ITG Reports First Quarter 2017 Results

Earnings Boosted by Record Profitability in EMEA and Asia Pacific

NEW YORK, May 3, 2017 – ITG (NYSE: ITG), a leading independent broker and financial technology provider, today reported results for the quarter ended March 31, 2017.

First Quarter 2017 Highlights

Commenting on the results, ITG President and Chief Executive Officer, Frank Troise, said, “We continue to build momentum in our international operations, with revenue growth in all three regions and record profitability in EMEA and Asia Pacific.  While the environment in the U.S. is challenging, we gained market share in the first quarter and are working to close the profitability gap through execution of our Strategic Operating Plan, which aims to enhance the value we deliver to clients through our core liquidity, execution, analytics and workflow technology solutions.”

First Quarter Regional Segment Results

North American revenues were $69.9 million in the first quarter of 2017 compared to revenues of $82.4 million in the first quarter of 2016.

ITG reported a net loss of $1.8 million in North America in the first quarter of 2017, including $3.3 million in pre-tax charges, or $2.0 million after-tax, related to (i) headcount reductions; and (ii) a rent reserve charge for the remaining lease obligation on a vacated portion of our Boston office. These charges were partially offset by a tax benefit of $0.8 million due to an accounting rule change for deductions taken on stock grants in excess of grant date fair value. North American net income was $3.1 million in the first quarter of 2016. 

U.S. revenues in the first quarter of 2017 were $53.4 million, compared to $66.3 million in the first quarter of 2016 including the impact of the divesture of the investment research operations in May 2016.

Canada revenues in the first quarter of 2017 were $16.5 million, compared to $16.1 million in the first quarter of 2016, including the impact of the closing of the Canadian arbitrage trading desk in April 2016.

Europe and Asia Pacific revenues were $50.7 million in the first quarter of 2017, compared to $41.9 million in the first quarter of 2016.

ITG reported net income for its Europe and Asia Pacific operations of $11.1 million in the first quarter of 2017, a new record high, compared to $4.1 million in the first quarter of 2016. First quarter 2017 net income includes a tax benefit of $0.3 million due to an accounting rule change for deductions taken on stock grants in excess of grant date fair value.

European revenues were a record $36.7 million in the first quarter of 2017 including the impact of currency translation, up from $31.1 million in the first quarter of 2016.

Asia Pacific revenues were $13.9 million, up from $10.8 million in the first quarter of 2016.

Corporate activity reduced GAAP net income by $4.0 million in the first quarter of 2017 and $9.7 million in the first quarter of 2016. Corporate activity in the first quarter of 2016 included the after-tax impact of the amount expensed during the first quarter of 2016 for the upfront cash and stock awards to ITG’s current CEO, a significant portion of which replaced compensation he forfeited at his former employer, and the reserves and associated legal fees related to the arbitration with ITG’s former CEO.

Corporate activity includes investment income and non-operating gains, as well as costs not associated with operating ITG's regional and product group business lines including, costs of being

a public company, intangible amortization, interest expense, costs of maintaining a global transfer pricing structure, foreign exchange gains and losses and certain non-operating items.

Non-GAAP Financial Measures

To supplement our financial information presented in accordance with accounting principles generally accepted in the U.S. (“GAAP”), management uses certain “non-GAAP financial measures” as such term is defined in Regulation G promulgated by the SEC. Generally, a non-GAAP financial measure is a numerical measure of a company’s operating performance, financial position or cash flows that excludes or includes amounts that are included in, or excluded from, the most directly comparable measure calculated and presented in accordance with GAAP. Management believes the presentation of these measures provides investors with greater transparency and supplemental data relating to our financial condition and results of operations, and therefore a more complete understanding of factors affecting our business than GAAP measures alone. In addition, management believes the presentation of these matters is useful to investors for period-to-period comparison of results as the items may reflect certain unique and/or non-operating items such as acquisitions, divestitures, restructuring charges, write-offs and impairments, charges associated with litigation or regulatory matters together with related expenses or items outside of management’s control.

Adjusted expenses, adjusted income (loss) before income tax expense (benefit), adjusted income tax expense (benefit), adjusted net income (loss) and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), together with related per share amounts, are non-GAAP performance measures that we believe are useful to assist investors in gaining an understanding of the trends and operating results for our core business. These measures should be viewed in addition to, and not in lieu of, results reported under GAAP.

Reconciliations of (i) adjusted expenses, adjusted income before income tax expense, adjusted income tax expense and adjusted net income to expenses, loss before income tax benefit, income tax benefit and net loss and related per share amounts as determined in accordance with GAAP for the three months ended March 31, 2016 and (ii) adjusted EBITDA to net loss as determined in accordance with GAAP for the three months ended March 31, 2017 and March 31, 2016, are provided in the accompanying supplemental tables at the end of this release.

Conference Call on 1Q17 Results

An investor conference call to discuss ITG’s results will be held today at 8:00 am ET. Those wishing to listen to the call should dial 1-844-881-0134  (1-412-317-6722 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 at: investor.itg.com. A replay will be available for one week by dialing 1-877-344-7529  (1-412-317-0088 outside the U.S.) and entering replay number 10104933. The replay will be available starting approximately one hour after the completion of the conference call.

About ITG

Investment Technology Group (NYSE: ITG) is a global financial technology company that helps leading brokers and asset managers improve returns for investors around the world. We empower traders to reduce the end-to-end cost of implementing investments via technology-enabled liquidity, execution, analytics and workflow technology solutions. ITG has offices in Asia Pacific, Europe and North America and offers execution services in more than 50 countries. Please visit www.itg.com for more information. 

In addition to historical information, this press release may contain "forward-looking" statements that reflect management’s expectations for the future. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “could” “should,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “trend,” “potential” or “continue” and the negative of these terms and other comparable terminology. A variety of important factors could cause results to differ materially from such statements. 

Certain of these factors are noted throughout ITG’s 2016 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, political and financial market conditions, both internationally and domestically, 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 increased regulatory scrutiny, the outcome of contingencies such as legal proceedings or governmental or regulatory investigations and customer or shareholder reaction to, or further proceedings or sanctions based on, such matters, the volatility of our stock price, changes in tax policy or accounting rules, the ability of the Company to recognize its deferred tax assets, 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, operational risks related to misconduct or errors by our employees or entities with which we do business, 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 protect our intellectual property, our ability to execute on strategic initiatives or transactions, our ability to attract and retain talented employees, and our ability to pay dividends or repurchase our common stock in the future.  

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.

ITG Media/Investor Contact:

J.T. Farley

1-212-444-6259

corpcomm@itg.com 

INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (unaudited)

(In thousands, except per share amounts)

INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES

Supplemental Financial Data (unaudited)

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INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Financial Condition

(In thousands, except share amounts)

INVESTMENT TECHNOLOGY GROUP, INC.

Reconciliation of US GAAP Results to Adjusted Results

(In thousands, except per share amounts)

Notes:

Reconciliation of Adjusted Earnings

Before Interest, Taxes, Depreciation, and Amortization

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