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| 8-K - FORM 8-K - KNIGHT CAPITAL GROUP, INC. | d336070d8k.htm |
Exhibit 99.1
KNIGHT CAPITAL GROUP ANNOUNCES CONSOLIDATED EARNINGS OF $0.36 PER DILUTED SHARE FOR THE FIRST QUARTER 2012
First quarter 2012 consolidated revenues rose 3% to $349.1 million and pre-tax earnings increased 9% to $54.5 million compared to the first quarter of 2011
JERSEY CITY, New Jersey (April 18, 2012) – Knight Capital Group, Inc. (NYSE Euronext: KCG) today reported consolidated earnings of $33.1 million, or $0.36 per diluted share, for the first quarter of 2012.
For the first quarter of 2011, the company reported consolidated earnings of $30.5 million, or $0.33 per diluted share.
Revenues from continuing operations for the first quarter of 2012 were $349.1 million, compared to $339.8 million from continuing operations for the first quarter of 2011.
“In the first quarter of 2012, Knight produced solid financial results,” said Thomas M. Joyce, Chairman and Chief Executive Officer, Knight Capital Group. “Consolidated revenues increased 3 percent while pre-tax earnings rose 9 percent year over year despite weaker market conditions. Market Making made a meaningful contribution, Institutional Sales and Trading demonstrated signs of a turnaround, and Electronic Execution Services experienced heightened trading activity across products. In addition, during the quarter, we provided the investment community with data specific to U.S. equities market making activity in order to better gauge the performance of our largest segment.”
“Continuing operations” includes the company’s Market Making, Institutional Sales and Trading, Electronic Execution Services, and Corporate and Other segments. Market Making consists of all global market making across equities, fixed income, foreign exchange, futures and options as well as the company’s activities as a Designated Market Maker at the NYSE. Institutional Sales and Trading includes full-service institutional research, sales and trading as well as equity and debt capital markets, reverse mortgage origination and securitization, and asset management. Electronic Execution Services includes Knight Direct, Hotspot FX and Knight BondPoint. Corporate and Other includes strategic investments primarily in financial services-related ventures, clearing and settlement activity, corporate overhead expenses and all other income and expenses that are not attributable to the other reporting segments.
In the first quarter of 2012, the company modified its quarterly revenue capture and monthly equity volume statistics in order to provide data specific to its U.S. equity market making activity within the Market Making segment. The company’s revenue capture and volume statistics previously also included U.S. institutional sales activity. Going forward, the company will post its U.S. equity market making volume statistics to its web site each month, and disclose, in future quarterly SEC filings, its U.S. equity market making revenue capture. The company’s web site has been updated to show the new monthly volume statistics dating back to the beginning of 2010. Additionally, the revised quarterly revenue capture and volume statistics dating back to the first quarter of 2010 have been included as a schedule within this press release.
| Q1 2012 | Q1 2011 | |||||||
| Revenues ($ thousands) |
349,079 | 339,774 | ||||||
| Net income ($ thousands) |
33,106 | 30,491 | ||||||
| Diluted EPS ($) |
0.36 | 0.33 | ||||||
| U.S. equity Market Making statistics: |
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| Average daily dollar value traded ($ billions) |
22.0 | 25.4 | ||||||
| Average daily trades (thousands) |
3,345.9 | 3,443.0 | ||||||
| Nasdaq and Listed shares traded (billions) |
47.3 | 56.5 | ||||||
| FINRA OTC Bulletin Board and Other shares traded (billions) |
171.2 | 320.8 | ||||||
| Average revenue capture per U.S. equity dollar value traded (bps) |
1.03 | 1.01 | ||||||
| Average daily Knight Direct equity shares (millions) |
215.8 | 165.3 | ||||||
| Average daily Hotspot FX notional dollar value traded ($ billions) |
55.7 | 55.1 | ||||||
Market Making
During the first quarter of 2012, the Market Making segment generated total revenues of $152.2 million and pre-tax income of $45.1 million. In the first quarter of 2011, Market Making reported total revenues of $167.2 million and pre-tax income of $63.4 million. Market Making had pre-tax margins of 30 percent in the first quarter of 2012 compared to pre-tax margins of 38 percent in the first quarter of 2011.
“In Market Making, Knight performed well despite subdued volatility and a decline in retail trading activity that was slightly more pronounced than the overall U.S. equity market,” said Mr. Joyce. “The result is attributable to the further expansion of market making activities, enhancements to trading technologies and successful cultivation of client relationships. Despite the market conditions, Knight achieved a pre-tax margin of 30 percent during the quarter. We continued to focus on achieving profitability in European equities and U.S. options.”
Institutional Sales and Trading
During the first quarter of 2012, the Institutional Sales and Trading segment generated total revenues of $142.2 million and pre-tax income of $14.7 million. In the first quarter of 2011, Institutional Sales and Trading reported total revenues of $127.4 million and pre-tax loss of $7.7 million. Institutional Sales and Trading had pre-tax margins of 10 percent in the first quarter of 2012.
“In Institutional Sales and Trading, Knight grew revenues 12 percent year over year and posted a healthy pre-tax gain after a loss a year ago,” said Mr. Joyce. “The improved financial results were driven by secondary trading of ETFs and fixed income. Knight realized further benefits from continuing efforts to reduce the cost structure and reconfigure the client offering. In addition, Urban performed well due to generally favorable market conditions in reverse mortgage lending and HMBS issuance.”
Electronic Execution Services
During the first quarter of 2012, the Electronic Execution Services segment generated total revenues of $44.2 million and pre-tax income of $12.3 million. In the first quarter of 2011, Electronic Execution Services reported total revenues of $40.3 million and pre-tax income of $11.4 million. Electronic Execution Services had pre-tax margins of 28 percent in both the first quarter of 2012 and in the first quarter of 2011.
“In Electronic Execution Services, Knight increased revenues 10 percent and pre-tax income 8 percent compared to the first quarter of 2011,” said Mr. Joyce. “All of the electronic trading products in the segment gained market share over the past year. During the first quarter, Knight Direct and Hotspot FX each grew average daily volumes and outperformed competitors amid signs of reduced institutional trading activity in their respective categories. Likewise, Knight BondPoint established a new record for average daily volume and continued to drive execution quality in retail fixed income.”
Corporate and Other
During the first quarter of 2012, the Corporate and Other segment reported a pre-tax loss of $17.6 million. In the first quarter of 2011, the Corporate and Other segment reported a pre-tax loss of $17.0 million.
“We are in the midst of the third straight year of dual declines in overall U.S. equity market volumes and volatility,” said Mr. Joyce. “Nevertheless, in that time, Knight continued to grow revenues and pre-tax earnings. Given our unique client network and innovative trading technologies, I believe we are positioned to benefit from a rebound in retail and institutional trading activity.”
Headcount at March 31, 2012 was 1,418 full-time employees, compared to 1,387 full-time employees at March 31, 2011.
As of March 31, 2012, the company had $336.2 million in cash and cash equivalents. The company had $1.5 billion in stockholders’ equity as of March 31, 2012, equivalent to a book value of $16.23 per diluted share. The company had a book value of $14.91 per diluted share as of March 31, 2011.
During the first quarter of 2012, the company repurchased 650,000 shares for $8.5 million under the company’s existing stock repurchase program. To date, the company has repurchased 75.9 million shares for $868.1 million. The company has approximately $131.9 million of availability to repurchase shares under the program. The company cautions that there are no assurances that any further repurchases may actually occur.
* * *
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 2012 earnings conference call for analysts, investors and the media at 9:00 a.m. Eastern Time (ET) today, April 18, 2012. To access Knight’s earnings conference call, please dial 800-479-9001 for domestic callers or 719-457-2662 for international callers. When prompted, please enter passcode 5340340. A replay of the first quarter 2012 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 5340340. 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 2012 on its website at http://www.knight.com/ourfirm/volumestats.asp before the start of trading today.
* * *
About Knight
Knight Capital Group (NYSE Euronext: KCG) is a global financial services firm that provides access to the capital markets across multiple asset classes to a broad network of clients, including broker-dealers, institutions and corporations. Knight is headquartered in Jersey City, N.J. with a global presence across the Americas, Europe, and the Asia Pacific regions. For further information about Knight, please visit 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 related to the corporate restructuring in the third quarter 2011, including the ability to recognize anticipated cost savings, the possibility of unexpected costs or expenditures, and the impact of the restructuring on the Company’s businesses and results of operations, risks associated with changes in market structure, legislative, regulatory and financial rules changes, risks associated with the Company’s changes to its organizational structure and management and the costs, integration, performance and operation of businesses recently acquired or developed organically, or that may be acquired or developed organically in the future. 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, 2011, 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, 2011, and in other reports or documents the Company files with, or furnishes to, the SEC from time to time.
CONTACTS
| Kara Fitzsimmons | Jonathan Mairs | |||
| Managing Director, | Director, | |||
| Media Relations | Corporate Communications | |||
| 201-356-1523 or | & Investor Relations | |||
| kfitzsimmons@knight.com | 201-356-1529 or | |||
| jmairs@knight.com |
KNIGHT CAPITAL GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| For the three months ended March 31, | ||||||||
| 2012 | 2011 | |||||||
| (In thousands, except per share amounts) | ||||||||
| Revenues |
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| Commissions and fees |
$ | 182,580 | $ | 182,525 | ||||
| Net trading revenue |
156,547 | 151,788 | ||||||
| Interest, net |
7,138 | 3,101 | ||||||
| Investment income and other, net |
2,814 | 2,360 | ||||||
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| Total revenues |
349,079 | 339,774 | ||||||
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| Expenses |
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| Employee compensation and benefits |
147,254 | 148,963 | ||||||
| Execution and clearance fees |
53,255 | 53,449 | ||||||
| Communications and data processing |
22,330 | 20,723 | ||||||
| Payments for order flow |
21,688 | 20,709 | ||||||
| Interest |
13,458 | 9,880 | ||||||
| Depreciation and amortization |
13,313 | 13,209 | ||||||
| Occupancy and equipment rentals |
6,519 | 7,354 | ||||||
| Professional fees |
5,733 | 4,354 | ||||||
| Business development |
5,158 | 3,711 | ||||||
| Writedown of assets and lease loss accrual |
— | 945 | ||||||
| Other |
5,905 | 6,394 | ||||||
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| Total expenses |
294,613 | 289,691 | ||||||
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| Income from continuing operations before income taxes |
54,466 | 50,083 | ||||||
| Income tax expense |
21,040 | 19,451 | ||||||
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| Income from continuing operations, net of tax |
33,426 | 30,632 | ||||||
| Loss from discontinued operations, net of tax |
(320 | ) | (141 | ) | ||||
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| Net income |
$ | 33,106 | $ | 30,491 | ||||
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| Basic earnings per share from continuing operations |
$ | 0.37 | $ | 0.33 | ||||
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| Diluted earnings per share from continuing operations |
$ | 0.36 | $ | 0.33 | ||||
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| Basic earnings per share |
$ | 0.37 | $ | 0.33 | ||||
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| Diluted earnings per share |
$ | 0.36 | $ | 0.33 | ||||
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| Shares used in computation of basic earnings per share |
89,764 | 91,897 | ||||||
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| Shares used in computation of diluted earnings per share |
92,175 | 93,668 | ||||||
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KNIGHT CAPITAL GROUP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
| March 31, 2012 | December 31, 2011 | |||||||
| (In thousands) | ||||||||
| ASSETS |
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| Cash and cash equivalents |
$ | 336,244 | $ | 467,633 | ||||
| Financial instruments owned, at fair value: |
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| Equities |
1,863,053 | 1,416,090 | ||||||
| Listed equity options |
207,344 | 280,384 | ||||||
| Debt securities |
108,276 | 134,631 | ||||||
| Loan inventory |
152,377 | 206,572 | ||||||
| Other financial instruments |
12,316 | 21,483 | ||||||
| Securitized HECM loan inventory |
2,248,164 | 1,722,631 | ||||||
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| Total financial instruments owned, at fair value |
4,591,530 | 3,781,791 | ||||||
| Collateralized agreements: |
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| Securities borrowed |
1,530,579 | 1,494,647 | ||||||
| Receivable from brokers, dealers and clearing organizations |
703,697 | 623,897 | ||||||
| Fixed assets and leasehold improvements, at cost, less accumulated depreciation and amortization |
110,279 | 111,464 | ||||||
| Investments |
93,406 | 83,231 | ||||||
| Goodwill |
337,843 | 337,843 | ||||||
| Intangible assets, less accumulated amortization |
88,990 | 92,889 | ||||||
| Other assets |
211,359 | 159,556 | ||||||
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| Total assets |
$ | 8,003,927 | $ | 7,152,951 | ||||
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| LIABILITIES & EQUITY |
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| Liabilities |
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| Financial instruments sold, not yet purchased, at fair value: |
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| Equities |
$ | 1,461,481 | $ | 1,369,750 | ||||
| Listed equity options |
206,011 | 254,506 | ||||||
| Debt securities |
160,764 | 63,073 | ||||||
| Other financial instruments |
13,717 | 34,563 | ||||||
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| Total financial instruments sold, not yet purchased, at fair value |
1,841,973 | 1,721,892 | ||||||
| Collateralized financings: |
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| Securities loaned |
689,725 | 697,998 | ||||||
| Financial instruments sold under agreements to repurchase |
560,215 | 420,320 | ||||||
| Liability to GNMA trusts, at fair value |
2,230,072 | 1,710,627 | ||||||
| Other secured financings |
43,580 | 59,405 | ||||||
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| Total collateralized financings |
3,523,592 | 2,888,350 | ||||||
| Payable to brokers, dealers and clearing organizations |
438,103 | 322,660 | ||||||
| Accrued compensation expense |
83,627 | 188,939 | ||||||
| Accrued expenses and other liabilities |
193,032 | 144,747 | ||||||
| Long-term debt |
427,761 | 424,338 | ||||||
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| Total liabilities |
6,508,088 | 5,690,926 | ||||||
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| Equity |
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| Class A common stock |
1,700 | 1,664 | ||||||
| Additional paid-in capital |
869,915 | 850,837 | ||||||
| Retained earnings |
1,466,426 | 1,433,320 | ||||||
| Treasury stock, at cost |
(841,754 | ) | (823,023 | ) | ||||
| Accumulated other comprehensive loss |
(448 | ) | (773 | ) | ||||
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| Total equity |
1,495,839 | 1,462,025 | ||||||
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| Total liabilities and equity |
$ | 8,003,927 | $ | 7,152,951 | ||||
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KNIGHT CAPITAL GROUP, INC.
PRE-TAX EARNINGS BY BUSINESS SEGMENT*
Amounts in millions
(Unaudited)
| For the three months ended March 31, |
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| 2012 | 2011 (1) | |||||||
| Market Making |
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| Revenues |
$ | 152.2 | $ | 167.2 | ||||
| Expenses |
107.0 | 103.8 | ||||||
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| Pre-tax earnings |
45.1 | 63.4 | ||||||
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| Institutional Sales and Trading |
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| Revenues |
142.2 | 127.4 | ||||||
| Expenses |
127.6 | 135.1 | ||||||
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| Pre-tax earnings (loss) |
14.7 | (7.7 | ) | |||||
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| Electronic Execution Services |
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| Revenues |
44.2 | 40.3 | ||||||
| Expenses |
32.0 | 29.0 | ||||||
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| Pre-tax earnings |
12.3 | 11.4 | ||||||
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| Corporate and Other |
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| Revenues |
10.4 | 4.9 | ||||||
| Expenses |
28.0 | 21.8 | ||||||
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| Pre-tax loss |
(17.6 | ) | (17.0 | ) | ||||
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| Consolidated |
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| Revenues |
349.1 | 339.8 | ||||||
| Expenses |
294.6 | 289.7 | ||||||
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| Pre-tax earnings |
$ | 54.5 | $ | 50.1 | ||||
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| * | Totals may not add due to rounding. |
| (1) - | Prior period amounts have been recast to conform with current period segment presentation. Such recast had no effect on previously reported Consolidated Pre-tax earnings. |
Knight Capital Group, Inc.
U.S. Equity Market Making Statistics
(Unaudited)
| Q1 2010 | Q2 2010 | Q3 2010 | Q4 2010 | Q1 2011 | Q2 2011 | Q3 2011 | Q4 2011 | Q1 2012 | ||||||||||||||||||||||||||||
| Average revenue capture per U.S. equity dollar value traded (bps) |
0.86 | 1.06 | 0.64 | 0.78 | 1.01 | 0.93 | 1.04 | 1.25 | 1.03 | |||||||||||||||||||||||||||
| Average daily dollar value traded ($ billions) |
23.7 | 27.8 | 20.1 | 21.7 | 25.4 | 23.4 | 29.3 | 23.2 | 22.0 | |||||||||||||||||||||||||||
| Average daily trades (thousands) |
3,323.3 | 3,893.8 | 3,046.5 | 3,070.6 | 3,443.0 | 3,253.8 | 4,189.6 | 3,583.8 | 3,345.9 | |||||||||||||||||||||||||||
| Nasdaq and Listed Shares Traded (billions) |
64.5 | 73.8 | 52.7 | 53.6 | 56.5 | 48.4 | 60.6 | 51.0 | 47.3 | |||||||||||||||||||||||||||
| FINRA OTC Bulletin Board and Other shares traded (billions) |
550.2 | 678.3 | 420.6 | 328.7 | 320.8 | 261.8 | 174.6 | 119.5 | 171.2 | |||||||||||||||||||||||||||