Global Markets more than doubled pre-tax income to $88.3 million in
the third quarter 2008, up from $32.2 million in the third quarter
2007, in one of the strongest quarterly performances in our history
JERSEY CITY, N.J., Oct. 22 /PRNewswire-FirstCall/ -- Knight Capital
Group, Inc. (NASDAQ:NITE) today reported earnings of $36.3 million,
or $0.40 per diluted share, and pre-tax income of $61.8 million for
the third quarter of 2008, which included minority interest expense
of $1.7 million related to Deephaven. For the third quarter of
2007, the company reported earnings of $16.4 million, or $0.17 per
diluted share, and pre-tax income of $27.8 million, which included
a pre-tax gain of $13.0 million, or approximately $0.08 per diluted
share, related to the transfer and sale of equity interests in
Direct Edge ECN. Excluding the gain from the equity transactions,
pre-tax income for the third quarter of 2007 would have been $14.8
million, or $0.09 per diluted share. Revenues for the third quarter
of 2008 were $269.9 million, compared to $205.0 million for the
third quarter of 2007. "In the third quarter of 2008, Knight
achieved exceptional performance amid a series of extraordinary
events that gripped the global capital markets," said Thomas M.
Joyce, Chairman and Chief Executive Officer, Knight Capital Group.
"On a consolidated basis, we grew year-over-year revenues and
pre-tax earnings while increasing pre-tax margins to 23 percent
from 14 percent in the third quarter of 2007. In Global Markets, we
again turned in one of the strongest quarterly performances in our
history driven by increasing order flow across both electronic and
voice channels in our hybrid market model and heightened market
volatility. In Asset Management, Deephaven's fund performance and
assets under management suffered as conditions continued to worsen
for alternative investment managers." ------- ------- Q3 2008 Q3
2007 ------- ------- Revenues ($ thousands) 269,895 204,959 Net
income ($ thousands) 36,295 16,445 Diluted EPS ($) 0.40 0.17
Average daily U.S. equity dollar value traded ($ billions) 20.0
14.0 Average daily U.S. equity trades (thousands) 2,581.6 1,407.7
Nasdaq and Listed equity shares traded (billions) 52.1 29.7 OTC
Bulletin Board and Pink Sheet shares traded (billions) 264.8 185.8
Average revenue capture per U.S. equity dollar value traded (bps)
1.5 1.3 Average month-end balance of assets under management ($
millions) 2,912.2 4,105.7 Quarterly fund return to investors*
-10.0% -1.8% * Quarterly fund return represents the blended
quarterly return across all assets under management in the
Deephaven funds. -------- -------- YTD 2008 YTD 2007 --------
-------- Revenues ($ thousands) 718,031 648,032 Net income ($
thousands) 98,209 72,677 Diluted EPS ($) 1.07 0.71 Average daily
U.S. equity dollar value traded ($ billions) 18.0 11.2 Average
daily U.S. equity trades (thousands) 2,066.0 1,220.3 Nasdaq and
Listed equity shares traded (billions) 120.6 79.3 OTC Bulletin
Board and Pink Sheet shares traded (billions) 636.0 637.9 Average
revenue capture per U.S. equity dollar value traded (bps) 1.4 1.6
Average month-end balance of assets under management ($ millions)
3,298.2 4,049.2 Year-to-date fund return to investors* -14.8% 5.3%
* Year-to-date fund return represents the blended return across all
assets under management in the Deephaven funds. Global Markets
During the third quarter of 2008, Global Markets generated total
revenues of $269.0 million, compared to $192.7 million in the third
quarter of 2007. In the third quarter of 2008, Global Markets
reported pre-tax earnings of $88.3 million, compared to pre-tax
earnings of $32.2 million in the third quarter of 2007. Global
Markets pre-tax margins of 33% in the third quarter of 2008
exceeded pre-tax margins of 17% in the third quarter of 2007. "In
Global Markets, we recorded pre-tax margins greater than 30 percent
for the fourth consecutive quarter," said Mr. Joyce. "Our equity
trade volumes were robust due to deep, in-house liquidity across
the market and the reliability, efficiency and scalability of our
trading technology infrastructure. During the third quarter, we
increased trade capacity to 20 million trades per day. The
flexibility of Knight's hybrid market model continues to provide
tremendous value to buy- and sell-side clients who turn to us for
market access and insights to meet their trading objectives. Our
results reflect the positive impact of our diversification and
expansion strategies across clients, products, services, order
flow, asset classes and geographies." Asset Management During the
third quarter of 2008, the Asset Management segment, Deephaven
Capital Management, generated $9.2 million in asset management
fees, compared to negative net asset management fees of $1.2
million in the same period a year ago. The negative net asset
management fees of $1.2 million during the third quarter of 2007
reflected a reduction of incentive fees due to the quarterly fund
returns, offset by positive asset-based management fees. In the
third quarter of 2008, Deephaven reported a pre-tax loss of $7.7
million, compared to a pre-tax loss of $8.3 million in the third
quarter of 2007. The third quarter of 2008 pre-tax loss included
minority interest expense of $1.7 million relating to the third
quarter's accrual for the one-year minimum distribution to the
Deephaven managers pursuant to the Limited Liability Agreement for
Deephaven Capital Management Holdings LLC. Asset Management had
approximately $2.7 billion under management at October 1, 2008,
compared with approximately $4.4 billion under management at
October 1, 2007. "During the third quarter, Deephaven's fund
performance and assets under management suffered as uncertainty and
fear in the global capital markets led to further declines in
market indexes and sent investors in search of safe havens," said
Mr. Joyce. "In the end, Deephaven's blended fund performance
declined along with that of benchmark funds. Assets under
management fell due to negative fund performance and redemptions.
As with most alternative investment managers, Deephaven has
significant redemption risk as investors consider reallocating
assets into more liquid investments given the current market
conditions. In light of the current environment, Deephaven will
continue to consider all alternatives to protect its investors."
Corporate In the third quarter of 2008, the Corporate segment
reported pre-tax loss of $18.8 million, compared to pre-tax income
of $3.9 million in the third quarter of 2007. Pre-tax income of
$3.9 million in the prior year's third quarter included a pre-tax
gain of $13.0 million, or approximately $0.08 per diluted share,
related to the transfer and sale of equity interests in the holding
company of Direct Edge ECN. Pursuant to SEC guidance, of the $13.0
million pre-tax gain, $8.8 million is reported as Non-operating
gain from subsidiary stock issuance, and $4.2 million is included
in Investment (loss) income and other, net on the Consolidated
Statements of Operations. The company's corporate investment in the
Deephaven funds incurred a pre-tax loss of $8.5 million during the
third quarter of 2008, compared to a pre-tax loss of $1.3 million
during the third quarter of 2007. As of September 30, 2008, the
company had $296.1 million in cash and cash equivalents as well as
a $63.3 million corporate investment in funds managed by Deephaven.
"In a period of historic turmoil in the global capital markets and
transformation on Wall Street, Knight produced exceptional results
by providing clients with superior and customized service," said
Mr. Joyce. "In Global Markets, our financial performance included
growing contributions from existing market access and trading
offerings as well as new high-velocity algorithmic trading models.
The composition of our volumes illustrates our evolution into an
all-market trade execution firm for global equities, while
broadening access for clients across asset classes. In the months
ahead, we will focus on opportunities to build on our strengths
such as adding electronic capabilities to our voice presence in
Europe as well as establishing a voice presence in Asia." The
company had $944.6 million in stockholders' equity as of September
30, 2008, equivalent to a book value of $10.49 per diluted share.
The company had a book value of $9.31 per diluted share as of
September 30, 2007. During the third quarter of 2008, the company
repurchased 5.8 million shares for approximately $89.7 million
under the company's $1.0 billion stock repurchase program. To date,
the company has repurchased 66.8 million shares for $745.7 million.
The company has approximately $254.3 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 third quarter
of 2008 earnings conference call for analysts, investors and the
media at 9:00 a.m. Eastern Daylight Time (EDT) today, October 22,
2008. To access Knight's earnings conference call, please dial
877.856.1968 for domestic callers or 719.325.4811 for international
callers. When prompted, provide the passcode, which is 6458498. 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
September 2008 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. In Global Markets, we provide
market access and trade execution services in nearly every U.S.
equity security and a large number of international securities,
futures, options, foreign exchange and fixed income. In Asset
Management, Knight owns a 51 percent stake in Deephaven Holdings
with Deephaven Partners controlling the remaining 49 percent as of
February 1, 2008. Deephaven (http://www.deephavenfunds.com/) is a
global, multi-strategy alternative investment manager serving
institutions and private clients. More information about Knight can
be found at http://www.knight.com/. Certain statements contained
herein, may 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 businesses recently
acquired, or that may be acquired in the future, by the Company,
and risks associated with the unprecedented current market
conditions and the resulting volatility, credit tightening and
counterparty risk, as well as the negative effect on performance
and assets under management in our Asset Management business. 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 disclosed in the
Company's reports with the U.S. Securities and Exchange Commission
(SEC), including, without limitation, those detailed under the
headings "Certain Factors Affecting Results of Operations" and
"Risk Factors" in the Company's Annual Report on Form 10-K for the
year-ended December 31, 2007, and in other reports or documents the
Company files with, or furnishes to, the SEC from time to time.
This information should also be read in conjunction with the
Company's Consolidated Financial Statements and the Notes thereto
contained in the Company's Annual Report on Form 10-K for the
year-ended December 31, 2007, and in other reports or documents the
Company files with, or furnishes to, the SEC from time to time.
KNIGHT CAPITAL GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) For the three For the nine months ended months ended
September 30, September 30, -------------- -------------- 2008 2007
2008 2007 ---- ---- ---- ---- (In thousands, except per share
amounts) Revenues Commissions and fees $151,160 $131,473 $378,537
$342,261 Net trading revenue 116,830 57,660 303,780 173,490 Asset
management fees, net 9,238 (1,237) 38,844 88,593 Interest, net
1,543 4,645 7,324 13,657 Non-operating gain from subsidiary stock
issuance - 8,757 - 8,757 Investment (loss) income and other, net
(8,876) 3,661 (10,454) 21,274 ------ ----- ------- ------ Total
revenues 269,895 204,959 718,031 648,032 ------- ------- -------
------- Transaction-based expenses Execution and clearance fees
27,062 39,555 76,114 95,656 Soft dollar and commission recapture
expense 18,844 15,256 53,469 44,261 Payments for order flow and ECN
rebates 10,112 18,978 27,338 44,338 ------ ------ ------ ------
Total transaction-based expenses 56,018 73,789 156,921 184,255
------ ------ ------- ------- Revenues, net of transaction-based
expenses 213,877 131,170 561,110 463,777 Other direct expenses
Employee compensation and benefits 109,244 71,785 279,020 252,715
Communications and data processing 11,982 9,948 33,865 28,034
Professional fees 3,377 5,281 16,044 13,961 Depreciation and
amortization 7,422 5,626 19,347 16,542 Occupancy and equipment
rentals 5,602 3,685 14,978 10,690 Business development 4,298 3,532
12,765 11,804 Interest expense 1,476 20 3,425 45 Writedown of
assets and lease loss accrual 2,516 136 644 (1,354) Other 4,471
3,403 9,764 9,011 ----- ----- ----- ----- Total other direct
expenses 150,388 103,416 389,852 341,448 ------- ------- -------
------- Income from continuing operations before income taxes and
minority interest 63,489 27,754 171,258 122,329 Income tax expense
25,511 11,205 68,798 48,215 ------ ------ ------ ------ Income from
continuing operations before minority interest 37,978 16,549
102,460 74,114 Minority interest expense 1,683 - 4,251 - ------
------ ------ ------ Income from continuing operations 36,295
16,549 98,209 74,114 Loss from discontinued operations, net of tax
- (104) - (1,437) ------ ------- ------ ------ Net income $36,295
$16,445 $98,209 $72,677 ======= ======= ======= ======= Basic
earnings per share from continuing operations $0.41 $0.17 $1.10
$0.75 ===== ===== ===== ===== Diluted earnings per share from
continuing operations $0.40 $0.17 $1.07 $0.73 ===== ===== =====
===== Basic and diluted earnings per share from discontinued
operations $- $- $- $(0.01) ===== ===== ===== ====== Basic earnings
per share $0.41 $0.17 $1.10 $0.74 ===== ===== ===== ===== Diluted
earnings per share $0.40 $0.17 $1.07 $0.71 ===== ===== ===== =====
Shares used in computation of basic earnings per share 87,612
95,893 89,207 98,809 ====== ====== ====== ====== Shares used in
computation of diluted earnings per share 90,076 98,315 92,069
102,081 ====== ====== ====== ======= KNIGHT CAPITAL GROUP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)
------------------ ----------------- September 30, 2008 December
31, 2007 ------------------ ----------------- (In thousands) ASSETS
Cash and cash equivalents $296,119 $222,435 Securities owned, held
at clearing brokers, at fair value 549,923 412,565 Receivable from
brokers and dealers 309,199 382,544 Asset management fees
receivable 11,532 27,588 Investment in Deephaven sponsored funds
63,272 83,732 Receivable from Deephaven sponsored funds - 85,000
Fixed assets and leasehold improvements, at cost, less accumulated
depreciation and amortization 78,172 62,073 Strategic investments
83,629 73,704 Goodwill 231,791 132,832 Intangible assets, less
accumulated amortization 93,327 57,845 Deferred compensation
investments 85,120 85,504 Other assets 145,648 129,991 -------
------- Total assets $1,947,732 $1,755,813 ========== ==========
LIABILITIES & STOCKHOLDERS' EQUITY Liabilities Securities sold,
not yet purchased, at fair value $374,931 $335,280 Payable to
brokers and dealers 176,040 117,001 Accrued compensation expense
196,695 228,275 Accrued expenses and other liabilities 110,148
119,879 Long term debt 140,000 70,000 ------- ------ Total
liabilities 997,814 870,435 ------- ------- Minority interest 5,276
- Stockholders' equity Class A common stock 1,536 1,509 Additional
paid-in capital 638,319 587,025 Retained earnings 1,032,307 934,099
Treasury stock, at cost (727,520) (637,255) -------- -------- Total
stockholders' equity 944,642 885,378 ------- ------- Total
liabilities and stockholders' equity $1,947,732 $1,755,813
========== ========== KNIGHT CAPITAL GROUP, INC. PRE-TAX EARNINGS
FROM CONTINUING OPERATIONS BY BUSINESS SEGMENT* Amounts in millions
(Unaudited) For the three For the nine months ended months ended
September 30, September 30, -------------- -------------- 2008 2007
2008 2007 ---- ---- ---- ---- Global Markets Revenues $269.0 $192.7
$691.4 $530.6 Expenses 180.6 160.5 459.7 429.6 ----- ----- -----
----- Pre-tax earnings 88.3 32.2 231.7 101.0 ---- ---- ----- -----
Asset Management Revenues 8.5 (0.9) 38.2 89.7 Expenses 14.5 7.4
53.7 72.8 ---- ---- ---- ---- Pre-tax earnings (6.1) (8.3) (15.5)
16.9 Minority interest expense 1.7 - 4.3 - ---- ---- ---- ----
Pre-tax earnings after minority interest expense (7.7) (8.3) (19.8)
16.9 ---- ---- ----- ---- Corporate Revenues (7.5) 13.2 (11.5) 27.7
Expenses 11.2 9.3 33.4 23.4 ---- --- ---- ---- Pre-tax earnings
(18.8) 3.9 (44.9) 4.4 ----- --- ----- --- Consolidated Revenues
269.9 205.0 718.0 648.0 Expenses 206.4 177.2 546.8 525.7 -----
----- ----- ----- Pre-tax earnings 63.5 27.8 171.3 122.3 Minority
interest expense 1.7 - 4.3 - ----- ----- ----- ----- Pre-tax
earnings after minority interest expense $61.8 $27.8 $167.0 $122.3
===== ===== ====== ====== * Totals may not add due to rounding.
DATASOURCE: Knight Capital Group, Inc. CONTACT: Margaret Wyrwasm,
Senior Managing Director, Communications, Marketing & Investor
Relations, +1-201-557-6954, , or 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/ourliquidity/volumestatistics.asp
https://www.deephavenfunds.com/
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