|JANUARY 19, 2000|
|Knight/Trimark Group Reports 233% Growth in Quarterly Earnings and 115% Growth in Quarterly Revenues Over Fourth Quarter 1998|
Business Model Excels in an Active Market Environment Leading to Record Fourth Quarter Results of $0.50 per share
JERSEY CITY, N.J., Jan. 19 /PRNewswire/ -- Knight/Trimark Group, Inc. (Nasdaq: NITE) today reported results for the fourth quarter and year ended December 31, 1999. Knight/Trimark Group is the leading market maker in both Nasdaq securities and the over-the-counter market for New York Stock Exchange- and American Stock Exchange-listed securities.
Fourth Quarter 1999 vs. Fourth Quarter 1998 (4)
* 115% growth in revenues * 118% growth in trades executed * 233% growth in net income * 116% growth in shares traded Fourth Quarter 1999 vs. Third Quarter 1999 (4) * 86% growth in revenues * 47% growth in trades executed * 167% growth in net income * 46% growth in shares traded Full Year 1999 vs. Full Year 1998 (4) * 125% growth in revenues * 122% growth in trades executed * 231% growth in net income (1) * 111% growth in shares traded Fourth Quarter Fourth Quarter Full Year Full Year 1999 (4) 1998 1999 (4) 1998 Revenues ($) 256,436,204 119,282,707 800,727,654 355,776,650 Net income ($)(1) 58,400,080 17,536,859 167,844,112 50,781,180 Diluted EPS ($)(2) .50 .17 1.46 .53 Trades executed 30,111,762 13,796,127 90,690,054 40,894,055 Average daily trades 470,496 215,564 359,881 162,278 Shares traded 25,946,697,929 12,017,814,616 81,010,256,250 38,372,592,340
Revenues for the fourth quarter of 1999 rose 115% to $256.4 million, compared to $119.3 million for the fourth quarter of 1998. Net income for the fourth quarter of 1999 totaled $58.4 million, or $0.50 per share on a diluted basis, a 233% increase from $17.5 million, or $0.17 per share on a diluted basis for the same period a year ago (4). One-time expenses incurred in connection with the Company's acquisition of Arbitrade reduced earnings by $0.04 per share on a diluted basis. The Company showed pre-tax margins of 37% in the fourth quarter of 1999 (39% excluding merger expenses), up from 25% in 1998. Return on equity for the fourth quarter and full year 1999, stated on an annualized basis, was 54% and 48%, respectively.
"Knight is the only market maker that predicates its business model on its customer-driven focus, innovative technology, scale and highly skilled human capital. Our record results in 1999's fourth quarter demonstrate that this value-added proposition is the optimal model to drive our future growth. Market conditions of orderly volatility and high volume in the fourth quarter presented an ideal environment for our business model. We executed 470,000 trades per day on average, a 47% increase from the previous quarter and a 118% gain from the fourth quarter 1998," said Kenneth D. Pasternak, the Company's President and Chief Executive Officer. "We also made significant headway during the past quarter in our efforts to diversify our revenue stream, evidenced by the fact that higher margin institutional order flow totaled $78 million or 31% of our overall fourth quarter trading revenues, up from 19% of total trading revenues in the fourth quarter 1998. These developments and high trading volumes are the main drivers of the 233% quarter-over-quarter and 231% year-over-year gains on Knight's bottom line."
Revenues and net income for the fourth quarter of 1999 increased 86% and 167%, respectively, from the third quarter of 1999. Trades executed and shares traded for the fourth quarter of 1999 increased 47% and 46%, respectively, from the third quarter of 1999. In addition, the Company set a new volume record on January 10, 2000, executing over 733,000 trades and over 722 million shares.
"During the past quarter, Knight implemented another phase of its growth strategy by announcing the acquisition of Arbitrade Holdings LLC, an options market maker and asset manager with operations in the U.S. and in Europe. Arbitrade's conservative trading methodology is risk averse and has resulted in consistent, stable revenues. This deal, which we expect to be immediately accretive to our earnings, was closed on January 12, 2000 when we issued approximately 10.5 million shares, valued at approximately $393 million, to Arbitrade's owners," continued Pasternak. "Our acquisition of Arbitrade will enable us to apply our proven business model to the options market, which is on the cusp of a revolution as pronounced as the one experienced in the equities market in the 1990s. The options market is in the second inning of a nine-inning ballgame. We plan to fulfill the compelling need in the options industry for a market maker that understands all of the variables at play, namely regulatory change, the rising integration of technology and the empowerment of the self-directed investor. Our presence in the options market will be immediately felt and will expand once the International Securities Exchange (ISE) begins trading this year."
"Knight is one of the fastest growing companies in America. We were one of the first to recognize the paradigm shift brought on by the advancement of technology, the empowerment of self-directed investors through the Internet, and the impact of regulatory change. Knight will continue to grow because we understand that future success in the marketplace will belong to the companies that deliver best of breed products and services with speed and flexibility to customers. Knight has demonstrated our prowess in this area through our accomplishments in the U.S. equities market," said Pasternak. "Knight aims to grow through additional product offerings such as options and asset management and is actively pursuing international expansion opportunities in Europe and Asia. In fact, we are in preliminary talks with The Nikko Securities Co., Ltd. of Japan about a joint venture operation that would provide wholesale market making services in Japanese securities."
"In the next year, Knight expects to continue its fast-paced growth rate. We believe that the secular trends that created a market opportunity for Knight's emergence are in their infancy and will continue to blossom in the coming periods. We foresee continued, dramatic growth in the need for Knight's range of services from online firms, national full-service brokers and our growing institutional base. In fact, industry analysts predict that the number of online investors will total 25 million by the end of 2002, a trend that will directly benefit Knight and its customer base," said Pasternak. "Knight has created a value proposition that leapfrogged competitors but we are not resting on our laurels. Ultimately, Knight's vision is to allow our customers to trade any financial instrument, anytime, from anywhere in the world."
The AutEx Group ("AutEx")(3) ranked Knight Securities as the largest market maker in Nasdaq/OTC securities for December 1999 with a 19.59% total market share which represents a 26% increase in market share from December 1998 when Knight achieved a 15.57% total market share.
Knight/Trimark, headquartered in Jersey City, NJ, is the parent company of Knight Securities, Trimark Securities and Arbitrade Holdings. Knight Securities makes markets in approximately 7,400 equity securities listed on Nasdaq and on the OTCBB of the National Association of Securities Dealers (NASD). Trimark trades NYSE- and AMEX-listed equity securities over the counter -- the Third Market. Arbitrade makes markets in options on individual equities, equity indices, fixed income instruments and certain commodities in the U.S. and in Europe. Arbitrade also maintains an asset management business for institutional investors and high net worth individuals through its Deephaven subsidiary.
As the number one destination for online trade executions, Knight/Trimark is the processing power behind the explosive growth in securities trading via the Internet. The firm was recently selected to Fortune magazine's "e-50 Stock Index," an elite collection of companies that are shaping the new Internet-based economy. Currently, the four-year-old company employs more than 800 people worldwide with offices in Jersey City, NJ; Jericho, White Plains, Purchase and New York, NY; Chicago, IL; Boston, MA; Minnetonka, MN; Santa Clara, CA and London, England.
Copies of this earnings release and other information on the Company can be obtained via the Internet at http://www.knight-sec.com or toll-free on the Company's investor information line at 1-877-INFO-NITE.
The matters described herein contain forward-looking statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve a number of risks, uncertainties or other factors beyond the Company's control, which could cause actual results to differ materially from historical results, performance or other expectations and from any opinions or statements expressed with respect to future periods. These factors include, but are not limited to, the Company's ability to implement its growth strategies, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, intellectual property rights, and other factors detailed in the Company's registration statement and periodic reports filed with the Securities & Exchange Commission.
(1) Net income for the year ended December 31, 1998 was adjusted to
reflect pro forma income taxes related to the Company's reorganization from a limited liability company to a C corporation in connection with the Company's initial public offering on July 8, 1998. (2) Diluted earnings per share excluding one-time expenses incurred in connection with the Company's acquisition of Arbitrade Holdings, L.L.C. was $0.54 for the quarter ended December 31, 1999 and $1.49 for the year ended December 31, 1999. (3) The AutEx Group is a widely-recognized industry reporting service that provides daily statistics on trading activity and broker-dealer market-share, as reported by broker-dealers. (4) Knight's acquisition of Arbitrade closed on January 12, 2000. As such, the results reported in this press release do not include the 1999 financial information of Arbitrade. Please see our Form 8-K filed on January 12, 2000 for additional discussion of the Arbitrade transaction. KNIGHT/TRIMARK GROUP, INC. Consolidated Statements of Income Three Months Ended Dec. 31, Year Ended Dec. 31, 1999 1998 1999 1998 Revenues Net trading revenue $247,014,571 $115,075,407 $771,437,707 $348,209,464 Commissions and fees 4,751,155 2,496,432 16,439,088 3,983,133 Interest, net 4,670,478 1,710,868 12,850,859 3,584,053 Total revenues 256,436,204 119,282,707 800,727,654 355,776,650 Expenses Employee compensation and benefits 77,716,347 40,189,198 242,145,274 108,321,436 Payments for order flow 39,845,973 26,401,525 138,696,689 82,499,233 Execution and clearance fees 21,849,626 13,360,492 79,321,769 45,718,605 Communications and data processing 5,198,050 3,167,439 17,975,757 10,616,663 Business development 3,607,630 743,235 8,963,616 2,364,231 Occupancy and equipment rentals 2,769,236 1,792,948 9,728,271 5,837,555 Depreciation and amortization 2,582,557 1,727,324 9,132,325 5,887,593 Professional fees 2,608,135 1,193,108 6,806,688 3,400,566 Merger related expenses **** 5,189,295 -- 5,189,295 -- Interest on Preferred Units -- -- -- 714,904 Other 841,548 678,570 3,377,919 2,063,628 Total expenses 162,208,397 89,253,839 521,337,603 267,424,414 Net income before taxes 94,227,807 30,028,868 279,390,051 88,352,236 Income tax expense 35,827,727 12,492,009 111,545,939 21,751,209 Net income $ 58,400,080 $ 17,536,859 $167,844,112 $66,601,027 Basic earnings per share $0.52 $0.17 $1.52 -- Diluted earnings per share $0.50 $0.17 $1.46 -- Pro forma adjustment:* Net income before taxes $88,352,236 Pro forma income tax expense 37,571,056 Pro forma net income $50,781,180 Pro forma basic and diluted earnings per share $0.53 Shares used in the computation of basic earnings per share ** 111,490,423 106,009,764 110,316,709 Shares used in the computation of diluted earnings per share ** 116,447,387 106,009,764 115,250,429 Pro forma shares outstanding for basic and diluted earnings per share*** 95,022,222 * Before its reorganization to a C Corporation on July 13, 1998, the Company, as a limited liability company, was not subject to income taxes. Pro forma income tax expense was computed based on an effective tax rate of 42.5% prior to this date. ** The shares used to calculate basic earnings per share for the periods ended December 31, 1999 reflect the weighted average shares outstanding during the period. The shares used to calculate diluted earnings per share include the effect of dilutive stock options. *** Pro forma shares outstanding for the year ended December 31, 1998 have been determined as if the Company's reorganization to a C Corporation occurred as of January 1, 1998. **** Primarily consists of investment banking, legal and accounting fees related to the merger with Arbitrade. KNIGHT/TRIMARK GROUP, INC. Consolidated Statements of Financial Condition December 31, December 31, 1999 1998 ASSETS Cash and cash equivalents $303,864,955 $117,381,556 Securities owned, at market value 135,816,418 100,476,151 Receivable from clearing brokers 193,458,033 107,503,274 Fixed assets and leasehold improvements at cost, less accumulated depreciation 17,429,242 12,014,991 Goodwill, less accumulated amortization 18,547,805 16,036,859 Investments 12,696,342 1,913,000 Other assets 13,304,332 3,534,544 Total assets $695,117,127 $358,860,375 LIABILITIES & STOCKHOLDERS' EQUITY Liabilities Securities sold, not yet purchased, at market value $129,849,223 $108,909,217 Short-term borrowings -- 10,000,000 Accrued compensation expense 45,218,384 16,529,004 Accrued execution and clearance fees 8,371,056 6,898,095 Accrued payments for order flow 13,978,854 8,672,668 Accounts payable, accrued expenses and other liabilities 17,725,571 5,445,112 Income taxes payable 15,992,937 2,285,620 Total liabilities 231,136,025 158,739,716 Stockholders' equity Class A Common Shares 1,116,165 981,244 Class B Common Shares -- 78,854 Additional paid-in capital 265,210,144 169,249,880 Retained earnings 197,654,793 29,810,681 Total stockholders' equity 463,981,102 200,120,659 Total liabilities and stockholders' equity $695,117,127 $358,860,375 SOURCE Knight/Trimark Group, Inc.
CONTACT: Robert Turner, Executive Vice President, Treasurer and Chief Financial Officer, 201-557-6845, or Margaret Wyrwas, Vice President, Corporate Communications & Investor Relations, 201-557-6954, email@example.com, both of Knight-Trimark Group; or Russell Dubner, 212-704-4538, or Chuck Dohrenwend, 212-704-8102, for Knight-Trimark Group/