|APRIL 21, 2010|
|Knight Capital Group Announces Consolidated Earnings of $0.30 per Diluted Share for the First Quarter 2010|
|--Equities generated first quarter 2010 revenues of $219.4 million, despite a decrease in broad U.S. equity market volumes and lower volatility, compared to first quarter 2009 revenues of $198.2 million
--Fixed Income, Currencies and Commodities (FICC) recorded first quarter 2010 revenues of $67.8 million, as credit spreads tightened and foreign exchange volume rose, compared to first quarter 2009 revenues of $52.0 million
JERSEY CITY, N.J., April 21, 2010 /PRNewswire via COMTEX/ -- Knight Capital Group, Inc. (Nasdaq: NITE) today reported consolidated earnings of $27.8 million, or $0.30 per diluted share. The company reported earnings from continuing operations of $28.1 million, or $0.30 per diluted share, and a loss from discontinued operations, net of tax, of $0.3 million.
For the first quarter of 2009, the company reported consolidated earnings of $9.4 million, or $0.10 per diluted share. The company 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 a $0.23 loss per diluted share.
Revenues from continuing operations for the first quarter of 2010 were $284.2 million, compared to $245.4 million for the first quarter of 2009.
"Knight recorded solid results in the first quarter of 2010 despite unfavorable market conditions," said Thomas M. Joyce, Chairman and Chief Executive Officer, Knight Capital Group. "Consolidated revenues increased 16 percent, compared to the first quarter of 2009, reflecting a rise in contributions from both the Equities and FICC segments. The gains defied a period of subdued activity among institutional and retail investors caused by recent economic and political uncertainty. During the quarter, Knight continued to invest in new initiatives to expand the offering, increase scale and maximize efficiencies. In addition, Knight completed a $375 million offering of convertible notes to repay short-term bank debt, fund new initiatives and enhance the capital structure."
"Continuing operations" includes the company's Equities, FICC and Corporate operating segments. Equities includes all global equities market-making and institutional sales and trading, such as Knight Direct and Knight Link. FICC includes all global trade execution services in fixed income, foreign exchange and commodities, such as fixed income sales, trading and research, Knight BondPoint and Hotspot FX. Corporate includes strategic investments primarily in financial services-related ventures, corporate overhead expenses and all other expenses that are not attributable to the Equities and FICC segments. Amounts reported as "discontinued operations" primarily include the company's Asset Management segment, which, on March 31, 2009, closed the sale of substantially all of Deephaven's assets to affiliates of Stark & Roth, Inc. As of that date, Deephaven was replaced as the investment adviser for the Deephaven funds and the company exited from the Asset Management business.
Q1 Q1 2010 2009 ------- ----- Revenues ($ thousands) 284,239 245,354 Income from continuing operations, net of tax ($ thousands) 28,118 29,881 Loss from discontinued operations, net of tax ($ thousands) (306) (20,514) Net income ($ thousands) 27,812 9,367 Diluted EPS from continuing operations ($) 0.30 0.33 Diluted EPS from discontinued operations ($) (0.00) (0.23) Average daily U.S. equity dollar value traded ($ billions) 26.6 19.9 Average daily U.S. equity trades (thousands) 3,696.3 3,842.3 Nasdaq and Listed equity shares traded (billions) 71.7 79.3 OTC Bulletin Board and Pink Sheet shares traded (billions) 553.3 259.2 Average revenue capture per U.S. equity dollar value traded (bps) 1.1 1.5 Average daily Knight Direct equity shares (millions) 111.2 52.3 Average daily Hotspot FX notional dollar value traded ($ billions) 32.6 17.0
During the first quarter of 2010, Equities generated total revenues of $219.4 million, compared to $198.2 million in the first quarter of 2009. In the first quarter of 2010, Equities reported pre-tax income of $56.6 million, compared to pre-tax income of $59.0 million in the first quarter of 2009. Equities had pre-tax margins of 26% in the first quarter of 2010, compared to pre-tax margins of 30% in the first quarter of 2009.
"In Equities, during the first quarter, Knight grew revenues amid a 20 percent decline in broad U.S. equity market volumes year-over-year and a decrease in volatility with the VIX dipping below 17 during intraday trading in mid-March," said Mr. Joyce. "During the first quarter, Knight increased industry-leading market share among U.S. broker-dealers in the face of heightened competition and electronic trading products Knight Link, Knight Direct and Knight Match grew trade volumes. We also experienced a modest increase in market share among U.S. institutions and continued to add clients in Europe and the Asia-Pacific region. In aggregate, Knight increased average daily volumes from the first quarter 2009 and maintained the number one AutEx rankings in Listed, NASDAQ, Bulletin Boards and ETFs among securities firms. Algorithmic principal trading models performed well despite the low volatility."
During the first quarter of 2010, FICC generated total revenues of $67.8 million, compared to $52.0 million in the first quarter of 2009. In the first quarter of 2010, FICC reported pre-tax income of $8.1 million, compared to pre-tax income of $10.2 million in the first quarter of 2009. FICC had pre-tax margins of 12% in the first quarter of 2010, compared to pre-tax margins of 20% in the first quarter of 2009.
"In FICC, during the first quarter, Knight continued the rapid expansion of fixed income and foreign exchange," said Mr. Joyce. "Knight's fixed income business grew revenues even as credit spreads tightened, offsetting a rise in broad market volumes of Corporate bonds. The performance is attributable to the experienced team, product coverage and in-depth research. The pending acquisition of Urban Financial will create an integrated origination-securitization-trading model for Ginnie Mae HMBS, a reverse-mortgage MBS guaranteed by the U.S. government. During the quarter, FICC pre-tax margins were impacted by narrowing credit spreads as well as expenses from hiring and retention activities. In foreign exchange, Hotspot FX turned in a record quarter in terms of average daily notional value traded, revenues and pre-tax income as a result of market conditions and continued gains in market share."
In the first quarter of 2010, the Corporate segment reported a pre-tax loss of $18.7 million, compared to a pre-tax loss of $18.1 million in the first quarter of 2009.
The company's corporate investment in funds formerly managed by Deephaven recognized a pre-tax gain of $0.3 million during the first quarter of 2010, compared to a pre-tax loss of $3.9 million during the first quarter of 2009.
Headcount from continuing operations at March 31, 2010 was 1,150 full-time employees, as compared to 966 full-time employees at March 31, 2009, resulting from our international expansion and expanded product offerings.
"During the first quarter of 2010, Knight continued to perform well due to diversification across clients, products and services, and asset classes," said Mr. Joyce. "As a firm, we've demonstrated an ability to compete in any environment against an array of competitors. During the quarter, Knight also made further progress in important new initiatives including self clearing and options market making."
As of March 31, 2010, the company had $513.2 million in cash and cash equivalents. The company had $1.25 billion in stockholders' equity as of March 31, 2010, equivalent to a book value of $13.41 per diluted share. The company had a book value of $11.50 per diluted share as of March 31, 2009.
In March 2010, the company issued $375 million in Cash Convertible Senior Subordinated Notes, which mature in five years and carry a 3.5% coupon.
During the first quarter of 2010, the company repurchased 502,000 shares for approximately $7.7 million under the company's $1.0 billion stock repurchase program. To date, the company has repurchased 68.8 million shares for $778.1 million. The company has approximately $221.9 million of availability to repurchase shares under the program. The company cautions that there are no assurances that any further repurchases may actually occur.
In the first quarter of 2010, the company reported a loss from discontinued operations of $0.3 million, net of tax, compared to a loss of $20.5 million, net of tax in the first quarter of 2009. These losses primarily relate to the wind-down of the Asset Management segment which 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 first quarter 2010 earnings conference call for analysts, investors and the media at 9:00 a.m. Eastern Time (ET) today, April 21, 2010. To access Knight's earnings conference call, please dial 800-967-7138 for domestic callers or 719-457-1529 for international callers. When prompted, please enter passcode 6426154. A replay of the first quarter 2010 earnings conference call will be available by dialing 888-203-1112 for domestic callers or 719-457-0820 for international callers. When prompted, please enter passcode6426154. 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 2010 on its website at http://www.knight.com/ourfirm/volumestats.asp before the start of trading today.
Knight Capital Group, Inc. (Nasdaq: NITE) is a global financial services 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 the leading source of liquidity in U.S. equities by share volume. Knight also offers 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 http://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 changes in market structure, legislative or regulatory rule changes, the costs, integration, performance and operation of businesses recently acquired or developed organically, 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, 2009, 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, 2009, 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, --------- 2010 2009 ---- ---- (In thousands, except per share amounts) Revenues Commissions and fees $159,513 $150,710 Trading revenue 124,964 99,460 Interest, net 624 (597) Investment loss and other, net (862) (4,219) ---- ------ Total revenues 284,239 245,354 ------- ------- Expenses Employee compensation and benefits 138,350 109,187 Execution and clearance fees 42,462 29,091 Communications and data processing 16,058 13,788 Payments for order flow 11,025 17,027 Depreciation and amortization 9,235 8,187 Occupancy and equipment rentals 6,341 5,361 Professional fees 4,753 2,902 Business development 4,228 4,346 Interest expense 2,474 981 Writedown of assets and lease loss accrual - 699 Other 3,355 2,756 ----- ----- Total expenses 238,281 194,325 ------- ------- Income from continuing operations before income taxes 45,958 51,029 Income tax expense 17,840 21,148 ------ ------ Income from continuing operations, net of tax 28,118 29,881 Loss from discontinued operations, net of tax (306) (20,514) ---- ------- Net income $27,812 $9,367 ======= ====== Basic earnings per share from continuing operations $0.31 $0.34 ===== ===== Diluted earnings per share from continuing operations $0.30 $0.33 ===== ===== Basic earnings per share from discontinued operations $(0.00) $(0.24) ====== ====== Diluted earnings per share from discontinued operations $(0.00) $(0.23) ====== ====== Basic earnings per share $0.31 $0.11 ===== ===== Diluted earnings per share $0.30 $0.10 ===== ===== Shares used in computation of basic earnings per share 89,463 86,911 ====== ====== Shares used in computation of diluted earnings per share 93,478 91,309 ====== ====== KNIGHT CAPITAL GROUP, INC. CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited) March 31, December 31, 2010 2009 ---------- ------------- (In thousands) ASSETS Cash and cash equivalents $513,161 $427,106 Financial instruments owned, at fair value 1,052,858 926,589 Securities borrowed 943,800 394,417 Receivable from brokers and dealers 491,962 500,143 Fixed assets and leasehold improvements, at cost, less accumulated depreciation and amortization 101,539 98,696 Investments 78,049 110,120 Goodwill 266,530 265,530 Intangible assets, less accumulated amortization 76,168 77,812 Other assets 195,002 213,611 ------- ------- Total assets $3,719,069 $3,014,024 ========== ========== LIABILITIES & EQUITY Liabilities Financial instruments sold, not yet purchased, at fair value $965,695 $639,259 Securities loaned 690,208 550,226 Payable to brokers and dealers 288,987 155,148 Accrued compensation expense 74,599 205,282 Accrued expenses and other liabilities 143,735 109,987 Credit facility - 140,000 Long-term debt 301,736 - ------- --- Total liabilities 2,464,960 1,799,902 --------- --------- Equity Knight Capital Group, Inc. stockholders' equity Class A common stock 1,613 1,586 Additional paid-in capital 779,115 746,778 Retained earnings 1,256,924 1,229,112 Treasury stock, at cost (779,825) (763,974) Cumulative translation adjustment (4,338) - ------ --- Total Knight Capital Group, Inc. stockholders' equity 1,253,489 1,213,502 Noncontrolling interests 620 620 --- --- Total equity 1,254,109 1,214,122 --------- --------- Total liabilities and equity $3,719,069 $3,014,024 ========== ========== KNIGHT CAPITAL GROUP, INC. PRE-TAX EARNINGS BY BUSINESS SEGMENT* Amounts in millions (Unaudited) For the three months ended March 31, -------------------- 2010 2009 ---- ---- Equities Revenues $219.4 $198.2 Expenses 162.8 139.2 ----- ----- Pre-tax earnings 56.6 59.0 ---- ---- FICC Revenues 67.8 52.0 Expenses 59.7 41.9 ---- Pre-tax earnings 8.1 10.2 --- ---- Corporate Revenues (2.9) (4.9) Expenses 15.8 13.2 ---- ---- Pre-tax earnings (18.7) (18.1) ----- ----- Consolidated Revenues 284.2 245.4 Expenses 238.3 194.3 Pre-tax earnings $46.0 $51.0 ===== ===== * Totals may not add due to rounding.
SOURCE Knight Capital Group, Inc.