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8-K - 8-K - Virtu KCG Holdings LLCd862691d8k.htm
EX-99.2 - EX-99.2 - Virtu KCG Holdings LLCd862691dex992.htm

Exhibit 99.1

KCG ANNOUNCES CONSOLIDATED EARNINGS OF $0.23

PER DILUTED SHARE FOR THE FOURTH QUARTER OF 2014

Pre-tax income from continuing operations of $26.5 million includes a net charge

of $4.0 million from items that are unrelated to core operations

JERSEY CITY, New Jersey – January 30, 2015 – KCG Holdings, Inc. (NYSE: KCG) today reported consolidated earnings of $26.1 million, or $0.23 per diluted share, for the fourth quarter of 2014.

The fourth quarter 2014 GAAP net income from continuing operations was $26.0 million, or $0.23 per diluted share. Included in these results is a net tax benefit of approximately $7 million related to the recognition of state deferred tax assets which primarily relate to state tax net operating losses, and a $1.2 million tax benefit related to federal tax credits. Fourth quarter pre-tax income from continuing operations was $26.5 million and included a $6.1 million lease loss and a $2.1 million gain related to the completion of the sale of KCG’s futures commission merchant (FCM). Excluding these items, on a non-GAAP basis, the fourth quarter 2014 income from continuing operations before taxes was $30.5 million. A reconciliation of GAAP to non-GAAP results is included in Exhibit 4.

KCG was formed July 1, 2013 as a result of the merger between Knight Capital Group, Inc. and GETCO Holding Company, LLC. Financial results for the periods prior to the third quarter of 2013 contained herein solely represent the results of GETCO Holding Company, LLC as the accounting acquirer.

 

Select Financial Results    ($ in thousands, except EPS)  
From Continuing Operations    4Q14      3Q14      4Q13  

Revenues

     346,139         272,302         323,374   

Trading revenues, net

     221,415         150,865         212,809   

Commissions and fees

     117,326         102,663         111,083   

GAAP pre-tax income (loss)

     26,531         (15,235      (16,699

GAAP EPS

     0.23         (0.09      (0.15

Non-GAAP pre-tax income (loss)*

     30,532         (19,518      19,845   

 

* See Exhibit 4 for a reconciliation of GAAP to non-GAAP results.


Fourth Quarter Highlights

 

    U.S. equity market making grew market share of SEC Rule 605 U.S. equity share volume

 

    Algorithmic trading and order routing established a new quarterly record for average daily U.S. equity share volume

 

    Released $45 million in excess capital from the consolidation of U.K. broker dealers

 

    Completed the sale of KCG’s FCM

 

    Subsequent to the fourth quarter, announced the sale of KCG Hotspot to BATS

Daniel Coleman, Chief Executive Officer of KCG, said, “During the fourth quarter, KCG generated solid financial results due in part to an improved operating environment. The U.S. equity market posted higher average daily share volume, dollar volume and realized volatility on both a sequential and annual basis. Amid the heightened activity, KCG recorded market share gains in U.S. equity market making as well as algorithmic trading and order routing from the third quarter. Also contributing to KCG’s results were increased market volumes and volatility in select segments of the global equities, fixed income, currencies and commodities markets. Finally, during the quarter, management completed a strategic review of KCG Hotspot and initiated a sale process which ultimately proved successful.”

In the first quarter of 2014, the Company began to charge the Market Making and Global Execution Services segments for the cost of aggregate debt interest. The interest amount charged to each of the segments is based on capital limits and requirements. Historically, debt interest was fully included within the Corporate and Other segment. This change in the measurement of segment profitability, which has no impact to the consolidated results, is reported prospectively and, therefore, is not reflected in the financial results for any period prior to January 1, 2014.

Market Making

The Market Making segment encompasses direct-to-client and non-client, exchange-based market making across multiple asset classes and is an active participant in all major cash, options and futures markets in the U.S., Europe and Asia. During the fourth quarter of 2014, the segment generated total revenues of $238.7 million and pre-tax income of $42.7 million, which included a debt interest charge of $5.6 million.

During the fourth quarter of 2014, the favorable market conditions drove heightened activity in direct-to-client and non-client, exchange-based market making across several asset classes. KCG’s average daily SEC Rule 605 U.S. equity share volume rose 27.3 percent sequentially due to a rebound in retail trading activity plus steady market share gains amid persistent strong competition. In aggregate, KCG direct-to-client and non-client market making in U.S. equities increased average daily exchange-listed share volume 28.3 percent quarter over quarter. Results from non-U.S. equity market making grew quarter over quarter on improved market conditions in certain classes of global equities, fixed income, currencies and commodities.

In the third quarter of 2014, the segment generated total revenues of $166.6 million and a pre-tax loss of $8.0 million. Excluding compensation related to a reduction in workforce and other employee separations, the pre-tax loss for the quarter was $5.2 million. In the fourth quarter of 2013, the segment reported total revenues of $232.5 million and pre-tax income of $48.0 million. Excluding compensation costs related to a reduction in workforce, the pre-tax earnings for the quarter was $53.2 million.

Mr. Coleman commented, “During the fourth quarter, U.S. equity market volumes picked up with the return of realized volatility to more normative levels over the past five years. KCG’s market share gains in direct-to-client U.S. equity market making were largely attributable to additive order flow from longstanding clients. Also, individual investors continued to express confidence in the market by allocating an estimated $27.7 billion in net inflows to U.S. equities during the quarter, which represented the highest quarterly total during 2014. In non-U.S. equity market making, KCG continued to develop strategic asset classes that demonstrate promise.”


Select Trade Statistics: U.S. Equity Market Making

 

     4Q14    3Q14    4Q13

Average daily dollar volume traded ($ millions)

   31,621    24,726    26,566

Average daily trades (thousands)

   4,036    3,326    3,909

Average daily shares traded (millions)

   5,241    5,787    5,113

NYSE and NASDAQ shares traded

   933    727    833

OTC Bulletin Board and OTC Market shares traded

   4,308    5,060    4,280

Average revenue capture per U.S. equity dollar value traded (bps)

   0.93    0.75    0.98

Global Execution Services

The Global Execution Services segment comprises agency execution services and trading venues. During the fourth quarter of 2014, the segment generated total revenues of $93.4 million and pre-tax income of $10.0 million, which included a debt interest charge of $1.2 million. The results also included a gain of $2.1 million related to the completion of the sale of the FCM. Excluding this gain, the Global Execution Services segment’s pre-tax income for the fourth quarter was $7.9 million.

The results for the fourth quarter of 2014 reflect increased trading activity across numerous addressable markets as well as signs of growth from strategic initiatives. In agency execution, algorithmic trading and order routing established a new quarterly high for average daily U.S. equity share volume. Institutional equity sales trading in the U.S. and Europe made a solid contribution while the ETF trading team continued to successfully cultivate existing clients and onboard new ones. Among KCG’s trading venues, KCG Hotspot increased average daily notional FX dollar volume 4.4 percent quarter over quarter while KCG BondPoint grew average daily par value traded by 3.9 percent.

In the third quarter of 2014, the segment generated total revenues of $79.2 million and a pre-tax loss of $1.7 million. Excluding compensation related to a reduction in workforce and other employee separations, the pre-tax results for the segment was earnings of $1.9 million. In the fourth quarter of 2013, the segment reported total revenues of $84.1 million and a pre-tax loss of $4.5 million. Excluding compensation costs related to the reduction in workforce and asset writedowns, the segment’s pre-tax results were earnings of $2.6 million.

Mr. Coleman commented, “Institutional trading activity was especially strong during the fourth quarter, which is reflected in the results from KCG’s agency execution services. Algorithmic trading continued to make steady inroads with a number of leading institutions and the ETF trading team is quickly approaching critical mass after a year of rebuilding.”

Select Trade Statistics: Agency Execution and Trading Venues

 

     4Q14    3Q14    4Q13

Average daily KCG algorithmic trading and order routing U.S. equities shares traded (millions)

   334.3    248.2    256.1

Average daily KCG Hotspot notional foreign exchange dollar value traded ($ billions)

   31.6    30.3    29.0

Average daily KCG BondPoint fixed income par value traded ($ millions)

   130.8    126.0    133.0


Corporate and Other

The Corporate and Other segment includes strategic investments and corporate overhead expenses. During the fourth quarter of 2014, the segment recorded total revenues of $14.0 million and a pre-tax loss of $26.1 million, which included lease loss expenses of $6.1 million. The Corporate and Other segment’s pre-tax loss for the fourth quarter was $20.0 million excluding the lease losses.

In the third quarter of 2014, the segment recorded total revenues of $26.5 million and a pre-tax loss of $5.5 million which included a net gain of $15.1 million related to KCG’s investment in tradeMONSTER, in conjunction with tradeMONSTER’s combination with OptionsHouse in the third quarter, compensation related to a reduction in workforce and other employee separations of $4.2 million and a lease loss accrual of $0.3 million. In the fourth quarter of 2013, the segment recorded total revenues of $6.8 million and a pre-tax loss of $60.2 million, which included approximately $24.2 million in writeoff of capitalized debt costs related to pay down of debt, asset writedown and lease losses, professional fees associated with the Merger and Knight’s August 1, 2012 technology issue and compensation costs related to a reduction in force.

Financial Condition

As of December 31, 2014, KCG had $578.8 million in cash and cash equivalents. Total outstanding debt was $422.3 million, of which $117.3 million is due in March 2015. The Company had $1.5 billion in stockholders’ equity, equivalent to a book value of $13.03 per share and tangible book value of $11.72 per share based on total shares outstanding of 116.9 million, including restricted stock units.

KCG’s headcount at December 31, 2014 was 1,093 full-time employees as compared to 1,153 full-time employees at September 30, 2014.

During the fourth quarter of 2014, KCG did not repurchase any shares under the Company’s $150.0 million stock repurchase program. As of December 31, 2014, KCG had approximately $55.0 million of remaining capacity available to repurchase additional shares under the program. The Company cautions that there are no assurances that any further repurchases may actually occur.

Announced Sale of KCG Hotspot

On January 28, 2015, KCG announced the sale of spot foreign exchange ECN KCG Hotspot to BATS Global Markets. Under the terms of the agreement, KCG will receive $365 million in cash upon the close of the transaction. In addition, the parties have agreed to share certain tax benefits, which could result in further payments to KCG of up to approximately $70 million in the three-year period following the close. Upon the close, the transaction is expected to increase KCG’s tangible book value by approximately $2.00 per share. The transaction is expected to be completed in the second quarter of 2015.

Conference Call

KCG will hold a conference call to discuss fourth quarter 2014 financial results starting at 9:00 a.m. Eastern Time today, January 30, 2015. To access the call, dial 888-218-8142 (domestic) or 913-312-0957 (international) and enter passcode 7898269. In addition, the call will be webcast at http://www.media-server.com/m/acs/41fae90442d481b1589c479d3013dbef. Following the conclusion of the call, a replay will be available by selecting a number based on country of origin from a list posted at: https://replaynumbers.conferencinghub.com/index.aspx?confid=7898269&passcode=7898269 and entering passcode 7898269.

Additional information for investors, including a presentation of the fourth quarter financial results, can be found at http://investors.kcg.com.


Non-GAAP Financial Presentations

KCG believes that certain non-GAAP financial presentations, when taken into consideration with the corresponding GAAP financial presentations, are important in understanding operating results. Selected financial information is included in the non-GAAP financial presentations for the three months ended December 31, 2014, September 30, 2014 and December 31, 2013 and for the twelve months ended December 31, 2014 and 2013. KCG believes the presentations provide a meaningful summary of results of operations for each of the three and twelve month periods. Reconciliations of GAAP to non-GAAP results are included in the schedules in Exhibit 4.

About KCG

KCG is a leading independent securities firm offering investors and clients a range of services designed to address trading needs across asset classes, product types and time zones. The firm combines advanced technology with exceptional client service across market making, agency execution and venues. KCG has multiple access points to trade global equities, fixed income, currencies and commodities via voice or automated execution. www.kcg.com

Certain statements contained herein may constitute “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are typically identified by words such as “believe,” “expect,” “anticipate,” “intend,” “target,” “estimate,” “continue,” “positions,” “prospects” or “potential,” by future conditional verbs such as “will,” “would,” “should,” “could” or “may,” or by variations of such words or by similar expressions. These “forward-looking statements” are not historical facts and are based on current expectations, estimates and projections about KCG’s industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Any forward-looking statement contained herein speaks only as of the date on which it is made. 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: (i) the strategic business combination (the “Mergers”) of Knight Capital Group, Inc. (“Knight”) and GETCO Holding Company, LLC (“GETCO”), including, among other things, (a) difficulties and delays in integrating the Knight and GETCO businesses or fully realizing cost savings and other benefits, (b) the inability to sustain revenue and earnings growth, and (c) customer and client reactions to the Mergers; (ii) the August 1, 2012 technology issue that resulted in Knight’s broker-dealer subsidiary sending numerous erroneous orders in NYSE-listed and NYSE Arca securities into the market and the impact to Knight’s business as well as actions taken in response thereto and consequences thereof; (iii) the sale of KCG’s reverse mortgage origination and securitization business, sale of KCG’s futures commission merchant and the agreement to sell KCG Hotspot; (iv) changes in market structure, legislative, regulatory or financial reporting rules, including the increased focus by regulators, the New York Attorney General, Congress and the media on market structure issues, and in particular, the scrutiny of high frequency trading, alternative trading systems, market fragmentation, colocation, access to market data feeds, and remuneration arrangements such as payment for order flow and exchange fee structures; (v) past or future changes to organizational structure and management; (vi) KCG’s ability to develop competitive new products and services in a timely manner and the acceptance of such products and services by KCG’s customers and potential customers; (vii) KCG’s ability to keep up with technological changes; (viii) KCG’s ability to effectively identify and manage market risk, operational and technology risk, legal risk, liquidity risk, reputational risk, counterparty and credit risk, international risk, regulatory risk, and compliance risk; (ix) the cost and other effects of material contingencies, including litigation contingencies, and any adverse judicial, administrative or arbitral rulings or proceedings; and (x) the effects of increased competition and KCG’s ability to maintain and expand market share. The list above is not exhaustive. Readers should carefully review the risks and uncertainties disclosed in KCG’s reports with the SEC, including, without limitation, those detailed under “Risk Factors” in KCG’s Annual Report on Form 10-K for the year-ended December 31, 2013, under “Certain Factors Affecting Results of Operations” in KCG’s Quarterly Report on Form 10-Q for the period ended September 30, 2014 and other reports or documents KCG files with, or furnishes to, the SEC from time to time.

CONTACTS

 

Sophie Sohn

Jonathan Mairs

Communications & Marketing

Investor Relations

312-931-2299

201-356-1529

media@kcg.com

jmairs@kcg.com


Exhibit 1

KCG HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

     For the three months ended  
     December 31,
2014
    September 30,
2014
    December 31,
2013
 
     (In thousands, except per share amounts)  

Revenues

  

   

Trading revenues, net

   $ 221,415      $ 150,865      $ 212,809   

Commissions and fees

     117,326        102,663        111,083   

Interest, net

     (177     139        433   

Investment income (loss) and other, net

     7,575        18,635        (951
  

 

 

   

 

 

   

 

 

 

Total revenues

  346,139      272,302      323,374   
  

 

 

   

 

 

   

 

 

 

Expenses

Employee compensation and benefits

  116,214      95,307      112,209   

Execution and clearance fees

  82,377      74,058      78,483   

Communications and data processing

  36,945      38,576      37,512   

Depreciation and amortization

  21,224      20,298      19,566   

Payments for order flow

  14,698      15,377      18,243   

Occupancy and equipment rentals

  8,514      7,672      9,358   

Collateralized financing interest

  7,973      7,330      5,327   

Debt interest expense

  7,721      7,714      12,943   

Professional fees

  5,695      7,161      7,734   

Business development

  2,308      3,163      1,923   

Writedown of assets and lease loss accrual, net

  6,117      301      10,500   

Writedown of capitalized debt costs

  —        —        13,209   

Other

  9,822      10,580      13,066   
  

 

 

   

 

 

   

 

 

 

Total expenses

  319,608      287,537      340,073   
  

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations before income taxes

  26,531      (15,235   (16,699

Income tax expense (benefit)

  562      (5,796   787   
  

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations, net of tax

  25,969      (9,439   (17,486

Income (loss) from discontinued operations, net of tax

  165      (177   864   
  

 

 

   

 

 

   

 

 

 

Net Income (loss)

$ 26,134    $ (9,616 $ (16,622
  

 

 

   

 

 

   

 

 

 

Basic earnings (loss) per share from continuing operations

$ 0.24    $ (0.09 $ (0.15
  

 

 

   

 

 

   

 

 

 

Diluted earnings (loss) per share from continuing operations

$ 0.23    $ (0.09 $ (0.15
  

 

 

   

 

 

   

 

 

 

Basic income (loss) per share from discontinued operations

$ —      $ —      $ 0.01   
  

 

 

   

 

 

   

 

 

 

Diluted income (loss) per share from discontinued operations

$ —      $ —      $ 0.01   
  

 

 

   

 

 

   

 

 

 

Basic earnings (loss) per share

$ 0.24    $ (0.09 $ (0.15
  

 

 

   

 

 

   

 

 

 

Diluted earnings (loss) per share

$ 0.23    $ (0.09 $ (0.15
  

 

 

   

 

 

   

 

 

 

Shares used in computation of basic earnings (loss) per share

  109,654      110,376      114,272   
  

 

 

   

 

 

   

 

 

 

Shares used in computation of diluted earnings (loss) per share

  112,224      110,376      114,272   
  

 

 

   

 

 

   

 

 

 


Exhibit 1

(Continued)

KCG HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS(1)

(Unaudited)

 

     For the years ended  
     December 31,
2014
    December 31,
2013
 
     (In thousands, except per share amounts)  

Revenues

  

 

Trading revenues, net

   $ 837,357      $ 628,304   

Commissions and fees

     437,022        275,474   

Interest, net

     621        (537

Investment income and other, net

     41,232        124,095   
  

 

 

   

 

 

 

Total revenues

  1,316,232      1,027,336   
  

 

 

   

 

 

 

Expenses

Employee compensation and benefits

  437,269      349,192   

Execution and clearance fees

  305,177      246,414   

Communications and data processing

  150,595      123,552   

Depreciation and amortization

  81,448      55,570   

Payments for order flow

  70,183      35,711   

Occupancy and equipment rentals

  32,707      24,812   

Collateralized financing interest

  27,860      9,847   

Debt interest expense

  32,456      34,938   

Professional fees

  25,596      46,662   

Business development

  9,763      4,609   

Writedown of assets and lease loss accrual, net

  8,625      14,748   

Writedown of capitalized debt costs

  9,552      13,209   

Other

  39,814      43,094   
  

 

 

   

 

 

 

Total expenses

  1,231,045      1,002,358   
  

 

 

   

 

 

 
Income from continuing operations before income taxes   85,187      24,978   
Income tax expense (benefit)   22,753      (101,114
  

 

 

   

 

 

 
Income from continuing operations, net of tax   62,434      126,092   
(Loss) income from discontinued operations, net of tax   (1,332   80   
  

 

 

   

 

 

 
Net income $ 61,102    $ 126,172   
  

 

 

   

 

 

 
Net loss allocated to preferred and participating units $ —      $ (21,565
  

 

 

   

 

 

 
Net income attributable to common shareholders $ 61,102    $ 147,737   
  

 

 

   

 

 

 
Basic earnings per share from continuing operations $ 0.55    $ 1.84   
  

 

 

   

 

 

 
Diluted earnings per share from continuing operations $ 0.54    $ 1.82   
  

 

 

   

 

 

 
Basic loss per share from discontinued operations $ (0.01 $ —     
  

 

 

   

 

 

 
Diluted loss per share from discontinued operations $ (0.01 $ —     
  

 

 

   

 

 

 
Basic earnings per share $ 0.54    $ 1.84   
  

 

 

   

 

 

 
Diluted earnings per share $ 0.52    $ 1.82   
  

 

 

   

 

 

 
Shares used in computation of basic earnings (loss) per share   112,854      80,143   
  

 

 

   

 

 

 
Shares used in computation of diluted earnings (loss) per share   116,534      81,015   
  

 

 

   

 

 

 

 

(1) Year ended December 31, 2013 includes six months of results of KCG Holdings, Inc. plus six months of GETCO Holding Company, LLC.


Exhibit 2

KCG HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited)

 

     December 31,
2014
    December 31,
2013
 
     (In thousands)  

ASSETS

  

 

Cash and cash equivalents

   $ 578,768      $ 674,281   

Cash and cash equivalents segregated under federal and other regulations

     3,361        183,082   

Financial instruments owned, at fair value:

    

Equities

     2,479,910        2,298,785   

Listed options

     144,586        339,798   

Debt securities

     82,815        83,256   

Other financial instruments

     60        —     
  

 

 

   

 

 

 

Total financial instruments owned, at fair value

  2,707,371      2,721,839   

Collateralized agreements:

Securities borrowed

  1,632,062      1,357,387   

Receivable from brokers, dealers and clearing organizations

  1,188,833      1,257,251   

Fixed assets and leasehold improvements, less accumulated depreciation and amortization

  134,051      146,668   

Investments

  100,726      125,413   

Goodwill and Intangible assets, less accumulated amortization

  152,594      208,806   

Deferred tax asset, net

  154,759      175,639   

Assets of business held for sale

  40,484      —     

Other assets

  137,645      146,638   
  

 

 

   

 

 

 

Total assets

$ 6,830,654    $ 6,997,004   
  

 

 

   

 

 

 

LIABILITIES & EQUITY

Liabilities

Financial instruments sold, not yet purchased, at fair value:

Equities

$ 2,069,342    $ 1,851,006   

Listed options

  115,362      252,282   

Debt securities

  101,003      57,198   

Other financial instruments

  —        5,014   
  

 

 

   

 

 

 

Total financial instruments sold, not yet purchased, at fair value

  2,285,707      2,165,500   

Collateralized financings:

Securities loaned

  707,744      733,230   

Financial instruments sold under agreements to repurchase

  933,576      640,950   
  

 

 

   

 

 

 

Total collateralized financings

  1,641,320      1,374,180   

Payable to brokers, dealers and clearing organizations

  674,345      474,108   

Payable to customers

  22,110      481,041   

Accrued compensation expense

  114,559      149,430   

Accrued expenses and other liabilities

  138,721      175,910   

Capital lease obligations

  6,700      10,039   

Liabilities of business held for sale

  2,356      —     

Debt

  422,259      657,259   
  

 

 

   

 

 

 

Total liabilities

  5,308,077      5,487,467   
  

 

 

   

 

 

 

Equity

Class A Common Stock

  1,275      1,233   

Additional paid-in capital

  1,369,298      1,306,549   

Retained earnings

  272,780      211,678   

Treasury stock, at cost

  (122,909   (11,324

Accumulated other comprehensive income

  2,133      1,401   
  

 

 

   

 

 

 

Total equity

  1,522,577      1,509,537   
  

 

 

   

 

 

 
$ 6,830,654    $ 6,997,004   
  

 

 

   

 

 

 


Exhibit 3

KCG HOLDINGS, INC.

PRE-TAX EARNINGS (LOSS) FROM CONTINUING OPERATIONS BY BUSINESS SEGMENT*

(In thousands)

(Unaudited)

 

     For the three months ended  
     December 31,
2014
    September 30,
2014
    December 31,
2013
 

Market Making

      

Revenues

   $ 238,740      $ 166,620      $ 232,519   

Expenses

     196,030        174,653        184,569   
  

 

 

   

 

 

   

 

 

 

Pre-tax earnings (loss)

     42,710        (8,033     47,951   
  

 

 

   

 

 

   

 

 

 

Global Execution Services

      

Revenues

     93,369        79,218        84,065   

Expenses

     83,401        80,882        88,557   
  

 

 

   

 

 

   

 

 

 

Pre-tax earnings (loss)

     9,968        (1,664     (4,491
  

 

 

   

 

 

   

 

 

 

Corporate and Other

      

Revenues

     14,030        26,464        6,790   

Expenses

     40,177        32,002        66,949   
  

 

 

   

 

 

   

 

 

 

Pre-tax loss

     (26,147     (5,538     (60,159
  

 

 

   

 

 

   

 

 

 

Consolidated

      

Revenues

     346,139        272,302        323,374   

Expenses

     319,608        287,537        340,073   
  

 

 

   

 

 

   

 

 

 

Pre-tax earnings (loss)

   $ 26,531      $ (15,235   $ (16,699
  

 

 

   

 

 

   

 

 

 

 

* Totals may not add due to rounding.


Exhibit 3

(Continued)

KCG HOLDINGS, INC.

PRE-TAX EARNINGS (LOSS) FROM CONTINUING OPERATIONS BY BUSINESS SEGMENT*

(In thousands)

(Unaudited)

 

     For the year ended  
     December 31,
2014
    December 31,
2013
 

Market Making

    

Revenues

   $ 901,152      $ 688,197   

Expenses

     754,439        584,585   
  

 

 

   

 

 

 

Pre-tax earnings

  146,713      103,612   
  

 

 

   

 

 

 

Global Execution Services

Revenues

  345,710      197,765   

Expenses

  334,654      223,559   
  

 

 

   

 

 

 

Pre-tax earnings (loss)

  11,056      (25,794
  

 

 

   

 

 

 

Corporate and Other

Revenues

  69,369      141,374   

Expenses

  141,951      194,216   
  

 

 

   

 

 

 

Pre-tax loss

  (72,582   (52,842
  

 

 

   

 

 

 

Consolidated

Revenues

  1,316,232      1,027,336   

Expenses

  1,231,045      1,002,358   
  

 

 

   

 

 

 

Pre-tax earnings

$ 85,187    $ 24,978   
  

 

 

   

 

 

 

 

* Totals may not add due to rounding.

Year ended December 31, 2013 includes six months of results of KCG Holdings, Inc. plus six months of GETCO Holding

Company, LLC.


Exhibit 4

 

KCG HOLDINGS, INC.
Regulation G Reconciliation of Non-GAAP financial measures (Continuing operations)
(in thousands)
Three months ended December 31, 2014    Market Making     Global
Execution
Services
    Corporate and
Other
    Consolidated  

Reconciliation of GAAP Pre-Tax to Non-GAAP Pre-Tax:

GAAP Income (loss) from continuing operations before income taxes

$ 42,710    $ 9,968    $ (26,147 $ 26,531   

Gain on sale of FCM

  —        (2,116   —        (2,116

Writedown of assets and lease loss accrual, net

  —        —        6,117      6,117   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non GAAP Income (loss) from continuing operations before income taxes

$ 42,710    $ 7,852    $ (20,030 $ 30,532   
  

 

 

   

 

 

   

 

 

   

 

 

 
Three months ended September 30, 2014    Market Making     Global
Execution
Services
    Corporate and
Other
    Consolidated  

Reconciliation of GAAP Pre-Tax to Non-GAAP Pre-Tax:

GAAP Loss from continuing operations before income taxes

$ (8,033 $ (1,664 $ (5,538 $ (15,235

Net gain related to tradeMONSTER combination with OptionsHouse

  —        —        (15,105   (15,105

Compensation related to reduction in workforce and other employee separations

  2,786      3,577      4,158      10,521   

Writedown of assets and lease loss accrual, net

  —        —        301      301   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non GAAP (loss) Income from continuing operations before income taxes

$ (5,247 $ 1,913    $ (16,184 $ (19,518
  

 

 

   

 

 

   

 

 

   

 

 

 
Three months ended December 31, 2013    Market Making     Global
Execution
Services
    Corporate and
Other
    Consolidated  

Reconciliation of GAAP Pre-Tax to Non-GAAP Pre-Tax:

GAAP Income (loss) from continuing operations before income taxes

$ 47,951    $ (4,491 $ (60,159 $ (16,699

Compensation and other expenses related to reduction in workforce

  5,254      5,447      708      11,409   

Professional and other fees related to Mergers and August 1st technology issue

  —        —        2,785      2,785   

Writedown of capitalized debt costs

  —        —        13,209      13,209   

Gain on strategic asset

  —        —        (1,359   (1,359

Writedown of assets and lease loss accrual

  —        1,681      8,819      10,500   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non GAAP Income (loss) from continuing operations before income taxes

$ 53,205    $ 2,637    $ (35,997 $ 19,845   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

* Totals may not add due to rounding


Exhibit 4

(Continued)

 

KCG HOLDINGS, INC.
Regulation G Reconciliation of Non-GAAP financial measures (Continuing operations)(1)
(in thousands)
Year ended December 31, 2014    Market Making      Global
Execution
Services
    Corporate and
Other
    Consolidated  

Reconciliation of GAAP Pre-Tax to Non-GAAP Pre-Tax:

GAAP Income (loss) from continuing operations before income taxes

$ 146,713    $ 11,056    $ (72,582 $ 85,187   

Net gain related to tradeMONSTER combination with OptionsHouse

  —        —        (15,105   (15,105

Income resulting from the merger of BATS and Direct Edge, net

  —        —        (9,644   (9,644

Gain on sale of FCM

  —        (2,116   —        (2,116

Compensation related to reduction in workforce and other employee separations

  3,169      5,463      4,958      13,590   

Writedown of capitalized debt costs

  —        —        9,552      9,552   

Writedown of assets and lease loss accrual, net

  811      —        7,814      8,625   
  

 

 

    

 

 

   

 

 

   

 

 

 

Non GAAP Income (loss) from continuing operations before income taxes

$ 150,693    $ 14,403    $ (75,007 $ 90,089   
  

 

 

    

 

 

   

 

 

   

 

 

 
Year ended December 31, 2013    Market Making      Global
Execution
Services
    Corporate and
Other
    Consolidated  

Reconciliation of GAAP Pre-Tax to Non-GAAP Pre-Tax:

GAAP Income (loss) from continuing operations before income taxes

$ 103,612    $ (25,794 $ (52,842 $ 24,978   

Gain on investment in Knight Capital Group, Inc.

  —        —        (127,972   (127,972

Professional and other fees related to Mergers and August 1st technology issue

  —        —        47,183      47,183   

Writedown of capitalized debt costs

  —        —        13,209      13,209   

Compensation and other expenses related to reduction in workforce

  11,518      21,444      708      33,670   

Unit based compensation acceleration due to Mergers

  —        —        22,031      22,031   

Strategic asset impairment

  —        —        7,825      7,825   

Writedown of assets and lease loss accrual

  108      1,681      13,344      15,133   
  

 

 

    

 

 

   

 

 

   

 

 

 

Non GAAP Income (loss) from continuing operations before income taxes

$ 115,238    $ (2,669 $ (76,514 $ 36,057   
  

 

 

    

 

 

   

 

 

   

 

 

 

 

* Totals may not add due to rounding
(1) Year ended December 31, 2013 includes six months of results of KCG Holdings, Inc. plus six months of GETCO Holding Company, LLC.