10,788

 

 

11,054

Intangibles, net

 

 

13,481

 

 

14,040

Income taxes receivable

 

 

128

 

 

3,917

Deferred tax assets

 

 

4,389

 

 

4,902

Other assets

 

 

44,009

 

 

22,124

Total assets

 

$

926,934

 

$

784,856

Liabilities and Stockholders’ Equity

 

 

  

 

 

  

Liabilities:

 

 

  

 

 

  

Accounts payable and accrued expenses

 

$

198,193

 

$

166,495

Short-term bank loans

 

 

72,997

 

 

101,422

Payables to brokers, dealers and clearing organizations

 

 

178,886

 

 

119,278

Payables to customers

 

 

113,340

 

 

23,568

Securities sold, not yet purchased, at fair value

 

 

 —

 

 

 1

Income taxes payable

 

 

4,287

 

 

6,003

Deferred tax liabilities

 

 

1,768

 

 

1,750

Term debt

 

 

2,329

 

 

3,104

Total liabilities

 

 

571,800

 

 

421,621

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; 52,748,475 and 52,639,823 shares issued at June 30, 2018 and December 31, 2017, respectively

 

 

527

 

 

526

Additional paid-in capital

 

 

247,897

 

 

250,216

Retained earnings

 

 

483,639

 

 

486,957

Common stock held in treasury, at cost; 19,757,705 and 20,038,809 shares at June 30, 2018 and December 31, 2017, respectively

 

 

(349,906)

 

 

(353,067)

Accumulated other comprehensive loss (net of tax)

 

 

(27,023)

 

 

(21,397)

Total stockholders’ equity

 

 

355,134

 

 

363,235

Total liabilities and stockholders’ equity

 

$

926,934

 

$

784,856


 

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INVESTMENT TECHNOLOGY GROUP, INC.

Reconciliation of US GAAP Results to Adjusted Results (unaudited)

(In thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

    

Three Months Ended

    

Six Months Ended

 

 

June 30, 2018

 

June 30, 2018

Total expenses

 

$

128,731

 

$

254,318

Less:

 

 

 

 

 

 

SEC settlement accrual and related fees (1)

 

 

(12,216)

 

 

(12,216)

Restructuring (2)

 

 

 —

 

 

(7,165)

Adjusted expenses

 

$

116,515

 

$

234,937

 

 

 

 

 

 

 

(Loss) income before income tax expense

 

$

(254)

 

$

5,643

Effect of adjustments

 

 

12,216

 

 

19,381

Adjusted pre-tax income

 

$

11,962

 

$

25,024

 

 

 

 

 

 

 

Income tax expense

 

$

2,781

 

$

4,301

Tax effect of adjustments (1)(2)

 

 

 —

 

 

 —

Reduction in tax reserves (3)

 

 

 —

 

 

1,862

Adjusted income tax expense

 

$

2,781

 

$

6,163

 

 

 

 

 

 

 

Net (loss) income

 

$

(3,035)

 

$

1,342

Net effect of adjustments

 

 

12,216

 

 

17,519

Adjusted net income

 

$

9,181

 

$

18,861

 

 

 

 

 

 

 

Diluted (loss) income per share

 

$

(0.09)

 

$

0.04

Net effect of adjustments

 

 

0.36

 

 

0.51

Adjusted diluted income per share

 

$

0.27

 

$

0.55


 

Notes:

(1)

During the three and six months ended June 30, 2018, the Company incurred a charge to establish an accrual of $12.0 million for a potential settlement with the SEC of an investigation into the operational features of U.S. POSIT and access to U.S. POSIT data, together with certain related disclosures, and incurred related legal fees of $0.2 million. Due to the non-deductibility of the settlement charge and the full valuation allowance on U.S. deferred tax assets, there is no tax effect on this adjustment. See ITG’s Second Quarter 2018 Form 10-Q filing for additional details.

 

(2)

During the six months ended June 30, 2018, the Company incurred restructuring charges of $7.2 million related to the elimination of certain positions in the U.S. Due to the full valuation on U.S. deferred tax assets, there is no tax effect on this adjustment.

 

(3)

During the six months ended June  30, 2018, the Company resolved a multi-year tax contingency in the U.S. and reduced tax reserves by $1.9 million.


 

Picture 3

Reconciliation of Adjusted Earnings

Before Interest, Taxes, Depreciation, and Amortization (unaudited)

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30, 

 

June 30, 

 

 

    

2018

    

2017

    

2018

    

2017

    

Net (loss) income (1)(2)

 

$

(3,035)

 

$

4,643

 

$

1,342

 

$

9,945

 

Impact of adjustments, after-tax

 

 

12,216

 

 

 —

 

 

17,519

 

 

 —

 

Adjusted net income

 

 

9,181

 

 

4,643

 

 

18,861

 

 

9,945

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deduct:

 

 

  

 

 

  

 

 

  

 

 

  

 

Investment income

 

 

(376)

 

 

(367)

 

 

(875)

 

 

(648)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Add Back:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

488

 

 

510

 

 

974

 

 

1,030

 

Income tax expense (benefit)

 

 

2,781

 

 

444

 

 

4,301

 

 

(1,047)

 

Reduction to tax reserves

 

 

 —

 

 

 —

 

 

1,862

 

 

 —

 

Depreciation and amortization

 

 

10,990

 

 

11,210

 

 

22,220

 

 

22,437

 

Adjusted earnings before interest, taxes, depreciation, and amortization

 

$

23,064

 

$

16,440

 

$

47,343

 

$

31,717

 


Notes:

(1)

Net income includes pre-tax charges for non-cash stock-based compensation of $5.9 million and $5.1 million for the three months ended June  30, 2018 and 2017, respectively.

(2)

Net income includes pre-tax charges for non-cash stock-based compensation of $14.2 million and $10.8 million for the six months ended June 30, 2018 and 2017, respectively.

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