Global Markets reported second quarter 2009 revenues of $310.1 million, a 67% increase from second quarter 2008 revenues of $185.6 million, driven by quantitative equity trading, global institutional fixed income and U.S. institutional equities sales and trading
Global Markets reported second quarter 2009 pre-tax GAAP income of $92.9 million, a 44% increase from second quarter 2008 pre-tax GAAP income of $64.4 million, and achieved pre-tax margins of 30% despite ongoing investments in new talent, geographic and asset class expansion, and infrastructure
In Discontinued Operations, Asset Management recorded additional pre-tax wind-down costs of $19 million in the second quarter 2009
JERSEY CITY, N.J., July 22 /PRNewswire-FirstCall/ -- Knight Capital Group,
Inc. (Nasdaq: NITE) today reported earnings from continuing operations of
$48.0 million, or $0.52 per diluted share, and a loss from discontinued
operations, net of tax, of $12.5 million, or $0.13 loss per diluted share. On
a consolidated basis, the company reported earnings of $35.5 million, or $0.39
per diluted share, for the second quarter of 2009.
During the second quarter 2009, Knight recorded a pre-tax benefit of $13.1
million related to an adjustment of a previously recognized lease loss with
respect to the company's headquarters at 545 Washington Boulevard in Jersey
City, New Jersey. The benefit reflects management's decision to build out and
occupy the space based on expected growth. Excluding the $13.1 million lease
loss benefit during the second quarter of 2009, pre-tax earnings from
continuing operations were $67.8 million.
For the second quarter of 2008, the company reported earnings from
continuing operations of $34.3 million, or $0.37 per diluted share, and a loss
from discontinued operations, net of tax, of $4.8 million, or $0.05 loss per
diluted share. On a consolidated basis, the company reported earnings of $29.4
million, or $0.32 per diluted share for the second quarter of 2008.
Revenues from continuing operations for the second quarter of 2009 were
$313.9 million, compared to $189.8 million from continuing operations for the
second quarter of 2008.
"Knight's strong financial results in the second quarter were due to
further market share gains in equities and the continued execution of our
multi-asset class strategy, especially the expansion in fixed income," said
Thomas M. Joyce, Chairman and Chief Executive Officer, Knight Capital Group.
"Equity trade volumes and revenues from both institutional and broker-dealer
clients rose in an industry environment marked by increasing competition and
downward pressure on margins. In institutional fixed income, Knight added
products, talent and new clients. During the second quarter, we made
additional investments in Europe and the Asia-Pacific region to drive future
growth."
"Continuing operations" includes the company's Global Markets and
Corporate operating segments. Amounts reported as "Discontinued operations"
include the company's Asset Management segment, which, on March 31, 2009,
closed the sale of substantially all of Deephaven's assets to affiliates of
Stark & Roth, Inc. As of that date, Deephaven was replaced as the investment
adviser for the Deephaven funds and the company exited from the Asset
Management business.
Q2 2009 Q2 2008
------- -------
Revenues ($ thousands) 313,867 189,792
Income from continuing operations, net of tax
($ thousands) 47,958 34,255
Loss from discontinued operations, net of tax
($ thousands) (12,460) (4,844)
Net income ($ thousands) 35,498 29,411
Diluted EPS from continuing operations ($) 0.52 0.37
Diluted EPS from discontinued operations ($) (0.13) (0.05)
Average daily U.S. equity dollar value traded
($ billions) 23.1 17.3
Average daily U.S. equity trades (thousands) 4,190.2 1,850.2
Nasdaq and Listed equity shares traded (billions) 100.0 34.8
OTC Bulletin Board and Pink Sheet shares traded
(billions) 447.8 206.1
Average revenue capture per U.S. equity dollar value
traded (bps) 1.5 1.3
-------- --------
YTD 2009 YTD 2008
-------- --------
Revenues ($ thousands) 559,221 383,770
Income from continuing operations, net of tax
($ thousands) 77,840 69,352
Loss from discontinued operations, net of tax
($ thousands) (32,975) (7,438)
Net income ($ thousands) 44,865 61,914
Diluted EPS from continuing operations ($) 0.85 0.75
Diluted EPS from discontinued operations ($) (0.36) (0.08)
Average daily U.S. equity dollar value traded
($ billions) 21.5 17.0
Average daily U.S. equity trades (thousands) 4,019.1 1,804.1
Nasdaq and Listed equity shares traded (billions) 179.3 68.4
OTC Bulletin Board and Pink Sheet shares traded
(billions) 707.0 371.2
Average revenue capture per U.S. equity dollar value
traded (bps) 1.5 1.4
Global Markets
During the second quarter of 2009, Global Markets generated total revenues
of $310.1 million, compared to $185.6 million in the second quarter of 2008.
In the second quarter of 2009, Global Markets reported pre-tax income of $92.9
million, compared to pre-tax income of $64.4 million in the second quarter of
2008. Global Markets had pre-tax margins of 30% in the second quarter of 2009,
compared to pre-tax margins of 35% in the second quarter of 2008. Excluding
the lease loss benefit of $13.1 million in the second quarter of 2009, Global
Markets reported pre-tax income of $79.8 million and a pre-tax margin of 26%.
"In Global Markets, quantitative equity trading, the institutional sales
and trading teams covering fixed income and equities, as well as the
increasing usage of Knight's electronic trade execution services helped to
fuel the increase in total revenues," said Mr. Joyce. "We reported a 32
percent increase in U.S. equity dollar value traded during a period of
concentrated trading activity in low-priced stocks. Despite ongoing
investments to grow and diversify revenues and an increase in execution and
clearing costs, we achieved pre-tax operating margins of 26 percent, which
exceeded management's goal of 20 percent across market cycles. We remain
committed to providing the highest levels of client service across the
electronic and voice services in our hybrid market model."
Corporate
In the second quarter of 2009, the Corporate segment reported a pre-tax
loss of $12.0 million, compared to a pre-tax loss of $7.2 million in the
second quarter of 2008.
The company's corporate investment in the Deephaven funds recognized a
pre-tax gain of $0.9 million during the second quarter of 2009, compared to a
pre-tax gain of $2.0 million during the second quarter of 2008.
Headcount from continuing operations at the end of June 30, 2009 was 1,046
full-time employees, as compared to 793 full-time employees at the end of June
30, 2008, reflecting personnel additions from acquisitions and new products
throughout the year.
"At Knight, our growing global, multi-asset class client offering is the
foundation of our strong financial performance," said Mr. Joyce. "The market
share gains are evidence of deepening existing client relationships and adding
new clients. In Europe, we continue to invest in our hybrid market model
featuring complementary electronic and voice trade execution services. And in
the Asia-Pacific region, the institutional sales and trading teams continue to
build relationships in equities and fixed income."
As of June 30, 2009, the company had $363.9 million in cash and cash
equivalents as well as a $28.6 million corporate investment in funds formerly
managed by Deephaven.
The company had $1.1 billion in stockholders' equity as of June 30, 2009,
equivalent to a book value of $11.97 per diluted share. The company had a book
value of $10.42 per diluted share as of June 30, 2008.
During the second 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.
Discontinued Operations
In the second quarter of 2009, discontinued operations reported a pre-tax
loss of $18.8 million, or $12.5 million, net of tax, which relates to the
wind-down of the Asset Management segment. In the second quarter of 2008,
discontinued operations reported a pre-tax loss of $7.9 million, or $4.8
million, net of tax. Deephaven was designated a discontinued operation for
financial reporting purposes as of the close of business on March 31, 2009.
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 second quarter 2009 earnings conference call for analysts, investors and
the media at 9:00 a.m. Eastern Time (ET) today, July 22, 2009. To access
Knight's earnings conference call, please dial 888-503-8171 for domestic
callers or 719-325-2394 for international callers. When prompted, please enter
passcode 9864718. A replay of the second quarter 2009 earnings conference call
will be available by dialing 888-203-1112 for domestic callers or 719-457-0820
for international callers. When prompted, enter passcode 9864718. 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 June 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 global capital markets firm
that provides market access and trade execution services across multiple asset
classes to buy- and sell-side firms. Knight's hybrid market model features
complementary electronic and voice trade execution services in global equities
and fixed income as well as foreign exchange, futures and options. The firm is
consistently ranked as the leading source of off-exchange liquidity in U.S.
equities. Knight also provides capital markets services to corporate issuers.
Knight is headquartered in Jersey City, NJ with a growing global presence
across North America, Europe and the Asia-Pacific region. For more
information, please go to 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 the costs, integration, performance
and operation of businesses recently acquired, or that may be acquired in the
future, by the Company and risks related to the 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.
In an effort to provide investors with additional information regarding
the Company's results as determined by Generally Accepted Accounting
Principles ("GAAP"), the Company also discloses certain non-GAAP information
which management believes provides useful information to investors. Within
this press release, the Company has disclosed its pre-tax operating income
amounts before lease loss benefits to assist the reader in understanding the
impact of these benefits on the Company's financial results, thereby
facilitating more useful period-to-period comparisons of the Company's
businesses.
KNIGHT CAPITAL GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the three months For the six months
ended June 30, ended June 30,
-------------------- ------------------
2009 2008 2009 2008
---- ---- ---- ----
(In thousands, except per share amounts)
Revenues
Commissions and fees $175,797 $98,452 $326,507 $192,752
Net trading revenue 135,405 85,433 234,865 186,950
Interest, net (1,041) 1,888 (1,638) 5,652
Investment gain (loss)
and other, net 3,706 4,019 (513) (1,584)
----- ----- ---- ------
Total revenues 313,867 189,792 559,221 383,770
------- ------- ------- -------
Expenses
Employee compensation and
benefits 135,614 67,751 244,801 140,245
Execution and clearance
fees 42,432 23,828 71,523 49,052
Payments for order flow 23,047 8,300 40,074 17,226
Communications and data
processing 14,281 11,234 28,069 20,700
Depreciation and
amortization 8,260 5,955 16,447 11,475
Occupancy and equipment
rentals 5,890 5,119 11,251 8,932
Business development 5,093 4,256 9,439 7,867
Professional fees 3,098 4,286 6,000 7,950
Interest expense 974 891 1,955 1,948
Writedown of assets and
lease loss accrual, net (10,695) (1,872) (9,996) (1,872)
Other 4,981 2,725 7,736 2,994
----- ----- ----- -----
Total expenses 232,975 132,473 427,299 266,517
------- ------- ------- -------
Income from continuing
operations before
income taxes 80,892 57,319 131,922 117,253
Income tax expense 32,934 23,064 54,082 47,901
------ ------ ------ ------
Income from continuing
operations, net of tax 47,958 34,255 77,840 69,352
Loss from discontinued
operations, net of tax (12,460) (4,844) (32,975) (7,438)
------- ------ ------- ------
Net income $35,498 $29,411 $44,865 $61,914
======= ======= ======= =======
Basic earnings per share
from continuing operations $0.55 $0.38 $0.89 $0.77
===== ===== ===== =====
Diluted earnings per share
from continuing operations $0.52 $0.37 $0.85 $0.75
===== ===== ===== =====
Basic earnings per share
from discontinued
operations $(0.14) $(0.05) $(0.38) $(0.08)
====== ====== ====== ======
Diluted earnings per share
from discontinued
operations $(0.13) $(0.05) $(0.36) $(0.08)
====== ====== ====== ======
Basic earnings per share $0.41 $0.33 $0.51 $0.69
===== ===== ===== =====
Diluted earnings per share $0.39 $0.32 $0.49 $0.67
===== ===== ===== =====
Shares used in computation
of basic earnings per share 87,410 90,215 87,162 90,013
====== ====== ====== ======
Shares used in computation
of diluted earnings per
share 92,136 92,637 92,089 92,699
====== ====== ====== ======
KNIGHT CAPITAL GROUP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
------------- -----------------
June 30, 2009 December 31, 2008
------------- -----------------
(In thousands)
ASSETS
Cash and cash equivalents $363,908 $416,957
Securities owned, held
at clearing brokers, at
fair value 808,223 476,111
Receivable from brokers
and dealers 504,267 341,350
Receivable from discontinued
operations 37,175 10,851
Investment in Deephaven funds 28,644 47,152
Fixed assets and leasehold
improvements, at cost, less
accumulated depreciation and
amortization 89,624 81,237
Strategic investments 89,277 83,697
Goodwill 232,197 232,197
Intangible assets, less
accumulated amortization 82,645 90,477
Deferred compensation
investments 44,285 41,637
Assets within discontinued
operations 42,007 84,868
Other assets 115,608 118,892
------- -------
Total assets $2,437,860 $2,025,426
========== ==========
LIABILITIES & EQUITY
Liabilities
Securities sold, not yet
purchased, at fair value $593,150 $385,003
Payable to brokers and
dealers 290,414 98,138
Accrued compensation
expense 134,128 171,392
Accrued expenses and other
liabilities 106,113 132,369
Liabilities within
discontinued operations 70,821 63,988
Long term debt 140,000 140,000
------- -------
Total liabilities 1,334,626 990,890
--------- -------
Equity
Knight Capital Group, Inc.
stockholders' equity
Class A common stock 1,579 1,544
Additional paid-in capital 684,588 648,716
Retained earnings 1,156,875 1,112,010
Treasury stock, at cost (740,450) (734,912)
-------- --------
Total Knight Capital Group,
Inc. stockholders' equity 1,102,592 1,027,358
Noncontrolling interest 642 7,178
--- -----
Total equity 1,103,234 1,034,536
--------- ---------
Total liabilities and equity $2,437,860 $2,025,426
========== ==========
KNIGHT CAPITAL GROUP, INC.
PRE-TAX OPERATING EARNINGS BY BUSINESS SEGMENT*
Amounts in millions
(Unaudited)
For the three For the six
months ended months ended
June 30, June 30,
------------- -------------
2009 2008 2009 2008
---- ---- ---- ----
Global Markets
Revenues $310.1 $185.6 $560.5 $387.7
Operating expenses 230.3 123.0 413.7 246.2
----- ----- ----- -----
Pre-tax operating earnings 79.8 62.6 146.8 141.5
---- ---- ----- -----
Corporate
Revenues 3.7 4.2 (1.3) (4.0)
Operating expenses 15.7 11.4 26.7 22.2
---- ---- ---- ----
Pre-tax operating earnings (12.0) (7.2) (28.0) (26.1)
----- ---- ----- -----
Consolidated
Revenues 313.9 189.8 559.2 383.8
Operating expenses 246.0 134.3 440.4 268.4
----- ----- ----- -----
Pre-tax operating earnings $67.8 $55.4 $118.9 $115.4
===== ===== ====== ======
* Totals may not add due to rounding.
KNIGHT CAPITAL GROUP, INC.
RECONCILIATION OF TOTAL GAAP EXPENSES AND PRE-TAX GAAP INCOME TO
OPERATING EXPENSES AND PRE-TAX OPERATING EARNINGS*
Amounts in millions
(Unaudited)
TOTAL GAAP EXPENSES TO OPERATING EXPENSES
For the three months ended June 30, 2009
----------------------------------------
Global Markets Corporate Total
-------------- --------- -----
TOTAL GAAP EXPENSES $217.3 $15.7 $233.0
Adjustment:
Lease loss benefit 13.1 - 13.1
---- ----- ----
OPERATING EXPENSES $230.3 $15.7 $246.0
------ ----- ------
For the three months ended June 30, 2008
----------------------------------------
Global Markets Corporate Total
-------------- --------- -----
TOTAL GAAP EXPENSES $121.1 $11.4 $132.5
Adjustments:
Lease loss benefit 1.9 - 1.9
--- ----- ---
OPERATING EXPENSES $123.0 $11.4 $134.3
------ ----- ------
PRE-TAX GAAP INCOME TO PRE-TAX OPERATING EARNINGS
For the three months ended June 30, 2009
----------------------------------------
Global Markets Corporate Total
-------------- --------- -----
PRE-TAX GAAP INCOME
FROM CONTINUING
OPERATIONS $92.9 $(12.0) $80.9
Adjustment:
Lease loss benefit (13.1) - (13.1)
----- ------ -----
PRE-TAX OPERATING
EARNINGS $79.8 $(12.0) $67.8
----- ------ -----
For the three months ended June 30, 2008
----------------------------------------
Global Markets Corporate Total
-------------- --------- -----
PRE-TAX GAAP INCOME
FROM CONTINUING
OPERATIONS $64.4 $(7.2) $57.3
Adjustments:
Lease loss benefit (1.9) - (1.9)
---- ----- ----
PRE-TAX OPERATING
EARNINGS $62.6 $(7.2) $55.4
----- ----- -----
* Totals may not add due to rounding.
KNIGHT CAPITAL GROUP, INC.
RECONCILIATION OF TOTAL GAAP EXPENSES AND PRE-TAX GAAP INCOME TO
OPERATING EXPENSES AND PRE-TAX OPERATING EARNINGS*
Amounts in millions
(Unaudited)
TOTAL GAAP EXPENSES TO OPERATING EXPENSES
For the six months ended June 30, 2009
--------------------------------------
Global Markets Corporate Total
-------------- --------- -----
TOTAL GAAP EXPENSES $400.6 $26.7 $427.3
Adjustment:
Lease loss benefit 13.1 - 13.1
---- ----- ----
OPERATING EXPENSES $413.7 $26.7 $440.4
------ ----- ------
For the six months ended June 30, 2008
--------------------------------------
Global Markets Corporate Total
-------------- --------- -----
TOTAL GAAP EXPENSES $244.3 $22.2 $266.5
Adjustments:
Lease loss benefit 1.9 - 1.9
--- ----- ---
OPERATING EXPENSES $246.2 $22.2 $268.4
------ ----- ------
PRE-TAX GAAP INCOME TO PRE-TAX OPERATING EARNINGS
For the six months ended June 30, 2009
--------------------------------------
Global Markets Corporate Total
-------------- --------- -----
PRE-TAX GAAP INCOME
FROM CONTINUING
OPERATIONS $159.9 $(28.0) $131.9
Adjustment:
Lease loss benefit (13.1) - (13.1)
----- ------ -----
PRE-TAX OPERATING
EARNINGS $146.8 $(28.0) $118.9
------ ------ ------
For the six months ended June 30, 2008
--------------------------------------
Global Markets Corporate Total
-------------- --------- -----
PRE-TAX GAAP INCOME
FROM CONTINUING
OPERATIONS $143.4 $(26.1) $117.3
Adjustments:
Lease loss benefit (1.9) - (1.9)
---- ------ ----
PRE-TAX OPERATING
EARNINGS $141.5 $(26.1) $115.4
------ ------ ------
* 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, or Kara
Fitzsimmons, Director, Media Relations, +1-201-356-1523,
kfitzsimmons@knight.com, or Jonathan Mairs, Vice President, Corporate
Communications, +1-201-356-1529 or jmairs@knight.com
/Web Site: http://www.knight.com
(NITE) |
