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ITG Reports First Quarter 2015 Results

Highest Quarterly EPS in More than Six Years

Earnings Growth Driven by Record Revenues in Europe and Asia Pacific

Declares First Quarterly Dividend of $0.07 Per Share

NEW YORK, April 30, 2015 (GLOBE NEWSWIRE) -- ITG (NYSE:ITG), an independent execution broker and research provider, today reported results for the quarter ended March 31, 2015.

First quarter 2015 highlights included:

  • Net income of $16.7 million, or $0.47 per diluted share compared to net income of $13.6 million, or $0.37 per diluted share for the first quarter of 2014.
  • Revenues of $149.7 million, compared to revenues of $137.6 million in the first quarter of 2014, including record revenues in Europe and Asia Pacific.
  • Expenses of $127.4 million, compared to expenses of $119.2 million in the first quarter of 2014.
  • Average daily trading volume in the U.S. of 191 million shares versus 164 million shares in the first quarter of 2014. POSIT® average daily U.S. volume was 93 million shares compared to 70 million shares in the first quarter of 2014. Total average daily volume traded through POSIT Alert® was 17 million shares, consistent with the first quarter of 2014.
  • In Europe, average daily value traded in POSIT was $1.3 billion, compared with $990 million in the first quarter of 2014. Total average daily value traded through POSIT Alert rose 9% in the first quarter of 2015 compared with the prior-year period.
  • An annualized return on average equity of 16.3%, compared with 13.1% in the first quarter of 2014.
  • The repurchase of 692,000 shares of common stock under ITG's authorized share repurchase program for a total of $16.4 million. Repurchases since the first quarter of 2010 have totaled $205.4 million for a total of 14.0 million shares, resulting in a decrease in shares outstanding, net of issuances, of 22%.

Regional Segment Results

ITG has changed its segment measures and is now presenting regional segment results excluding the impact of Corporate activity. Corporate activity reduced overall net income by $2.6 million in the first quarter of 2015 and by $3.1 million in the first quarter of 2014. Corporate activity includes investment income as well as costs not associated with operating ITG's regional and product group business lines including, among others, the costs of being a public company, intangible amortization, interest expense and the costs of maintaining a global transfer pricing structure. Previously the majority of these costs were presented in the U.S. segment.

ITG's North American revenues were $99.3 million in the first quarter of 2015 compared to $94.8 million in the first quarter of 2014. ITG reported net income of $8.9 million in North America in the first quarter of 2015, up from $8.6 million in the first quarter of 2014. U.S. revenues were $80.4 million, up 6% from the first quarter of 2014 while Canada revenues were down 2% to $18.9 million in the first quarter of 2015 due to currency translation. The overall revenue capture rate per share in the U.S. was $0.0045, up from $0.0044 in the fourth quarter of 2014 but down from $0.0047 in the first quarter of 2014. The year-over-year decline in the overall average rate was due in large part to an increase in trading activity from sell-side clients.

ITG's Europe and Asia Pacific revenues were $50.1 million in the first quarter of 2015 compared to $42.5 million in the first quarter of 2014. European revenues were a record $36.6 million, up 12% from the first quarter of 2014 while Asia Pacific revenues were a record $13.5 million, up 39% from the first quarter of 2014. ITG's Europe and Asia Pacific operations reported net income of $10.5 million in the first quarter of 2015 versus net income of $8.2 million in the first quarter of 2014.

"Our record revenues in Europe and Asia Pacific are the result of our multi-year program of investment in our international businesses, while our North American results continue to be strong," said Bob Gasser, ITG's Chief Executive Officer and President. "Our global portfolio approach to the business, combined with our disciplined expense management, has delivered the highest earnings per share in more than six years, with return on equity of 16%, well above most of our peers," said Mr. Gasser.

Quarterly Dividend

ITG's Board of Directors has initiated a dividend program under which the Company intends to pay quarterly cash dividends beginning in the second quarter of 2015, subject to quarterly declarations by the Board of Directors. For the second quarter of 2015, the Board of Directors declared a quarterly dividend of $0.07 per share. The dividend is payable on June 5, 2015, to shareholders of record on May 15, 2015.

"The initiation of this dividend program reflects our strong growth and robust cash flow, as well as the optimism we have about the future prospects of the firm," said ITG's Chairman, Maureen O'Hara. "Our previously stated capital return guidance for 2015 remains unchanged and we intend to pursue it through a combination of increased share repurchases and the new quarterly dividend."

Conference Call

A conference call to discuss the firm's results will be held at 11:00 am ET on April 30, 2015. Those wishing to listen to the call should dial 1-877-317-6789 (1-412-317-6789 outside the U.S.) at least 15 minutes prior to the start of the call to ensure connection. The webcast and accompanying slideshow presentation will be available on ITG's website at investor.itg.com. For those unable to listen to the live broadcast of the call, a replay will be available for one week by dialing 1-877-344-7529 (1-412-317-0088 outside the U.S.) and entering conference number 10063846. The replay will be available starting approximately one hour after the completion of the conference call.

About ITG

ITG is an independent execution broker and research provider that partners with global portfolio managers and traders to provide unique data-driven insights throughout the investment process. From investment decision through settlement, ITG helps clients understand market trends, improve performance, mitigate risk and navigate increasingly complex markets. ITG is headquartered in New York with offices in North America, Europe, and Asia Pacific. For more information, please visit www.itg.com.

In addition to historical information, this press release may contain "forward-looking" statements that reflect management's expectations for the future. A variety of important factors could cause results to differ materially from such statements. Certain of these factors are noted throughout ITG's 2014 Annual Report on Form 10-K, and its Form 10-Qs (as amended, if applicable) and include, but are not limited to, general economic, business, credit and financial market conditions, both internationally and nationally, financial market volatility, fluctuations in market trading volumes, effects of inflation, adverse changes or volatility in interest rates, fluctuations in foreign exchange rates, evolving industry regulations and regulatory scrutiny, changes in tax policy or accounting rules, the actions of both current and potential new competitors, changes in commission pricing, rapid changes in technology, errors or malfunctions in our systems or technology, cash flows into or redemptions from equity mutual funds, ability to meet liquidity requirements related to the clearing of our customers' trades, customer trading patterns, the success of our products and service offerings, our ability to continue to innovate and meet the demands of our customers for new or enhanced products, our ability to successfully integrate acquired companies and our ability to attract and retain talented employees. The forward-looking statements included herein represent ITG's views as of the date of this release. ITG undertakes no obligation to revise or update publicly any forward-looking statement for any reason unless required by law.

INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Income (unaudited)
(In thousands, except per share amounts)
Three Months Ended
March 31,
2015 2014
Revenues:
Commissions and fees $ 118,926 $ 108,424
Recurring 26,932 25,577
Other 3,869 3,608
Total revenues 149,727 137,609
Expenses:
Compensation and employee benefits 57,408 51,177
Transaction processing 24,573 20,496
Occupancy and equipment 14,372 15,078
Telecommunications and data processing services 12,772 12,697
Other general and administrative 17,757 19,105
Interest expense 505 636
Total expenses 127,387 119,189
Income before income tax expense 22,340 18,420
Income tax expense 5,607 4,800
Net income $ 16,733 $ 13,620
Earnings per share:
Basic $ 0.49 $ 0.38
Diluted $ 0.47 $ 0.37
Basic weighted average number of common shares outstanding 34,268 36,081
Diluted weighted average number of common shares outstanding 35,451 37,185
INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
Supplemental Financial Data (unaudited)
(In thousands)
Three months ended March 31,
2015 2014
Revenues by Geographic Region:
U.S Operations $ 80,454 $ 75,607
Canadian Operations 18,913 19,218
European Operations 36,605 32,790
Asia Pacific Operations 13,522 9,697
Corporate 233 297
Total Revenues $ 149,727 $ 137,609
Three months ended March 31,
2015 2014
Revenues by Product Group:
Electronic Brokerage $ 80,454 $ 72,884
Research Sales and Trading 32,513 29,245
Trading Platforms 25,073 23,733
Analytics 11,454 11,450
Corporate 233 297
Total Revenues $ 149,727 $ 137,609
INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Financial Condition
(In thousands, except share amounts)
March 31, 2015 December 31, 2014
Assets (unaudited)
Cash and cash equivalents $205,762 $275,210
Cash restricted or segregated under regulations and other 37,876 38,080
Deposits with clearing organizations 89,674 72,527
Securities owned, at fair value 12,204 12,073
Receivables from brokers, dealers and clearing organizations 881,887 644,614
Receivables from customers 110,225 107,935
Premises and equipment, net 56,967 60,306
Capitalized software, net 38,650 38,333
Goodwill 12,041 12,803
Intangibles, net 30,789 31,595
Income taxes receivable 2,114 105
Deferred taxes 28,270 37,209
Other assets 22,992 20,059
Total assets $1,529,451 $1,350,849
Liabilities and Stockholders' Equity
Liabilities:
Accounts payable and accrued expenses $163,795 $199,211
Short‑term bank loans 107,269 78,360
Payables to brokers, dealers and clearing organizations 788,964 600,041
Payables to customers 29,775 11,132
Securities sold, not yet purchased, at fair value 8,552 8,253
Income taxes payable 10,795 19,772
Deferred taxes 703
Term debt 14,612 17,781
Total liabilities 1,123,762 935,253
Commitments and contingencies
Stockholders' Equity:
Preferred stock, $0.01 par value; 1,000,000 shares authorized; no shares issued or outstanding
Common stock, $0.01 par value; 100,000,000 shares authorized; 52,265,654 and 52,229,962 shares issued at March 31, 2015 and December 31, 2014, respectively 522 522
Additional paid‑in capital 231,273 240,135
Retained earnings 504,195 487,462
Common stock held in treasury, at cost; 18,038,374 and 18,000,756 shares at March 31, 2015 and December 31, 2014, respectively (313,560) (306,629)
Accumulated other comprehensive income (net of tax) (16,741) (5,894)
Total stockholders' equity 405,689 415,596
Total liabilities and stockholders' equity $1,529,451 $1,350,849

INVESTMENT TECHNOLOGY GROUP, INC.

Non-GAAP Financial Measures

Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP performance measure, that the Company believes is useful to assist investors in gaining an understanding of the trends and operating results for ITG's core businesses. This measure should be viewed in addition to, and not in lieu of, ITG's reported results under GAAP.

Reconciliation of Adjusted Earnings
Before Interest, Taxes, Depreciation, and Amortization
(In thousands)
Three Months Ended
March 31,
2015 2014
Net Income (1) $ 16,733 $ 13,620
Deduct:
Investment income (222) (288)
Add Back:
Interest expense 505 636
Provision for income taxes 5,607 4,800
Depreciation and Amortization 11,161 13,034
Adjusted earnings before interest, taxes, depreciation, and amortization $ 33,784 $ 31,802
Notes:
(1) Net income includes pre-tax charges for non-cash stock-based compensation of $4.9 million and $3.8 million for the three months ended March 31, 2015 and 2014, respectively.

CONTACT: ITG Media/Investor Contact: J.T. Farley 1-212-444-6259 corpcomm@itg.com

Source:Investment Technology Group Inc.