In Continuing Operations, Global Markets reported strong first quarter
pre-tax income of $67 million while pre-tax margins were impacted by
continuing investment in geographic and asset class expansion, infrastructure
and new talent
Knight's asset class diversification strategy combined with industry
trends favoring fixed income largely drove Global Markets revenue growth and
revenue mix shift toward commissions during first quarter 2009
Quantitative equity trading experienced increased revenues from new
trading models and higher trading costs associated with greater share volume
of low-priced stocks in the current market environment
Asset Management segment reported as Discontinued Operations following its
sale of assets and replacement as investment adviser; results include $23
million in initial wind-down costs in first quarter 2009
JERSEY CITY, N.J., April 22 /PRNewswire-FirstCall/ -- - Knight Capital
Group, Inc. (Nasdaq: NITE) today reported earnings from continuing operations
of $29.9 million, or $0.33 per diluted share, and a loss from discontinued
operations, net of tax, of $20.5 million, or $0.23 loss per diluted share. On
a consolidated basis, the company reported earnings of $9.4 million, or $0.10
per diluted share, for the first quarter of 2009.
For the first quarter of 2008, the company reported earnings from
continuing operations of $35.1 million, or $0.38 per diluted share, and a loss
from discontinued operations, net of tax, of $2.6 million, or $0.03 loss per
diluted share. On a consolidated basis, the company reported earnings of $32.5
million, or $0.35 per diluted share, for the first quarter of 2008.
Revenues from continuing operations for the first quarter of 2009 were
$245.4 million, compared to $194.0 million from continuing operations for the
first quarter of 2008.
"Knight reported a solid first quarter while investing in strategic growth
initiatives and managing the firm's exit from the asset management business,"
said Thomas M. Joyce, Chairman and Chief Executive Officer, Knight Capital
Group. "Our performance is attributable to the dynamic and adaptable nature of
our hybrid model and the success of our strategic decision to expand our
non-equity businesses, particularly fixed income. Global Markets revenues
advanced due to ongoing diversification across clients, order flow, products
and services, asset classes and geographies. Pre-tax margins were affected by
increased costs associated with opportunistic hiring, investments in trading
technology and infrastructure expenses for our geographic expansion."
"Continuing operations" includes the company's Global Markets and
Corporate operating segments. Amounts reported as "discontinued operations"
include the company's Asset Management segment, which, on March 31, 2009,
closed the sale of substantially all of Deephaven's assets to affiliates of
Stark & Roth, Inc. As of that date, Deephaven was replaced as the investment
adviser for the Deephaven funds, and the company has exited from the asset
management business.
"Looking ahead, we will continue to make investments in expanding our
offering across asset classes, enhancing our trading technology and
selectively hiring new talent," said Mr. Joyce. "We remain focused on
exceeding our goal of 20% pre-tax margins across all market cycles and further
strengthening our position on the new Wall Street."
Q1 2009 Q1 2008
------- -------
Revenues ($ thousands) 245,354 193,978
Income from continuing operations, net of tax
($ thousands) 29,881 35,097
Loss from discontinued operations, net of tax
($ thousands) (20,514) (2,594)
Net income ($ thousands) 9,367 32,503
Diluted EPS from continuing operations ($) 0.33 0.38
Diluted EPS from discontinued operations ($) (0.23) (0.03)
Average daily U.S. equity dollar value traded
($ billions) 19.9 16.8
Average daily U.S. equity trades (thousands) 3,842.3 1,755.7
Nasdaq and Listed equity shares traded (billions) 79.3 33.7
OTC Bulletin Board and Pink Sheet shares
traded (billions) 259.2 165.1
Average revenue capture per U.S. equity dollar value
traded (bps) 1.5 1.5
Average month-end balance of assets under management
($ millions) 1,545.6 3,577.6
Quarterly fund return to investors* -6.0% -8.0%
* Quarterly fund return represents the blended quarterly return across
all assets under management in the Deephaven funds.
Global Markets
During the first quarter of 2009, Global Markets generated total revenues
of $250.4 million, compared to $202.2 million in the first quarter of 2008. In
the first quarter of 2009, Global Markets reported pre-tax income of $67.0
million, compared to pre-tax income of $78.9 million in the first quarter of
2008. Global Markets had pre-tax margins of 27% in the first quarter of 2009,
compared to pre-tax margins of 39% in the first quarter of 2008.
"In Global Markets, our quantitative trading models performed well despite
a challenging equity market environment of concentrated trading activity in
low-priced stocks, resulting in an increase in transaction-related fees," said
Mr. Joyce. "Institutional equity sales and trading remained focused on clients
while we expanded our electronic capabilities in Europe. For the quarter,
equity revenues were supported by gains in U.S. equities market share and
increased dollar volumes from the prior year's first quarter.
"In a period when investors were searching for yield over equity
appreciation, Knight Libertas experienced dramatic growth due to a strong
fixed income market, strategic hires and addition of new products. Global
Markets' 60% increase in total commissions was fueled largely by the rapid
expansion of Knight Libertas which we acquired in the third quarter of 2008,"
Mr. Joyce added.
Corporate
In the first quarter of 2009, the corporate segment reported a pre-tax
loss of $16.0 million, compared to a pre-tax loss of $19.0 million in the
first quarter of 2008.
The company's corporate investment in the Deephaven funds recorded a
pre-tax loss of $3.9 million during the first quarter of 2009, compared to a
pre-tax loss of $7.0 million during the first quarter of 2008.
Headcount in continuing operations at the end of March 31, 2009 was 966
full-time employees, as compared to 778 full-time employees at the end of
March 31, 2008, reflecting personnel additions from acquisitions and new
products throughout the year.
Discontinued Operations
In the first quarter of 2009, the discontinued Asset Management segment
reported a pre-tax loss of $31.1 million, or $20.5 million net of tax, which
includes approximately $23 million in pre-tax charges associated with the
wind-down of the business. The Asset Management segment reported a pre-tax
loss of $4.1 million, or $2.6 million net of tax, in the first quarter of
2008.
Assets under management averaged approximately $1.5 billion in the first
quarter of 2009, compared to an average of approximately $3.6 billion during
the first quarter of 2008.
"Knight has exited the asset management business with the completion of
the sale of Deephaven's assets and replacement as investment adviser," said
Mr. Joyce. "A small transition team at Deephaven is now winding down
operations. As of the close of business on March 31, 2009, Deephaven is a
discontinued operation for financial reporting purposes."
As of March 31, 2009, the company had $336.9 million in cash and cash
equivalents from continuing operations as well as a $31.6 million corporate
investment in funds formerly managed by Deephaven.
The company had $1.1 billion in stockholders' equity as of March 31, 2009,
equivalent to a book value of $11.50 per diluted share. The company had a book
value of $10.05 per diluted share as of March 31, 2008.
During the first quarter of 2009, the company did not repurchase any
shares under its $1.0 billion stock repurchase program. To date, the company
has repurchased 67.1 million shares for $750.4 million. The company has
approximately $249.6 million available to repurchase shares under the program.
The company cautions that there are no assurances that any further repurchases
may actually occur.
Copies of this earnings release and other company information can be
obtained on Knight's website, http://www.knight.com. The company will conduct
its first quarter of 2009 earnings conference call for analysts, investors and
the media at 9:00 a.m. Eastern Time (ET) today, April 22, 2009. To access
Knight's earnings conference call, please dial 877-874-1563 for domestic
callers or 719-325-4748 for international callers. When prompted, provide the
passcode, which is 4027675. The conference call will be webcast live at 9:00
a.m. ET for all investors and interested parties on Knight's website. In
addition, the company will release its monthly volume statistics for March
2009 on its website at http://www.knight.com/ourfirm/volumestats.asp before
the start of trading today.
About Knight
Knight Capital Group, Inc. (Nasdaq: NITE) is a leading financial services
firm that provides electronic and voice access to the global capital markets
across multiple asset classes for buy-side, sell-side and corporate clients.
In Global Markets, we provide market access and trade execution services in
nearly every U.S. equity security and a large number of global equities and
fixed income, foreign exchange, futures and options. Our approach to trading
combines deep liquidity with robust trading technology and capital
facilitation, when necessary, to deliver high quality trade executions
consistent with client defined measures. We recently exited the Asset
Management business, which consists of our 51% ownership of Deephaven
Holdings, the parent company of Deephaven, formerly a global multi-strategy
alternative investment manager. For information regarding our exit from our
Asset Management segment, refer to the Form 8-K's furnished by the Company on
April 1, 2009 and January 27, 2009, and the Form 8-K filed by the Company on
February 26, 2009. More information about Knight can be found at
www.knight.com.
Certain statements contained herein may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. These forward-looking statements are not historical facts and are
based on current expectations, estimates and projections about the Company's
industry, management's beliefs and certain assumptions made by management,
many of which, by their nature, are inherently uncertain and beyond our
control. Accordingly, readers are cautioned that any such forward-looking
statements are not guarantees of future performance and are subject to certain
risks, uncertainties and assumptions that are difficult to predict including,
without limitation, risks associated with (i) the costs, integration,
performance and operation of businesses recently acquired, or that may be
acquired in the future, by the Company, and (ii) the closing of the sale of
the assets of the Asset Management business and costs and expenses associated
with the Company's exit from the Asset Management business. Since such
statements involve risks and uncertainties, the actual results and performance
of the Company may turn out to be materially different from the results
expressed or implied by such forward-looking statements. Given these
uncertainties, readers are cautioned not to place undue reliance on such
forward-looking statements. Unless otherwise required by law, the Company also
disclaims any obligation to update its view of any such risks or uncertainties
or to announce publicly the result of any revisions to the forward-looking
statements made herein. Readers should carefully review the risks and
uncertainties disclosed in the Company's reports with the U.S. Securities and
Exchange Commission (SEC), including, without limitation, those detailed under
the headings "Certain Factors Affecting Results of Operations" and "Risk
Factors" in the Company's Annual Report on Form 10-K for the year-ended
December 31, 2008, and in other reports or documents the Company files with,
or furnishes to, the SEC from time to time. This information should also be
read in conjunction with the Company's Consolidated Financial Statements and
the Notes thereto contained in the Company's Annual Report on Form 10-K for
the year-ended December 31, 2008, and in other reports or documents the
Company files with, or furnishes to, the SEC from time to time.
KNIGHT CAPITAL GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the three months ended
March 31,
-------------
2009 2008
---- ----
(In thousands,
except per share amounts)
Revenues
Commissions and fees $150,710 $94,300
Net trading revenue 99,460 101,517
Interest, net (597) 3,764
Investment loss and other, net (4,219) (5,603)
------ ------
Total revenues 245,354 193,978
------- -------
Expenses
Employee compensation and benefits 109,187 72,494
Execution and clearance fees 29,091 25,224
Payments for order flow 17,027 8,926
Communications and data processing 13,788 9,466
Depreciation and amortization 8,187 5,520
Occupancy and equipment rentals 5,361 3,813
Business development 4,346 3,611
Professional fees 2,902 3,664
Interest expense 981 1,057
Writedown of assets 699 -
Other 2,756 269
----- ---
Total expenses 194,325 134,044
------- -------
Income from continuing operations before
income taxes 51,029 59,934
Income tax expense 21,148 24,837
------ ------
Income from continuing operations, net of
tax 29,881 35,097
Loss from discontinued operations, net of
tax (20,514) (2,594)
------- ------
Net income $9,367 $32,503
====== =======
Basic earnings per share from continuing
operations $0.34 $0.39
===== =====
Diluted earnings per share from continuing
operations $0.33 $0.38
===== =====
Basic earnings per share from discontinued
operations $(0.24) $(0.03)
====== ======
Diluted earnings per share from discontinued
operations $(0.23) $(0.03)
====== ======
Basic earnings per share $0.11 $0.36
===== =====
Diluted earnings per share $0.10 $0.35
===== =====
Shares used in computation of basic
earnings per share 86,911 89,810
====== ======
Shares used in computation of diluted
earnings per share 91,309 92,445
====== ======
KNIGHT CAPITAL GROUP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
--------- ------------
March 31, December 31,
2009 2008
--------- ------------
(In thousands)
ASSETS
Cash and cash equivalents $336,862 $416,957
Securities owned, held at clearing
brokers, at fair value 819,102 476,111
Receivable from brokers and dealers 402,133 341,350
Receivable from discontinued operations 35,866 10,851
Investment in Deephaven sponsored funds 31,620 47,152
Fixed assets and leasehold improvements, at
cost, less accumulated depreciation and
amortization 81,500 81,237
Strategic investments 83,610 83,697
Goodwill 232,197 232,197
Intangible assets, less accumulated
amortization 87,641 90,477
Deferred compensation investments 42,712 41,637
Assets within discontinued operations 58,746 84,868
Other assets 108,538 118,892
------- -------
Total assets $2,320,527 $2,025,426
========== ==========
LIABILITIES & STOCKHOLDERS' EQUITY
Liabilities
Securities sold, not yet purchased, at
fair value $598,468 $385,003
Payable to brokers and dealers 280,099 98,138
Accrued compensation expense 88,720 171,392
Accrued expenses and other liabilities 88,591 132,369
Liabilities within discontinued
operations 74,290 63,988
Long term debt 140,000 140,000
------- -------
Total liabilities 1,270,168 990,890
--------- -------
Stockholders' equity
Knight Capital Group, Inc. stockholders' equity
Class A common stock 1,577 1,544
Additional paid-in capital 670,095 648,716
Retained earnings 1,121,377 1,112,010
Treasury stock, at cost (743,449) (734,912)
-------- --------
Total Knight Capital Group, Inc.
stockholders' equity 1,049,600 1,027,358
Noncontrolling interest 759 7,178
--- -----
Total stockholders' equity 1,050,359 1,034,536
--------- ---------
Total liabilities and stockholders'
equity $2,320,527 $2,025,426
========== ==========
KNIGHT CAPITAL GROUP, INC.
PRE-TAX EARNINGS FROM CONTINUING
OPERATIONS BY BUSINESS SEGMENT*
Amounts in millions
(Unaudited)
For the three months ended
March 31,
-------------
2009 2008
---- ----
Global Markets
Revenues $250.4 $202.2
Expenses 183.3 123.2
----- -----
Pre-tax earnings 67.0 78.9
---- ----
Corporate
Revenues (5.0) (8.2)
Expenses 11.0 10.8
---- ----
Pre-tax earnings (16.0) (19.0)
----- -----
Consolidated
Revenues 245.4 194.0
Expenses 194.3 134.0
----- -----
Pre-tax earnings $51.0 $59.9
===== =====
* Totals may not add due to rounding.
SOURCE Knight Capital Group, Inc.
CONTACT: Margaret Wyrwas, Senior Managing Director, Communications,
Marketing & Investor Relations, +1-201-557-6954, mwyrwas@knight.com;
Kara
Fitzsimmons, Director, Media Relations, +1-201-356-1523,
kfitzsimmons@knight.com; or Jonathan Mairs, Vice President, Corporate
Communications, +1-201-356-1529, jmairs@knight.com
/Web Site: http://www.knight.com
(NITE) |
