Global Markets segment generated second quarter pre-tax earnings of
$32.7 million and achieved pre-tax margins of 20% in a mixed
trading environment JERSEY CITY, N.J., July 18
/PRNewswire-FirstCall/ -- Knight Capital Group, Inc. (NASDAQ:NITE)
today reported GAAP earnings from continuing operations of $24.4
million, or $0.24 per diluted share, for the second quarter of
2007. Pre-tax earnings from continuing operations for this period
were $39.9 million. For the second quarter of 2006, the company
reported GAAP earnings from continuing operations of $30.3 million,
or $0.29 per diluted share, and pre-tax earnings from continuing
operations of $50.8 million. Excluding a pre-tax gain of $7.1
million, or approximately $0.04 per diluted share, related to the
sale of a part of the company's equity ownership in the
International Securities Exchange, Inc., earnings from continuing
operations for the second quarter of 2006 would have been $25.9
million, or $0.25 per diluted share. "Continuing operations"
include the company's two operating business segments, Global
Markets and Asset Management. Continuing operations also include a
Corporate segment, encompassing corporate investments and overhead
expenses. Amounts reported as "discontinued operations" include the
company's former Derivative Markets business segment, which
included the subsidiary Knight Financial Products LLC, the sale of
which was completed to Citigroup at the close of business on
December 9, 2004. Revenues for the second quarter of 2007 were
$201.4 million, compared to $206.0 million for the second quarter
of 2006. Global Markets During the second quarter of 2007, the
Global Markets business segment generated total revenues of $165.3
million, compared to $183.4 million in the second quarter of 2006.
In the second quarter of 2007, the Global Markets business segment
reported pre-tax earnings of $32.7 million, compared to pre- tax
earnings of $49.0 million in the second quarter of 2006. "Knight's
Global Markets segment held steady in a mixed second quarter
trading environment characterized by one-way price directionality
and unremarkable volumes," said Thomas M. Joyce, Chairman and Chief
Executive Officer of Knight Capital Group. "With intense focus, our
broker-dealer business set out to increase and source new
liquidity. We have successfully added sell-side clients whose
trading 'exhaust,' or order flow that would otherwise go to
exchanges and ECNs, serves as an alternative liquidity source.
Their interest in our trading software to more efficiently execute
these orders has garnered more sell-side order flow that not only
feeds Knight's virtual exchange with more volume, but introduces
liquidity that's different from our established equity businesses.
Equity volumes also increased during the quarter on the Direct Edge
ECN, and foreign exchange and fixed income volumes increased on our
Hotspot and ValuBond electronic platforms, respectively. Knight's
institutional business has performed consistently quarter over
quarter and year over year. Our sales traders continue to win
business based on their relationships and service." Q2 2007 Q2 2006
Revenues ($) 201,397,011 205,950,333 Net income from continuing
operations ($) 24,378,236 30,339,584 Diluted EPS ($) 0.24 0.29 U.S.
equity dollar value traded (in $ millions) 650,636 566,224 U.S.
equity trades executed (in thousands) 72,720 59,222 Average daily
U.S. equity trades (in thousands) 1,154 940 Nasdaq and Listed
equity shares traded (in millions) 25,819 25,671 OTC Bulletin Board
and Pink Sheet shares traded (in millions) 233,281 304,994 Average
revenue capture per U.S. equity dollar value traded (bps) 1.6 2.1
Average month-end balance of assets under management (in $
millions) 3,970.0 3,074.6 Quarterly fund return to investors* 2.0%
0.7% * Quarterly fund return represents the blended quarterly
return across all assets under management in the Deephaven funds
YTD 2007 YTD 2006 Revenues ($) 443,048,674 483,144,770 Net income
from continuing operations ($) 57,563,948 79,471,625 Loss from
discontinued operations, net of tax ($) (1,332,818) - Net income
($) 56,231,130 79,471,625 Diluted EPS ($) 0.54 0.75 U.S. equity
dollar value traded (in $ millions) 1,213,135 1,125,896 U.S. equity
trades executed (in thousands) 139,611 120,241 Average daily U.S.
equity trades (in thousands) 1,126 962 Nasdaq and Listed equity
shares traded (in millions) 49,580 53,532 OTC Bulletin Board and
Pink Sheet shares traded (in millions) 452,107 678,670 Average
revenue capture per U.S. equity dollar value traded (bps) 1.8 2.2
Average month-end balance of assets under management (in $
millions) 4,020.9 3,009.2 Year-to-date fund return to investors*
7.0% 9.2% * Year-to-date fund return represents the blended return
across all assets under management in the Deephaven funds The
company announced today in a separate press release that Citadel
Derivatives Group LLC, an affiliate of Citadel Investment Group,
L.L.C., has agreed to purchase a minority equity interest in Direct
Edge ECN, a wholly owned subsidiary of Knight. Asset Management
During the second quarter of 2007, the Asset Management business
segment, Deephaven Capital Management, generated $29.1 million in
asset management fees, compared to $14.1 million in the same period
a year ago. In the second quarter of 2007, Asset Management
reported pre-tax earnings of $6.3 million, compared to pre-tax
earnings of $2.3 million in the second quarter of 2006. Asset
Management had approximately $4.2 billion under management at July
1, 2007, up from $3.1 billion under management at July 1, 2006.
"Deephaven Capital Management gained further traction in the second
quarter by continuing to deliver attractive risk-adjusted rates of
return and growing assets under management," Mr. Joyce said.
"Performance was positive across nearly all of the diverse
geographic regions in which Deephaven invests and the investment
strategies it employs. Outstanding performance history over more
than a decade continues to attract new clients and assets. We are
bullish on the significant opportunities Deephaven has to build its
business." Corporate In the second quarter of 2007, the Corporate
segment reported pre-tax earnings of $0.9 million, compared to a
pre-tax loss of $0.5 million in the second quarter of 2006.
Included in the results for the second quarter of 2006 was a
pre-tax gain of $7.1 million, or approximately $0.04 per diluted
share, related to the sale of a part of the company's equity
ownership in the International Securities Exchange, Inc. The
company's corporate investment in the Deephaven funds earned $6.3
million pre-tax during the second quarter of 2007, compared to a
pre-tax gain of $0.9 million during the second quarter of 2006. As
of June 30, 2007, the company had $125.6 million in cash and cash
equivalents and a $200.8 million corporate investment in funds
managed by Deephaven. The company had $965.0 million in
stockholders' equity as of June 30, 2007, equivalent to a book
value of approximately $9.41 per diluted share. During the second
quarter of 2007, the company repurchased 2.9 million shares for
approximately $47.9 million under the company's $495 million stock
repurchase program. To date, the company has repurchased 47 million
shares for $460 million. The company announced today in a separate
press release that its Board of Directors has authorized the
repurchase of up to an additional $505 million of the company's
outstanding common shares. The company has $540 million available
to repurchase shares under the revised program. The company
cautions that there are no assurances that any further repurchases
may actually occur. "By achieving a steady revenue stream and
keeping costs in line, Knight once again this quarter reached its
profit margin goal of 20% within Global Markets," Mr. Joyce said.
"We also demonstrated our commitment to building shareholder value
by buying back Knight stock throughout the second quarter, and that
commitment continues with the $505 million extension of our
repurchase program announced today. With Knight's businesses
exhibiting strength and our attention to our capital structure, we
are well-positioned to deliver value for our shareholders." * * *
Copies of this earnings release and other information on the
company can be obtained at the company's website,
http://www.knight.com/. The company will conduct its second quarter
2007 earnings conference call for analysts, investors and the media
at 9:00 a.m. Eastern Daylight Time (EDT) today, July 18, 2007. To
access Knight's earnings conference call, please dial 800.802.2266
for domestic callers or 913.312.1270 for international callers.
When prompted, provide the passcode, which is 3438543. The
conference call will be webcast live at 9:00 a.m. EDT for all
investors and interested parties on Knight's website. In addition,
the company will release its monthly volume statistics for June
2007 on its website before the start of trading today at
http://www.knight.com/ourLiquidity/volumeStatistics.asp. * * *
About Knight Knight Capital Group, Inc. (NASDAQ:NITE) is a leading
financial services firm that provides voice and electronic access
to the capital markets across multiple asset classes for buy-side,
sell-side and corporate clients, and asset management for
institutions and private clients. Our Global Markets business
offers superior execution quality through natural liquidity,
capital facilitation and trading technology, with comprehensive
products and services that support the capital formation process.
Our Asset Management business, Deephaven Capital Management, is a
global multi-strategy alternative investment manager focused on
delivering attractive risk-adjusted returns with low correlation to
the broader markets. More information about Knight can be found at
http://www.knight.com/. Presentation of Information in this Press
Release Certain statements contained herein constitute
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking
statements are based on current expectations, estimates and
projections about the Company's industry, management's beliefs and
certain assumptions made by management. 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. Since such statements
involve risks and uncertainties, the actual results and performance
of the Company may turn out to be materially different from the
results expressed or implied by such forward-looking statements.
Given these uncertainties, readers are cautioned not to place undue
reliance on such forward-looking statements. Unless otherwise
required by law, the Company also disclaims any obligation to
update its view of any such risks or uncertainties or to announce
publicly the result of any revisions to the forward-looking
statements made herein; however, readers should carefully review
reports or documents the Company files from time to time with the
Securities and Exchange Commission including, without limitation,
the risks and uncertainties detailed under the headings "Certain
Factors Affecting Results of Operations" and "Risks Affecting our
Business" in the Company's Annual Report on Form 10-K. Other risk
factors include those associated with pursuing the substantially
increased repurchase program, including, without limitation,
whether or not the Company will complete the share repurchase
program during any particular time frame or at all, whether the
Company's cash flow from earnings and cash on hand will be
sufficient to fund the share repurchase program, the effect of
pursuing the program on the Company's balance sheet, the impact of
market conditions, trading restrictions and alternative
requirements for available cash, and the possibility that pursuing
the program will limit the ability of the Company to pursue other
opportunities. KNIGHT CAPITAL GROUP, INC. CONSOLIDATED STATEMENTS
OF OPERATIONS (Unaudited) For the three months ended For the six
months ended June 30, June 30, 2007 2006 2007 2006 Revenues
Commissions and fees $106,929,092 $112,475,157 $210,788,547
$215,118,168 Net trading revenue 54,192,639 68,220,068 115,829,721
148,259,218 Asset management fees 29,116,156 14,075,709 89,830,111
84,586,752 Interest, net 4,169,037 2,775,335 8,986,980 6,089,307
Investment income and other 6,990,087 8,404,064 17,613,315
29,091,325 Total revenues 201,397,011 205,950,333 443,048,674
483,144,770 Transaction-based expenses Execution and clearance fees
28,690,546 30,026,355 56,101,032 58,950,758 Soft dollar and
commission recapture expense 14,468,448 18,684,431 29,005,096
37,130,756 Payments for order flow and ECN rebates 12,761,373
12,126,021 25,360,338 21,999,419 Total transaction- based expenses
55,920,367 60,836,807 110,466,466 118,080,933 Revenues, net of
trans- action-based expenses 145,476,644 145,113,526 332,582,208
365,063,837 Other direct expenses Employee compensation and
benefits 78,697,298 64,615,557 180,930,190 164,171,725
Communications and data processing 9,387,289 8,403,791 18,086,514
16,041,932 Depreciation and amortization 5,513,772 5,324,879
10,915,552 9,732,574 Professional fees 3,190,973 5,092,238
8,680,095 11,475,361 Business development 4,493,303 3,134,363
8,272,135 5,256,681 Occupancy and equipment rentals 3,550,286
3,398,114 7,005,512 6,750,599 Writedown of assets and lease loss
accrual (1,490,061) 482,269 (1,490,061) 8,479,703 Other 2,275,187
3,896,612 5,607,934 10,344,981 Total other direct expenses
105,618,047 94,347,823 238,007,871 232,253,556 Income from
continuing operations before income taxes 39,858,597 50,765,703
94,574,337 132,810,281 Income tax expense 15,480,361 20,426,119
37,010,389 53,338,656 Net income from continuing operations
24,378,236 30,339,584 57,563,948 79,471,625 Loss from discontinued
operations, net of tax - - (1,332,818) - Net income $24,378,236
$30,339,584 $56,231,130 $79,471,625 Basic earnings per share from
continuing operations $0.24 $0.30 $0.57 $0.79 Diluted earnings per
share from continuing operations $0.24 $0.29 $0.56 $0.75 Basic and
diluted earnings per share from discontinued operations $- $-
$(0.01) $- Basic earnings per share $0.24 $0.30 $0.56 $0.79 Diluted
earnings per share $0.24 $0.29 $0.54 $0.75 Shares used in
computation of basic earnings per share 99,683,315 100,739,240
100,291,311 100,822,519 Shares used in computation of diluted
earnings per share 102,523,827 105,397,197 103,540,053 105,358,680
KNIGHT CAPITAL GROUP, INC. CONSOLIDATED STATEMENTS OF FINANCIAL
CONDITION (Unaudited) June 30, 2007 December 31, 2006 ASSETS Cash
and cash equivalents $125,552,681 $214,759,915 Securities owned,
held at clearing brokers, at market value 440,385,042 711,774,643
Receivable from brokers and dealers 410,815,715 372,897,376 Asset
management fees receivable 58,240,104 112,204,064 Investment in
Deephaven sponsored funds 200,750,859 187,573,291 Fixed assets and
leasehold improvements at cost, less accumulated depreciation and
amortization 64,426,641 66,449,617 Strategic investments 48,211,877
49,436,605 Goodwill 133,072,889 133,042,889 Intangible assets, less
accumulated amortization 60,805,204 63,701,006 Other assets
216,599,858 116,374,310 Total assets $1,758,860,870 $2,028,213,716
LIABILITIES & STOCKHOLDERS' EQUITY Liabilities Securities sold,
not yet purchased, at market value $416,625,320 $693,071,230
Payable to brokers and dealers 120,525,119 47,852,721 Accrued
compensation expense 169,803,152 227,846,699 Accrued expenses and
other liabilities 86,881,567 96,956,122 Total liabilities
793,835,158 1,065,726,772 Stockholders' equity Class A common stock
1,502,023 1,449,588 Additional paid-in-capital 566,088,994
519,790,132 Retained earnings 868,090,455 811,859,325 Treasury
stock, at cost (470,655,760) (370,612,101) Total stockholders'
equity 965,025,712 962,486,944 Total liabilities and stockholders'
equity $1,758,860,870 $2,028,213,716 KNIGHT CAPITAL GROUP, INC.
PRE-TAX EARNINGS BY BUSINESS SEGMENT* Amounts in millions
(Unaudited) For the three For the six months ended months ended
June 30, June 30, June 30, June 30, 2007 2006 2007 2006 Asset
Management Revenues $29.4 $14.2 $90.6 $85.0 Expenses 23.1 11.9 65.4
56.0 Pre-Tax Earnings 6.3 2.3 25.2 29.0 Global Markets Revenues
165.3 183.4 337.8 372.0 Expenses 132.6 134.4 269.0 274.5 Pre-Tax
Earnings 32.7 49.0 68.8 97.5 Corporate Revenues 6.8 8.4 14.6 26.1
Expenses 5.9 8.9 14.1 19.9 Pre-Tax Earnings 0.9 (0.5) 0.5 6.2
Consolidated Revenues 201.4 206.0 443.0 483.1 Expenses 161.5 155.2
348.5 350.3 Pre-Tax Earnings $39.9 $50.8 $94.6 $132.8 * Totals may
not add due to rounding. DATASOURCE: Knight Capital Group, Inc.
CONTACT: Margaret Wyrwas, Senior Managing Director, Corporate
Communications & Investor Relations, +1-201-557-6954, , or Kara
Fitzsimmons, Vice President, Corporate Communications,
+1-201-356-1523, Web site: http://www.knight.com/
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