| JULY 21, 2010 |
| Knight Capital Group Announces Consolidated Earnings of $0.58 per Diluted Share for the Second Quarter 2010 |
Equities second quarter 2010 revenues increased 25% to $305.0 million, driven by market conditions and electronic market making, compared to second quarter 2009 revenues of $243.9 million Fixed Income, Currencies and Commodities (FICC) second quarter 2010 revenues of $60.4 million were negatively affected by a broad market decline in volumes of corporate bonds offset by continuing currency volatility, compared to second quarter 2009 revenues of $66.1 million JERSEY CITY, N.J., July 21, 2010 /PRNewswire via COMTEX/ -- Knight Capital Group, Inc. (NYSE Euronext: KCG) today reported consolidated earnings of $54.4 million, or $0.58 per diluted share. For the second quarter of 2009, the company 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. Revenues from continuing operations for the second quarter of 2010 were $366.3 million, compared to $313.9 million from continuing operations for the second quarter of 2009. "Knight's strong results in the second quarter of 2010 were aided by an upturn in volatility following five straight quarters of declines," said Thomas M. Joyce, Chairman and Chief Executive Officer, Knight Capital Group. "Consolidated revenues increased 17 percent, compared to the second quarter of 2009, driven by market conditions, electronic market-making and diversification across products and services. In capital markets, Knight announced a marketing alliance with investment bank Houlihan Lokey to provide best-in-class advice and distribution to public and private companies. We made further progress in expanding Knight's research offering across equities and fixed income. In addition, on May 25th, Knight transferred its listing to the NYSE and simultaneously cross-listed on NYSE Euronext." "Continuing operations" includes the company's Equities, FICC and Corporate operating segments. Equities includes all global equities market-making and institutional sales and trading, such as Knight Direct and Knight Link. FICC includes all global trade execution services in fixed income, foreign exchange and commodities, such as fixed income sales, trading and research, Knight BondPoint and Hotspot FX. Corporate includes strategic investments primarily in financial services-related ventures, corporate overhead expenses and all other expenses that are not attributable to the Equities and FICC segments. "Discontinued operations" primarily comprises the company's former Asset Management segment, which closed the sale of substantially all of its assets and was replaced as the investment adviser for the Deephaven funds on March 31, 2009. Q2 Q2
2010 2009
----- -----
Revenues ($ thousands) 366,274 313,867
Income from continuing operations, net of
tax ($ thousands) 54,435 47,958
Loss from discontinued operations, net of
tax ($ thousands) (44) (12,460)
Net income ($ thousands) 54,391 35,498
Diluted EPS from continuing operations ($) 0.58 0.52
Diluted EPS from discontinued operations
($) 0.00 (0.13)
Average daily U.S. equity dollar value
traded ($ billions) 31.5 23.1
Average daily U.S. equity trades
(thousands) 4,335.5 4,190.2
Nasdaq and Listed equity shares traded
(billions) 83.0 100.0
OTC Bulletin Board and Pink Sheet shares
traded (billions) 682.1 447.8
Average revenue capture per U.S. equity
dollar value traded (bps) 1.3 1.5
Average daily Knight Direct equity shares
(millions) 164.3 62.8
Average daily Hotspot FX notional dollar
value traded ($ billions) 40.2 19.6
YTD YTD
2010 2009
---- ----
Revenues ($ thousands) 650,513 559,221
Income from continuing operations, net of
tax ($ thousands) 82,553 77,840
Loss from discontinued operations, net of
tax ($ thousands) (350) (32,975)
Net income ($ thousands) 82,203 44,865
Diluted EPS from continuing operations ($) 0.88 0.85
Diluted EPS from discontinued operations
($) 0.00 (0.36)
Average daily U.S. equity dollar value
traded ($ billions) 29.1 21.5
Average daily U.S. equity trades
(thousands) 4,021.0 4,019.1
Nasdaq and Listed equity shares traded
(billions) 154.7 179.3
OTC Bulletin Board and Pink Sheet shares
traded (billions) 1,235.4 707.0
Average revenue capture per U.S. equity
dollar value traded (bps) 1.2 1.5
Average daily Knight Direct equity shares
(millions) 138.2 57.7
Average daily Hotspot FX notional dollar
value traded ($ billions) 36.5 18.3
Equities During the second quarter of 2010, the Equities segment generated total revenues of $305.0 million and pre-tax income of $111.3 million. In the second quarter of 2009, Equities reported total revenues of $243.9 million and pre-tax income of $67.3 million. Equities had pre-tax margins of 36% in the second quarter of 2010, compared to pre-tax margins of 28% in the second quarter of 2009. "In Equities, Knight grew second quarter revenues as heightened volatility in May propelled broad U.S. equity market volumes to the highest monthly total in more than two years," said Mr. Joyce. "During periods of intense trading activity, Knight continued to play a critical role in adding liquidity to the U.S. equity markets. The combination of advanced electronic trading with traditional sales and trading allowed Knight to garner a sizeable share of Listed and NASDAQ order flow. In the second quarter, on a year-over-year basis, we increased average daily U.S. equity dollar volume, trade volume and share volume. In addition, our algorithmic principal trading models performed particularly well because of the intraday volatility." FICC During the second quarter of 2010, the FICC segment generated total revenues of $60.4 million and pre-tax income of $0.9 million. In the second quarter of 2009, FICC reported total revenues of $66.1 million and pre-tax income of $14.8 million. FICC had pre-tax margins of 1% in the second quarter of 2010, compared to pre-tax margins of 22% in the second quarter of 2009. "In FICC, Knight continued to invest in expanding the firm's multi-asset class platform," said Mr. Joyce. "Results were impacted by a broad market decline in volumes of investment grade, high yield and convertibles, and higher compensation costs in institutional fixed income for hiring and retention. On July 1, 2010, we closed the acquisition of Urban Financial Group which will strengthen Knight's ABS/MBS capabilities by establishing a captive pipeline of HMBS for institutional clients. We added to the retail fixed income offering with the introduction of a new team to provide financial advisors with access to fixed income trading and research. In foreign exchange, we turned in another record quarter in terms of average daily notional value traded as a result of new client growth and continued currency volatility." Corporate In the second quarter of 2010, the Corporate segment reported a pre-tax loss of $21.0 million, compared to a pre-tax loss of $1.2 million in the second quarter of 2009. During the second quarter of 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 in Jersey City, New Jersey. Excluding the $13.1 million lease loss benefit during the second quarter of 2009, the pre-tax loss from the Corporate segment was $14.3 million. In March 2010, the company issued $375 million in Cash Convertible Senior Subordinated Notes, which mature in five years and carry a 3.5 percent coupon and an effective interest rate of approximately 7.9 percent. For the second quarter of 2010, the company recorded interest expense of $6.4 million related to the debt. "During the second quarter of 2010, Knight's results reflect market conditions and investments made to enhance and expand our businesses," said Mr. Joyce. "Knight possesses considerable intellectual capital which drives innovative new models, products and services. We have several ongoing initiatives to realize future growth across asset classes and geographies." Headcount at June 30, 2010 was 1,207 full-time employees, as compared to 1,046 full-time employees at June 30, 2009. With the close of the acquisition of Urban Financial Group on July 1, 2010, the company added 109 employees. As of June 30, 2010, the company had $422.7 million in cash and cash equivalents. The company had $1.3 billion in stockholders' equity as of June 30, 2010, equivalent to a book value of $13.96 per diluted share. The company had a book value of $11.97 per diluted share as of June 30, 2009. During the second quarter of 2010, the company repurchased 900,000 shares for approximately $13.1 million under the company's $1.0 billion stock repurchase program. To date, the company has repurchased 69.7 million shares for $791.2 million. The company has approximately $208.8 million of availability 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 2010, the company reported a loss from discontinued operations of $44,000, net of tax, compared to a loss of $12.5 million, net of tax in the second 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 second quarter 2010 earnings conference call for analysts, investors and the media at 9:00 a.m. Eastern Time (ET) today, July 21, 2010. To access Knight's earnings conference call, please dial 888-298-3451 for domestic callers or 719-325-2234 for international callers. When prompted, please enter passcode 3688845. A replay of the second 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 passcode 3688845. 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 2010 on its website at http://www.knight.com/ourfirm/volumestats.asp before the start of trading today. About Knight Knight Capital Group, Inc. (NYSE Euronext: KCG) 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 the Americas, 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, "Risk Factors" in the Company's Quarterly Report on Form 10-Q for the quarter-ended March 31, 2010, 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
June 30,
--------------------------
2010 2009
---- ----
(In thousands, except per share amounts)
Revenues
Commissions and fees $177,992 $175,797
Net trading revenue 187,964 135,405
Interest, net 137 (1,041)
Investment income (loss)
and other, net 181 3,706
--- -----
Total revenues 366,274 313,867
------- -------
Expenses
Employee compensation and
benefits 158,695 135,614
Execution and clearance
fees 47,521 42,432
Communications and data
processing 17,071 14,281
Payments for order flow 11,089 23,047
Depreciation and
amortization 9,834 8,260
Interest 7,137 974
Occupancy and equipment
rentals 6,361 5,890
Business development 6,312 5,093
Professional fees 4,033 3,098
Writedown of assets and
lease loss accrual
(benefit), net 1,032 (10,695)
Other 6,061 4,981
----- -----
Total expenses 275,146 232,975
------- -------
Income from continuing
operations before income
taxes 91,128 80,892
Income tax expense 36,693 32,934
------ ------
Income from continuing
operations, net of tax 54,435 47,958
Loss from discontinued
operations, net of tax (44) (12,460)
--- -------
Net income $54,391 $35,498
======= =======
Basic earnings per share
from continuing operations $0.61 $0.55
===== =====
Diluted earnings per share
from continuing operations $0.58 $0.52
===== =====
Basic earnings per share
from discontinued
operations $0.00 $(0.14)
===== ======
Diluted earnings per share
from discontinued
operations $0.00 $(0.13)
===== ======
Basic earnings per share $0.61 $0.41
===== =====
Diluted earnings per share $0.58 $0.39
===== =====
Shares used in computation
of basic earnings per
share 89,425 87,410
====== ======
Shares used in computation
of diluted earnings per
share 93,508 92,136
====== ======
For the six months ended
June 30,
------------------------
2010 2009
---- ----
(In thousands, except per share amounts)
Revenues
Commissions and fees $337,505 $326,507
Net trading revenue 312,928 234,865
Interest, net 761 (1,638)
Investment income (loss)
and other, net (681) (513)
---- ----
Total revenues 650,513 559,221
------- -------
Expenses
Employee compensation and
benefits 297,045 244,801
Execution and clearance
fees 89,983 71,523
Communications and data
processing 33,129 28,069
Payments for order flow 22,114 40,074
Depreciation and
amortization 19,069 16,447
Interest 9,611 1,955
Occupancy and equipment
rentals 12,702 11,251
Business development 10,540 9,439
Professional fees 8,786 6,000
Writedown of assets and
lease loss accrual
(benefit), net 1,032 (9,996)
Other 9,416 7,736
----- -----
Total expenses 513,427 427,299
------- -------
Income from continuing
operations before income
taxes 137,086 131,922
Income tax expense 54,533 54,082
------ ------
Income from continuing
operations, net of tax 82,553 77,840
Loss from discontinued
operations, net of tax (350) (32,975)
---- -------
Net income $82,203 $44,865
======= =======
Basic earnings per share
from continuing operations $0.92 $0.89
===== =====
Diluted earnings per share
from continuing operations $0.88 $0.85
===== =====
Basic earnings per share
from discontinued
operations $0.00 $(0.38)
===== ======
Diluted earnings per share
from discontinued
operations $0.00 $(0.36)
===== ======
Basic earnings per share $0.92 $0.51
===== =====
Diluted earnings per share $0.88 $0.49
===== =====
Shares used in computation
of basic earnings per
share 89,462 87,162
====== ======
Shares used in computation
of diluted earnings per
share 93,891 92,089
====== ======
KNIGHT CAPITAL GROUP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
June 30, December 31,
2010 2009
--------- -------------
(In thousands)
ASSETS
Cash and cash equivalents $422,690 $427,106
Financial instruments owned, at
fair value 1,239,162 926,589
Securities borrowed 1,189,265 394,417
Receivable from brokers and
dealers 771,357 500,143
Fixed assets and leasehold
improvements, at cost, less
accumulated depreciation and
amortization 103,117 98,696
Investments 88,672 118,619
Goodwill 266,530 265,530
Intangible assets, less
accumulated amortization 88,451 93,332
Other assets 199,897 189,592
------- -------
Total assets $4,369,141 $3,014,024
========== ==========
LIABILITIES & EQUITY
Liabilities
Financial instruments sold, not
yet purchased, at fair value $986,855 $639,259
Collateralized financings:
Securities loaned 870,374 550,226
Financial instruments sold
under agreements to
repurchase, at fair value 80,000 -
Other secured financings 35,000 -
Payable to brokers and dealers 480,521 155,148
Accrued compensation expense 127,450 205,282
Accrued expenses and other
liabilities 178,552 109,987
Credit facility - 140,000
Long-term debt 304,844 -
------- ---
Total liabilities 3,063,596 1,799,902
--------- ---------
Equity
Knight Capital Group, Inc.
stockholders' equity
Class A common stock 1,621 1,586
Additional paid-in capital 791,489 746,778
Retained earnings 1,308,027 1,229,112
Treasury stock, at cost (793,931) (763,974)
Accumulated other comprehensive
loss (2,281) -
------ ---
Total Knight Capital Group,
Inc. stockholders' equity 1,304,925 1,213,502
Noncontrolling interests 620 620
--- ---
Total equity 1,305,545 1,214,122
--------- ---------
Total liabilities and equity $4,369,141 $3,014,024
========== ==========
KNIGHT CAPITAL GROUP, INC.
PRE-TAX EARNINGS BY BUSINESS SEGMENT*
Amounts in millions
(Unaudited)
For the three months For the six months
ended June 30, ended June 30,
-------------------- ------------------
2010 2009 2010 2009
---- ---- ---- ----
Equities
Revenues $305.0 $243.9 $524.4 $442.1
Expenses 193.7 176.6 356.6 315.9
Pre-tax
earnings 111.3 67.3 167.8 126.3
----- ---- ----- -----
FICC
Revenues 60.4 66.1 128.2 118.1
Expenses 59.5 51.2 119.2 93.1
Pre-tax
earnings 0.9 14.8 9.0 25.0
--- ---- --- ----
Corporate
Revenues 0.9 3.8 (2.0) (1.0)
Expenses 21.9 5.1 37.7 18.3
Pre-tax
earnings (21.0) (1.2) (39.7) (19.4)
----- ---- ----- -----
Consolidated
Revenues 366.3 313.9 650.5 559.2
Expenses 275.1 233.0 513.4 427.3
Pre-tax
earnings $91.1 $80.9 $137.1 $131.9
===== ===== ====== ======
* Totals may not add due to rounding. SOURCE Knight Capital Group, Inc. |