NEW YORK, Oct. 27 /PRNewswire-FirstCall/ -- Investment Technology Group, Inc. (NYSE:ITG), a leading provider of technology-based equity trading services and transaction research, today announced that for the third quarter ended September 30, 2005, net income was $15.6 million, 47 percent higher than net income of $10.6 million in the third quarter of 2004. Earnings were $0.37 per diluted share, an increase of 48 percent versus earnings of $0.25 per diluted share in the third quarter of last year. ITG's total revenue for the third quarter of 2005 was $102.2 million, 18 percent higher than total revenue of $86.3 million for the third quarter of 2004.
Excluding the impact of non-recurring items, operating revenues of $102.0 million increased by 21 percent from third quarter 2004 operating revenues of $84.2 million. Operating earnings per share of $0.36 in the third quarter of 2005 increased 33 percent versus operating earnings of $0.27 per diluted share in the third quarter of last year. Pre-tax operating margins in the third quarter of 2005 were 27 percent, up from 22 percent in the third quarter of 2004.
"ITG maintained momentum in the growth of our volume, market share and earnings in the third quarter," stated Ray Killian, ITG's Chairman, President and Chief Executive Officer. "We have made strides in executing our growth strategy by announcing two strategic acquisitions, expanding our product offerings internationally, and increasing penetration domestically with clients across our product spectrum." ITG's International revenues were $22.4 million in the third quarter of 2005, 23 percent higher than revenues of $18.2 million in the third quarter of 2004. International pre-tax operating profits decreased from $1.0 million in the third quarter of 2004 to $0.8 million in the third quarter of 2005.
"ITG has experienced a decline in our European volumes, primarily due to security concerns throughout London in July as well as typical seasonality in August. We are confident that this remains an area of growth for ITG, and are committed to enhancing our presence in key financial centers around the world," stated Mr. Killian.
Other highlights of the third quarter include the announcements of two strategic acquisitions. In July, ITG announced that it would acquire Macgregor, a leading provider of trade order management technology for the global financial community. This deal is now expected to close in early 2006. In September, ITG announced the acquisition of Plexus, a research and consulting firm dedicated to enhancing investment performance. This deal is expected to close in January 2006.
Year to date - US GAAP Results For the nine months ended September 30, 2005, revenues increased 21 percent from $244.9 million in 2004 to $296.1 million in 2005. Net income increased to $46.3 million, a 64 percent increase from $28.3 million in 2004, and diluted earnings per share increased 67 percent, from $0.66 in 2004 to $1.10 in 2005.
Conference Call ITG has scheduled a conference call today at 11:00 a.m. ET to discuss third quarter results. Those wishing to listen to the call should dial 1-800-309-1245 at least 10 minutes prior to the start of the call to ensure connection. A listen-only webcast will also be available on ITG's website at http://www.itginc.com/investor. For those unable to listen to the live broadcast of the call, a replay will be available for one week by dialing 1-888-203-1112 and entering the pass code 9453771. A replay will be available for two weeks on ITG's website. Both methods of listening to the replay will be available starting approximately two hours after the completion of the conference call.
About ITG Investment Technology Group, Inc. (ITG), is a specialized brokerage firm that partners with clients globally to provide innovative solutions spanning the entire trading process. A pioneer in electronic trading, ITG has a unique approach to trading that combines pre-trade analysis, trade execution, and post-trade evaluation to provide continuous improvements in trading and cost efficiency. The firm is headquartered in New York and maintains offices in North America, Europe and the Asia Pacific regions. For additional information, visit http://www.itginc.com/.
In addition to historical information, this press release may contain "forward-looking" statements, as defined in the Private Securities Litigation Reform Act of 1995, that reflect management's expectations for the future. A variety of important factors could cause results to differ materially from such statements. These factors include the company's ability to achieve expected future levels of sales; the actions of both current and potential new competitors; rapid changes in technology; financial market volatility; general economic conditions in the United States and elsewhere; evolving industry regulation; cash flows into or redemption from equity funds; effects of inflation; customer trading patterns; and new products and services. These and other risks are described in greater detail in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2004, and other documents filed with the Securities and Exchange Commission and available on the company's web site.
Contacts:
Maureen Murphy Alicia Curran
Investor Relations Media Relations
(212) 444-6323 (212) 444-6130
INVESTMENT TECHNOLOGY GROUP, INC. Consolidated Statements of Income (unaudited)
(In thousands, except per share amounts) Three Months Ended Nine Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2005 2004 2005 2004
Revenues:
Commissions $96,817 $79,567 $280,038 $229,749
Other 5,414 6,748 16,037 15,125
Total revenues 102,231 86,315 296,075 244,874 Expenses:
Compensation and employee
benefits 36,751 31,620 108,722 90,162
Transaction processing 14,852 13,368 42,061 37,119
Software royalties - 3,381 1,088 10,485
Occupancy and equipment 6,995 7,918 21,468 22,708
Telecommunications and data
processing services 5,039 4,549 14,839 13,524
Other general and
administrative 10,792 8,097 30,374 22,973
Total expenses 74,429 68,933 218,552 196,971 Income before income tax
expense 27,802 17,382 77,523 47,903
Income tax expense 12,210 6,798 31,255 19,581 Net income $15,592 $10,584 $46,268 $28,322 Earnings per share: Basic $0.37 $0.25 $1.10 $0.66 Diluted $0.37 $0.25 $1.10 $0.66 Basic weighted average
number of common shares
outstanding 42,101 41,885 42,051 43,108 Diluted weighted average
number of common shares
outstanding 42,369 41,892 42,197 43,116
INVESTMENT TECHNOLOGY GROUP, INC. Consolidated Statements of Financial Condition
(In thousands, except share amounts) September 30, December 31,
2005 2004
(unaudited)
Assets
Cash and cash equivalents $ 188,510 $ 206,465
Cash, restricted or segregated 9,592 7,287
Securities owned, at fair value 6,483 32,530
Receivables from brokers, dealers and other, net 844,219 198,642
Investments in limited partnerships 10,695 20,311
Premises and equipment, net 19,314 24,023
Capitalized software, net 12,236 8,926
Goodwill 176,365 86,550
Other Intangibles 12,365 2,657
Deferred taxes 10,304 10,226
Other assets 13,668 14,841
Total assets $1,303,751 $ 612,458
Liabilities and Stockholders' Equity
Liabilities:
Accounts payable and accrued expenses $107,096 $ 82,821
Payables to brokers, dealers and other 768,637 142,446
Software royalties payable - 3,350
Securities sold, not yet purchased, at fair value 49 30
Income taxes payable 5,046 13,310
Total liabilities 880,828 241,957 Commitments and contingencies
Stockholders' Equity:
Preferred stock, par value $0.01;
1,000,000 shares authorized; no shares issued - -
Common stock, par value $0.01;
100,000,000 shares authorized; 51,390,027
and 51,327,388 shares issued at
September 30, 2005 and December 31, 2004,
respectively and 42,184,042 and 41,950,670
shares outstanding at September 30, 2005
and December 31, 2004, respectively 514 513
Additional paid-in capital 167,456 161,169
Retained earnings 421,229 374,961
Common stock held in treasury, at cost;
9,205,985 and 9,376,718 shares at
September 30, 2005 and December 31, 2004,
respectively (173,870) (177,095)
Accumulated other comprehensive income:
Currency translation adjustment 7,594 10,953 Total stockholders' equity 422,923 370,501 Total liabilities and stockholders' equity $1,303,751 $612,458
INVESTMENT TECHNOLOGY GROUP, INC. Reconciliation of US GAAP Results to Pro Forma Operating Results (unaudited) In evaluating the Company's financial performance, management reviews results from operations which excludes non-operating or one-time charges. Pro forma earnings per share is a non-GAAP (generally accepted accounting principles) performance measure, but the Company believes that it is useful to assist investors in gaining an understanding of the trends and operating results for the Company's core businesses. Pro forma earnings per share should be viewed in addition to, and not in lieu of, the Company's reported results under US GAAP.
The following is a reconciliation of US GAAP results to pro forma results for the periods presented (in thousands except per share amounts): Three Months Ended Nine Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2005 2004 2005 2004 Total revenues $102,231 $86,315 $296,075 $244,874
Less:
Non-recurring revenue (1) (282) (2,091) (3,107) (4,481)
Pro forma operating revenues 101,949 84,224 292,968 240,393 Total expenses 74,429 68,933 218,552 196,971
Asset impairment charges (2) - (700) - (700)
Other non-recurring expenses (3) - (2,557) - (2,557)
Pro forma operating expenses 74,429 65,676 218,552 193,714 Income before income tax expense 27,802 17,382 77,523 47,903
Effect of pro forma adjustments (282) 1,166 (3,107) (1,224)
Pro forma operating income
before income tax expense 27,520 18,548 74,416 46,679 Income tax expense 12,210 6,798 31,255 19,581
Tax effect of pro forma
adjustments (116) 463 (1,274) (446)
Pro forma operating income
tax expense 12,094 7,261 29,981 19,135 Net income 15,592 10,584 46,268 28,322
Net effect of pro forma
adjustments (166) 703 (1,833) (778)
Pro forma operating net income $15,426 $11,287 $44,435 $27,544 Diluted earnings per share $0.37 $0.25 $1.10 $0.66
Net effect of pro forma
adjustments (0.01) 0.02 (0.05) (0.02)
Pro forma diluted operating
earnings per share $0.36 $0.27 $1.05 $0.64 Notes: (1) 2005 non-recurring revenue is comprised of gains ($2.5 million) from
our shares of Archipelago Holdings common stock that we received as
part of an equity entitlement program, of which $0.1 million was
recognized in the Third Quarter of 2005, as well as a recovery
against previous investment write-downs of $0.6 million for the year,
of which $0.2 million was recovered in the Third Quarter 2005. 2004
non-recurring revenue is comprised of a gain of $2.4 million on the
sale of 50% of Investment Technology Group, Inc.'s ("ITG") Canadian
subsidiary, KTG Technology Corp. in the Second Quarter 2004, and
unrealized gains of $2.1 million from our holding of Archipelago
Holdings common stock after the corporation's initial public offering
in the Third Quarter 2004.
(2) Pertains to 2004 write-down of two New York Stock Exchange seats that
ITG obtained as part of the Hoenig acquisition. Since the market
environment led to a reduction in NYSE seat prices, we took a $0.7
million impairment write-down to reflect the fair value of these
seats at $1.15 million each.
(3) The other non-recurring expenses incurred in the Third Quarter 2004
contain a lease abandonment charge and employee separation costs. DATASOURCE: ITG CONTACT: Maureen Murphy, Investor Relations, +1-212-444-6323, or Alicia Curran, Media Relations, +1-212-444-6130 Web site: http://www.itginc.com/ http://www.itginc.com/investor
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