Knight generated pre-tax earnings from operations of $89.5 million,
or $0.56 per diluted share, which excluded a pre-tax gain of $51.6
million, or $0.33 per diluted share, from the partial sale of
Knight's ownership stake in Direct Edge Holdings JERSEY CITY, N.J.,
Jan. 22 /PRNewswire-FirstCall/ -- Knight Capital Group, Inc.
(NASDAQ:NITE) today reported earnings of $79.7 million, or $0.89
per diluted share, and pre-tax income of $141.1 million for the
fourth quarter of 2008. These results included a pre-tax gain of
$51.6 million, or $0.33 per diluted share, relating to the partial
sale of Knight's investment in Direct Edge Holdings, and minority
interest expense of $1.9 million related to Deephaven. Excluding
the effect of the partial sale of Direct Edge Holdings, the company
generated pre-tax earnings of $89.5 million, or $0.56 per diluted
share, for the fourth quarter of 2008. For the fourth quarter of
2007, the company reported earnings of $49.6 million, or $0.52 per
diluted share, and pre-tax income of $78.9 million. Revenues for
the fourth quarter of 2008 were $330.2 million, compared to $257.5
million for the fourth quarter of 2007. "By staying focused on our
clients, Knight achieved outstanding results in a period of
historic market volatility, intense trading activity and steep
declines in the major market indexes in the fourth quarter of
2008," said Thomas M. Joyce, Chairman and Chief Executive Officer,
Knight Capital Group. "On a consolidated basis, we grew revenues
and pre-tax income while achieving pre-tax margins of 43 percent
for this quarter. In Global Markets, we gained market share during
the fourth quarter and executed greater share volume than any U.S.
exchange or securities firm according to industry reports. In Asset
Management, the unprecedented market conditions continued to
depress fund performance. Finally, our consolidated results
included a pre-tax gain of $51.6 million from the partial sale of
Knight's ownership stake in Direct Edge as well as the sale of our
remaining interest in the ISE Stock Exchange to International
Securities Exchange Holdings." Q4 2008 Q4 2007 ------- -------
Revenues ($ thousands) 330,183 257,473 Net income ($ thousands)
79,702 49,563 Diluted EPS ($) 0.89 0.52 Average daily U.S. equity
dollar value traded ($ billions) 22.5 17.3 Average daily U.S.
equity trades (thousands) 3,990.3 1,671.0 Nasdaq and Listed equity
shares traded (billions) 75.1 34.3 OTC Bulletin Board and Pink
Sheet shares traded (billions) 166.8 183.9 Average revenue capture
per U.S. equity dollar value traded (bps) 1.6 1.6 Average month-end
balance of assets under management ($ millions) 2,078.5 4,202.9
Quarterly fund return to investors* -20.9% 1.4% * Quarterly fund
return represents the blended quarterly return across all assets
under management in the Deephaven funds. -------- -------- YTD 2008
YTD 2007 -------- -------- Revenues ($ thousands) 1,042,616 896,749
Net income ($ thousands) 177,911 122,240 Diluted EPS ($) 1.94 1.21
Average daily U.S. equity dollar value traded ($ billions) 19.2
12.7 Average daily U.S. equity trades (thousands) 2,548.0 1,334.1
Nasdaq and Listed equity shares traded (billions) 195.7 113.6 OTC
Bulletin Board and Pink Sheet shares traded (billions) 802.7 821.8
Average revenue capture per U.S. equity dollar value traded (bps)
1.5 1.6 Average month-end balance of assets under management ($
millions) 2,993.3 4,087.8 Year-to-date fund return to investors*
-32.6% 6.8% * Year-to-date fund return represents the blended
return across all assets under management in the Deephaven funds.
"The year-over-year improvement in our financial performance is due
to the successful and ongoing execution of our growth strategy in
Global Markets," said Mr. Joyce. "We undertook several concurrent
initiatives in 2008 to increase pre-tax margins and to expand and
diversify revenues across clients, products and services, order
flow, asset classes and geographies. These initiatives included the
further development of electronic trade execution services
including Knight Link, Knight Direct and EdgeTrade, the expansion
into new asset classes such as fixed income through Knight Libertas
and Knight BondPoint, and the continuous building and refining of
high-velocity algorithmic trading models." Global Markets During
the fourth quarter of 2008, Global Markets generated total revenues
of $316.9 million, compared to $220.9 million in the fourth quarter
of 2007. In the fourth quarter of 2008, Global Markets reported
pre-tax income of $125.8 million, compared to pre-tax income of
$79.4 million in the fourth quarter of 2007. Global Markets pre-tax
margins of 40% in the fourth quarter of 2008 exceeded pre-tax
margins of 36% in the fourth quarter of 2007. "In Global Markets,
we achieved exceptional performance on the strength of our deep,
in-house liquidity, hybrid market model and expanded client
offerings," said Mr. Joyce. "Revenues from electronic trade
execution services exceeded 50 percent of total Global Markets
revenues. Our trade volumes during the fourth quarter solidified
our place as one of the leaders on the new Wall Street. The
innovative electronic and voice trade execution services in our
hybrid market model offer buy- and sell-side firms choice, which is
critical to attracting new clients and capturing an ever-greater
share of order flow. We also recorded sizeable contributions from
the expansion of Knight Link and introduction of Knight Libertas as
well as from our high-velocity algorithmic trading models." Asset
Management During the fourth quarter of 2008, the Asset Management
segment, Deephaven Capital Management, generated $7.5 million in
asset management fees, compared to $28.2 million in the same period
a year ago. In the fourth quarter of 2008, Deephaven reported a
pre-tax loss of $5.7 million, compared to a pre-tax loss of
$426,000 in the fourth quarter of 2007. The fourth quarter of 2008
pre-tax loss included minority interest expense of $1.9 million
relating to the fourth 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.
"In Asset Management, market conditions continued to impact
Deephaven's fund performance during the fourth quarter amid
industry-wide deleveraging," said Mr. Joyce. "Blended fund
performance for the year finished down for the first time in
Deephaven's 14-year history. Further, the unprecedented market
conditions, pending redemptions and industry-wide changes in margin
and finance requirements, led Deephaven to announce the suspension
of redemptions and withdrawals in the Global Multi-Strategy Funds
and International Volatility Strategies Funds on October 30, 2008.
Deephaven continues to consider all alternatives with the goal of
protecting the interests of its investors." Asset Management had
approximately $2.0 billion under management at January 1, 2009,
compared with approximately $4.0 billion under management at
January 1, 2008. Corporate In the fourth quarter of 2008, the
Corporate segment reported pre-tax earnings of $21.1 million,
compared to a pre-tax loss of $41,000 in the fourth quarter of
2007. During the fourth quarter of 2008, the company recorded a
pre-tax gain of $51.6 million, or approximately $0.33 per diluted
share, from the partial sale of the company's investment in Direct
Edge Holdings. Pursuant to SEC guidance, of the $51.6 million
pre-tax gain, $15.9 million is reported as Non-operating gain from
subsidiary stock issuance, and $35.7 million is included in
Investment 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 $14.8 million during the fourth
quarter of 2008, compared to pre-tax income of $4.9 million during
the fourth quarter of 2007. "In 2008, Global Markets made
considerable progress in further expanding our offerings, adding
and deepening client relationships, and building a base of
sustainable financial results," said Mr. Joyce. "We head into 2009
with considerable momentum. We are driven by a client-centered
philosophy which is rooted in a thorough understanding of what buy-
and sell-side firms value in the trade execution process. Our
reliable, efficient and scalable trading technology infrastructure
provides us with exchange-like capacity. On the international
front, we are aggressively building on our presence in Europe and
plan to open an office in Hong Kong in the first quarter of 2009.
Finally, we have a strong, liquid balance sheet and a low
debt-to-equity ratio." As of December 31, 2008, the company had
$440.6 million in cash and cash equivalents as well as a $47.2
million corporate investment in funds managed by Deephaven. The
company had $1.0 billion in stockholders' equity as of December 31,
2008, equivalent to a book value of $11.53 per diluted share. The
company had a book value of $9.35 per diluted share as of December
31, 2007. During the fourth quarter of 2008, the company
repurchased 301,200 shares for approximately $4.6 million under the
company's $1.0 billion stock repurchase program. To date, the
company has repurchased 67.1 million shares for $750.4 million. The
company has approximately $249.6 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 2008 earnings conference call
for analysts, investors and the media at 9:00 a.m. Eastern Daylight
Time (EDT) today, January 22, 2009. To access Knight's earnings
conference call, please dial 877-857-6163 for domestic callers or
719-325-4746 for international callers. When prompted, provide the
passcode, which is 5983549. 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 December 2008 on its website at
http://www.knight.com/ourfirm/volumestats.asp before the start of
trading today. 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 and
the suspension of redemptions and withdrawals announced in the Form
8-K filed by the Company on October 30, 2008. 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 Quarterly Report on Form 10-Q for the three months
ended September 30, 2008, 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 For the three months years ended ended December
31, December 31, ------------- ------------- 2008 2007 2008 2007
---- ---- ---- ---- (In thousands, except per share amounts)
Revenues Commissions and fees $170,056 $105,234 $548,593 $447,495
Net trading revenue 142,927 112,709 446,707 286,199 Asset
management fees, net 7,500 28,184 46,344 116,777 Interest, net 256
3,902 7,579 17,560 Investment income (loss) and other, net 9,444
7,444 (6,607) 28,718 ----- ----- ------ ------ Total revenues
330,183 257,473 1,042,616 896,749 ------- ------- --------- -------
Transaction-based expenses Execution and clearance fees 31,288
24,605 107,402 120,261 Soft dollar and commission recapture expense
16,997 17,106 70,467 61,367 Payments for order flow and ECN rebates
16,301 10,226 43,639 54,564 ------ ------ ------ ------ Total
transaction- based expenses 64,586 51,937 221,508 236,192 ------
------ ------- ------- Revenues, net of transaction-based expenses
265,597 205,536 821,108 660,557 Other direct expenses Employee
compensation and benefits 97,355 93,761 370,778 346,476
Communications and data processing 13,597 8,922 47,461 36,956
Depreciation and amortization 8,147 5,533 27,494 22,075 Occupancy
and equipment rentals 5,516 3,393 20,494 14,083 Business
development 5,456 4,193 18,221 15,997 Professional fees 3,439 5,399
19,483 19,360 Interest expense 1,590 136 5,014 182 Writedown of
assets and lease loss accrual, net 592 (1,116) 1,236 (2,470) Other
2,853 6,407 12,617 15,418 ----- ----- ------ ------ Total other
direct expenses 138,545 126,628 522,798 468,077 ------- -------
------- ------- Other Income Non-operating gain from subsidiary
stock issuance 15,947 - 15,947 8,757 ------ - ------ ----- Income
from continuing operations before income taxes and minority
interest 142,999 78,908 314,257 201,237 Income tax expense 61,395
29,345 130,193 77,560 ------ ------ ------- ------ Income from
continuing operations before minority interest 81,604 49,563
184,064 123,677 Minority interest expense 1,902 - 6,153 - ----- -
----- - Income from continuing operations 79,702 49,563 177,911
123,677 Loss from discontinued operations, net of tax - - - (1,437)
- - - ------ Net income $79,702 $49,563 $177,911 $122,240 =======
======= ======== ======== Basic earnings per share from continuing
operations $0.93 $0.54 $2.01 $1.27 ===== ===== ===== ===== Diluted
earnings per share from continuing operations $0.89 $0.52 $1.94
$1.23 ===== ===== ===== ===== Basic and diluted earnings per share
from discontinued operations $- $- $- $(0.01) == == == ====== Basic
earnings per share $0.93 $0.54 $2.01 $1.26 ===== ===== ===== =====
Diluted earnings per share $0.89 $0.52 $1.94 $1.21 ===== =====
===== ===== Shares used in computation of basic earnings per share
86,025 91,828 88,407 97,050 ====== ====== ====== ====== Shares used
in computation of diluted earnings per share 89,121 94,722 91,760
100,796 ====== ====== ====== ======= KNIGHT CAPITAL GROUP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)
------------- ------------- December 31, December 31, 2008 2007
------------- ------------- (In thousands) ASSETS Cash and cash
equivalents $440,621 $222,435 Securities owned, held at clearing
brokers, at fair value 476,111 412,565 Receivable from brokers and
dealers 341,350 382,544 Asset management fees receivable 11,866
27,588 Investment in Deephaven sponsored funds 47,152 83,732
Receivable from Deephaven sponsored funds - 85,000 Fixed assets and
leasehold improvements, at cost, less accumulated depreciation and
amortization 83,831 62,073 Strategic investments 83,697 73,704
Goodwill 232,197 132,832 Intangible assets, less accumulated
amortization 90,477 57,845 Deferred compensation investments 72,690
85,504 Other assets 134,583 129,991 ------- ------- Total assets
$2,014,575 $1,755,813 ========== ========== LIABILITIES &
STOCKHOLDERS' EQUITY Liabilities Securities sold, not yet
purchased, at fair value $385,003 $335,280 Payable to brokers and
dealers 98,138 117,001 Accrued compensation expense 216,024 228,275
Accrued expenses and other liabilities 140,874 119,879 Long term
debt 140,000 70,000 ------- ------ Total liabilities 980,039
870,435 ------- ------- Minority interest 7,178 - Stockholders'
equity Class A common stock 1,544 1,509 Additional paid-in capital
648,716 587,025 Retained earnings 1,112,010 934,099 Treasury stock,
at cost (734,912) (637,255) -------- -------- Total stockholders'
equity 1,027,358 885,378 --------- ------- Total liabilities and
stockholders' equity $2,014,575 $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 years months ended ended December 31, December
31, ------------- --------------- 2008 2007 2008 2007 ---- ----
---- ---- Global Markets Revenues $316.9 $220.9 $1,008.3 $751.5
Expenses 191.1 141.5 650.8 571.1 ----- ----- ----- ----- Pre-tax
earnings 125.8 79.4 357.5 180.4 ----- ---- ----- ----- Asset
Management Revenues (1.1) 28.5 33.3 118.2 Expenses 2.7 28.9 52.6
101.7 --- ---- ---- ----- Pre-tax earnings (3.8) (0.4) (19.4) 16.5
Minority interest expense 1.9 - 6.2 - --- ---- --- ----- Pre-tax
earnings after minority interest expense (5.7) (0.4) (25.5) 16.5
---- ---- ----- ---- Corporate Revenues 14.4 8.1 1.1 27.1 Expenses
9.3 8.1 40.9 31.5 Other income 15.9 - 15.9 8.8 ---- --- ---- ---
Pre-tax earnings 21.1 - (23.8) 4.3 ---- --- ----- --- Consolidated
Revenues 330.2 257.5 1,042.6 896.7 Expenses 203.1 178.6 744.3 704.3
Other income 15.9 - 15.9 8.8 ---- ---- ---- --- Pre-tax earnings
143.0 78.9 314.3 201.2 Minority interest expense 1.9 - 6.2 - ---
--- --- --- Pre-tax earnings after minority interest expense $141.1
$78.9 $308.1 $201.2 ====== ===== ====== ====== * Totals may not add
due to rounding. DATASOURCE: Knight Capital Group, Inc. CONTACT:
Margaret Wyrwas, Senior Managing Director, Communications,
Marketing 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, Web Site: http://www.knight.com/
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