Global Markets generated fourth quarter revenues of $220.9 million,
driven by electronic access and trading services, a 42% increase
from fourth quarter 2006 revenues of $155.4 million JERSEY CITY,
N.J., Jan. 16 /PRNewswire-FirstCall/ -- Knight Capital Group, Inc.
(NASDAQ:NITE) today reported earnings of $49.6 million, or $0.52
per diluted share, and pre-tax income of $78.9 million for the
fourth quarter of 2007. The results include a non-recurring tax
benefit of $0.02 per diluted share. Excluding this item, earnings
for the fourth quarter of 2007 were $0.50 per diluted share. For
the fourth quarter of 2006, the company reported earnings of $47.4
million, or $0.45 per diluted share, and pre-tax income of $71.6
million. The results included a $0.09 per diluted share gain from
the sale of the remaining strategic investment in shares of the
International Securities Exchange, Inc. (ISE) and a non-recurring
tax benefit of $0.03 per diluted share. Excluding these two items,
earnings for the fourth quarter of 2006 were $0.33 per diluted
share. Revenues for the fourth quarter of 2007 were $257.3 million,
compared to $261.5 million for the fourth quarter of 2006. "I am
extremely proud of the results we achieved in the fourth quarter of
2007," said Thomas M. Joyce, Chairman and CEO, Knight Capital
Group. "In Global Markets, Knight witnessed a powerful confluence
of events in the markets that favored our hybrid market model.
First, the volatility that began over the summer months continued
into the fourth quarter. Second, our clients continued to show
preference for Knight as a trade execution destination which was
reflected in sustained high trading volumes. In Asset Management,
Deephaven rebounded from its first down quarter in two and a half
years to post positive blended fund returns for this quarter. On a
consolidated basis, Knight achieved 31 percent pre-tax margins.
Finally, our employees simply outdid themselves to provide clients
with high quality transactions and improving returns in an
uncertain market environment." Q4 2007 Q4 2006 Revenues (in $
thousands) 257,337 261,452 Pre-tax margin 31% 27% Net income (in $
thousands) 49,563 47,414 Diluted EPS ($) 0.52 0.45 U.S. equity
dollar value traded (in $ millions) 1,088,001 497,153 U.S. equity
trades executed (in thousands) 105,273 58,680 Average daily U.S.
equity trades (in thousands) 1,671 939 Nasdaq and Listed equity
shares traded (in millions) 34,271 21,991 OTC Bulletin Board and
Pink Sheet shares traded (in millions) 183,942 160,589 Average
revenue capture per U.S. equity dollar value traded (bps) 1.6 2.0
Average month-end balance of assets under management (in $
millions) 4,202.9 4,183.9 Quarterly fund return to investors* 1.4%
7.1% * Quarterly fund return represents the blended quarterly
return across all assets under management in the Deephaven funds
YTD 2007 YTD 2006 Revenues (in $ thousands) 905,324 956,289 Pre-tax
margin 22% 27% Net income (in $ thousands) 122,240 158,346 Diluted
EPS ($) 1.21 1.49 U.S. equity dollar value traded (in $ millions)
3,178,626 2,033,574 U.S. equity trades executed (in thousands)
332,864 225,512 Average daily U.S. equity trades (in thousands)
1,334 902 Nasdaq and Listed equity shares traded (in millions)
113,599 94,348 OTC Bulletin Board and Pink Sheet shares traded (in
millions) 821,827 1,063,089 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) 4,087.8 3,420.4 Annual fund
return to investors* 6.8% 22.8% * Annual fund return represents the
blended return across all assets under management in the Deephaven
funds Global Markets During the fourth quarter of 2007, Global
Markets generated total revenues of $220.9 million, compared to
$155.4 million in the fourth quarter of 2006. In the fourth quarter
of 2007, Global Markets reported pre-tax income of $79.4 million,
compared to pre-tax income of $25.3 million in the fourth quarter
of 2006. "The fourth quarter was the best from a revenue standpoint
for Global Markets in my tenure at Knight," Mr. Joyce said. "The
continued hard work developing our electronic and voice trade
execution services, coupled with Knight's maturation into an
all-market U.S. equity trade execution destination, allowed us to
grow and diversify our client base. As the volatility fluctuated
throughout the fourth quarter, we gained market share while
maintaining high quality trade execution standards.
Diversification, both from a revenue and client perspective, better
prepared us to withstand continued softness in areas such as
Bulletin Boards and Pink Sheets. The results are even more
remarkable in that Global Markets achieved pre-tax margins of 36
percent for the fourth quarter of 2007." At the close of business
on January 14, 2008, Knight completed the acquisition of EdgeTrade
Inc., a leading agency-only trade execution and algorithmic
software firm. EdgeTrade's algorithms, including smart order
execution, benchmark and participation strategies, are now
available on its broker-neutral trading platform Knight Direct
EMS(TM). Asset Management During the fourth quarter of 2007, the
Asset Management business segment, Deephaven Capital Management,
generated $28.2 million in asset management fees, compared to $78.8
million in the same period a year ago. In the fourth quarter of
2007, Deephaven reported a pre-tax operating loss of $426,000,
compared to pre-tax operating earnings of $27.4 million in the
fourth quarter of 2006. Deephaven had approximately $3.9 billion
under management at December 31, 2007, down from the $4.2 billion
under management at December 31, 2006. Deephaven had approximately
$4.0 billion under management at January 1, 2008. As noted in its
Form 8-K filing on August 27, 2007, the company, at its sole
discretion, made the determination that if a Deephaven fund with a
six- month performance period incurs losses in the performance
period ending December 31, 2007, Deephaven will return all or a
portion of the incentive allocation fees collected from investors
in that fund for the six-month performance period ended June 30,
2007. As a result, Deephaven repaid approximately $19 million in
fees in the fourth quarter of 2007. "In Asset Management, continued
uncertainty in the credit markets resulted in weaker Deephaven fund
performance during the fourth quarter," Mr. Joyce said. "The Event
Fund, for example, was affected by more stringent lending standards
and a subsequent lack of deal activity. That being said, Deephaven
funds performed comparably to their benchmark indexes. Over the
course of the year, Deephaven continued to execute in terms of
diversifying the fund offering, adding new fund investors and
attracting talent." On January 10, 2008, Deephaven Managing
Partners, LLC, an entity owned and controlled by three senior
managers of Deephaven Capital Management, gave notice to the
company that it is exercising its option to obtain a 49% interest
in a new limited liability company to which the company's interests
in Deephaven would be contributed. For more information, please
refer to Knight's SEC Form 8-K which was furnished on January 11,
2008. Corporate In the fourth quarter of 2007, the Corporate
segment reported a pre-tax loss of $41,000, compared to pre-tax
earnings of $18.9 million in the fourth quarter of 2006. Included
in the fourth quarter 2006 results is a pre-tax gain of $15.8
million, or approximately $0.09 per diluted share, from the sale of
the company's remaining equity ownership in the ISE. The company's
corporate investment in the Deephaven funds earned $4.9 million
pre-tax during the fourth quarter of 2007, down from $9.5 million
pre- tax during the fourth quarter of 2006. As of December 31,
2007, the company had $222.4 million in cash and cash equivalents
and an $83.7 million corporate investment in funds managed by
Deephaven. During the fourth quarter of 2007, the company redeemed
a total of $120.0 million of its investment in the Deephaven funds,
of which $85.0 million is included as a Receivable from Deephaven
sponsored funds on the Consolidated Statement of Financial
Condition at December 31, 2007. In the fourth quarter of 2007, the
company borrowed $70.0 million under its existing $140.0 million
credit facility. The proceeds were used to finance share
repurchases and other general corporate purposes. "We are energized
by our accomplishments of 2007 and, looking ahead, expect to see
growth in several areas," Mr. Joyce said. "In Global Markets, we'll
continue to invest in trade execution services that increase
efficiencies and allow us to improve client service. Expansion in
Europe will accelerate as recent successes and changing market
conditions present new opportunities. In Asset Management,
Deephaven will continue to develop new investment strategies,
particularly in Asia. Finally, we expect volatility to remain high
in 2008 as the credit market turmoil continues and the election
year builds to a resolution." The company had $885.4 million in
stockholders' equity as of December 31, 2007, equivalent to a book
value of $9.35 per diluted share. The company had a book value of
$9.06 per diluted share as of December 31, 2006. During the fourth
quarter of 2007, the company repurchased 6.7 million shares for
approximately $89.4 million under the company's $1.0 billion stock
repurchase program. To date, the company has repurchased 59.2
million shares for $626.2 million. The company has $373.8 million
available 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 fourth quarter
of 2007 earnings conference call for analysts, investors and the
media at 9:00 a.m. Eastern Standard Time (EST) today, January 16,
2008. To access Knight's earnings conference call, please dial
877.741.4251 for domestic callers or 719.325.4820 for international
callers. When prompted, provide the passcode, which is 5059041. The
conference call will be webcast live at 9:00 a.m. EST for all
investors and interested parties on Knight's website. In addition,
the company will release its monthly volume statistics for December
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 electronic and voice 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/. 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 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 associated with the costs,
integration, performance and operation of the business acquired by
the Company. 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. Readers should
carefully review 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 and under the heading "Risk Factors" in the Company's
Form 10-Q's for the quarterly periods ended June 30, 2007 and
September 30, 2007, respectively, and in other reports or documents
the Company files from time to time with the Securities and
Exchange Commission. KNIGHT CAPITAL GROUP, INC. CONSOLIDATED
STATEMENTS OF OPERATIONS (Unaudited) For the three For the months
ended year ended December 31, December 31, 2007 2006 * 2007 2006 *
(In thousands, except per share amounts) Revenues Commissions and
fees $105,234 $97,851 $447,495 $410,394 Net trading revenue 112,709
52,657 286,199 243,761 Asset management fees, net 28,184 78,765
116,777 213,888 Interest, net 3,766 4,762 17,378 16,027
Non-operating gain from subsidiary stock issuance - - 8,757 -
Investment income and other, net 7,444 27,417 28,718 72,219 Total
revenues 257,337 261,452 905,324 956,289 Transaction-based expenses
Execution and clearance fees 24,605 25,857 120,261 106,908 Soft
dollar and commission recapture expense 17,106 15,291 61,367 70,537
Payments for order flow and ECN rebates 10,226 10,529 54,564 42,191
Total transaction-based expenses 51,937 51,677 236,192 219,636
Revenues, net of transaction- based expenses 205,400 209,775
669,132 736,653 Other direct expenses Employee compensation and
benefits 93,761 105,635 346,476 352,353 Communications and data
processing 8,922 8,594 36,956 33,120 Depreciation and amortization
5,533 5,462 22,075 20,641 Professional fees 5,399 5,356 19,360
20,568 Business development 4,193 5,715 15,997 14,343 Occupancy and
equipment rentals 3,393 3,621 14,083 13,536 Writedown of assets and
lease loss accrual (1,116) - (2,470) 8,480 Other 6,407 3,832 15,418
17,101 Total other direct expenses 126,492 138,215 467,895 480,142
Income from continuing operations before income taxes 78,908 71,560
201,237 256,511 Income tax expense 29,345 24,146 77,560 98,165 Net
income from continuing operations 49,563 47,414 123,677 158,346
Loss from discontinued operations, net of tax - - (1,437) - Net
income $49,563 $47,414 $122,240 $158,346 Basic earnings per share
from continuing operations $0.54 $0.47 $1.27 $1.56 Diluted earnings
per share from continuing operations $0.52 $0.45 $1.23 $1.49 Basic
and diluted earnings per share from discontinued operations $- $-
$(0.01) $- Basic earnings per share $0.54 $0.47 $1.26 $1.56 Diluted
earnings per share $0.52 $0.45 $1.21 $1.49 Shares used in
computation of basic earnings per share 91,828 101,818 97,050
101,420 Shares used in computation of diluted earnings per share
94,722 106,189 100,796 106,243 "Continuing operations" include the
company's two operating 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. * Certain
reclassifications have been made to prior years' Consolidated
Statements of Operations in order to conform to the current year
presentation. Such reclassifications had no effect on previously
reported Net income. KNIGHT CAPITAL GROUP, INC. CONSOLIDATED
STATEMENTS OF FINANCIAL CONDITION (Unaudited) December 31, December
31, 2007 2006 (In thousands) ASSETS Cash and cash equivalents
$222,435 $214,760 Securities owned, held at clearing brokers, at
market value 412,565 711,775 Receivable from brokers and dealers
382,786 372,897 Asset management fees receivable 27,588 112,204
Investment in Deephaven sponsored funds 83,732 187,573 Receivable
from Deephaven sponsored funds 85,000 - Fixed assets and leasehold
improvements at cost, less accumulated depreciation and
amortization 62,073 66,450 Strategic investments 73,704 49,437
Goodwill 132,832 133,043 Intangible assets, less accumulated
amortization 57,845 63,701 Deferred compensation investments 85,504
31,586 Other assets 127,121 84,789 Total assets $1,753,185
$2,028,215 LIABILITIES & STOCKHOLDERS' EQUITY Liabilities
Securities sold, not yet purchased, at market value $335,280
$693,071 Payable to brokers and dealers 117,243 47,853 Accrued
compensation expense 228,275 227,847 Accrued expenses and other
liabilities 117,009 96,957 Long term debt 70,000 - Total
liabilities 867,807 1,065,728 Stockholders' equity Class A common
stock 1,509 1,450 Additional paid-in-capital 587,025 519,790
Retained earnings 934,099 811,859 Treasury stock, at cost (637,255)
(370,612) Total stockholders' equity 885,378 962,487 Total
liabilities and stockholders' equity $1,753,185 $2,028,215 KNIGHT
CAPITAL GROUP, INC. PRE-TAX EARNINGS BY BUSINESS SEGMENT* Amounts
in millions (Unaudited) For the three For the months ended year
ended December December December December 31, 2007 31, 2006 31,
2007 31, 2006 Asset Management Revenues $28.5 $79.1 $118.2 $214.9
Expenses 28.9 51.7 101.7 140.0 Pre-Tax Earnings (0.4) 27.4 16.5
74.8 Global Markets Revenues 220.9 155.4 751.4 674.8 Expenses 141.5
130.2 571.1 524.5 Pre-Tax Earnings 79.4 25.3 180.4 150.3 Corporate
Revenues 7.9 27.0 35.7 66.6 Expenses 8.0 8.0 31.3 35.3 Pre-Tax
Earnings - 18.9 4.3 31.4 Consolidated Revenues 257.3 261.5 905.3
956.3 Expenses 178.4 189.9 704.1 699.8 Pre-Tax Earnings $78.9 $71.6
$201.2 $256.5 * 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, , Kara Fitzsimmons, Director, Media
Relations, +1-201-356-1523, , or Jonathan Mairs, Vice President,
Corporate Communications, +1-201-356-1529, , all of Knight Capital
Group, Inc. Web site: http://www.knight.com/
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