Global Markets reported third quarter 2009 revenues of $295.2
million, an 18% increase from third quarter 2008 revenues of $250.1
million, driven by market share gains in U.S. equities as well as
new products and increased trade volumes in global institutional
fixed income Global Markets reported third quarter 2009 pre-tax
income of $58.5 million, a 34% decrease from third quarter 2008
pre-tax income of $88.3 million, due to lower market volatility,
higher regulatory transaction fees and ongoing investments in
execution quality, global expansion, options market-making and self
clearing In Discontinued Operations, Asset Management recorded
additional pre-tax wind-down costs of $1.9 million in the third
quarter 2009 JERSEY CITY, N.J., Oct. 21 /PRNewswire-FirstCall/ --
Knight Capital Group, Inc. (NASDAQ:NITE) today reported earnings
from continuing operations of $30.5 million, or $0.32 per diluted
share, and a loss from discontinued operations, net of tax, of $1.3
million, or $0.01 loss per diluted share. On a consolidated basis,
the company reported earnings of $29.2 million, or $0.31 per
diluted share, for the third quarter of 2009. For the third quarter
of 2008, the company reported earnings from continuing operations
of $41.1 million, or $0.46 per diluted share, and a loss from
discontinued operations, net of tax, of $4.8 million, or $0.05 loss
per diluted share. On a consolidated basis, the company reported
earnings of $36.3 million, or $0.40 per diluted share for the third
quarter of 2008. Revenues from continuing operations for the third
quarter of 2009 were $299.9 million, compared to $240.8 million for
the third quarter of 2008. "Total revenues in the third quarter
were fueled by market share gains in equities and increased fixed
income trade volumes amid renewed competitive pressures from the
larger firms," said Thomas M. Joyce, Chairman and Chief Executive
Officer, Knight Capital Group. "In equities, we grew average daily
dollar value traded and executed more than 13 billion shares per
day as competing firms refocused on garnering retail order flow
from broker-dealer clients. Demand for bonds and ETFs among
institutional clients helped drive commissions and also altered the
composition of our commission revenue mix. However, due to the
profile of the order flow and increased execution and clearing
costs, which include regulatory transaction fees, pre-tax margins
were lower. In addition, we continued to invest in new talent,
products and services, asset classes and global expansion."
"Continuing operations" includes the company's Global Markets and
Corporate operating segments. Amounts reported as "Discontinued
operations" include the company's Asset Management segment, which,
on March 31, 2009, closed the sale of substantially all of
Deephaven's assets to affiliates of Stark & Roth, Inc. As of
that date, Deephaven was replaced as the investment adviser for the
Deephaven funds and the company exited from the Asset Management
business. -------- -------- Q3 2009 Q3 2008 -------- --------
Revenues ($ thousands) 299,930 240,775 Income from continuing
operations, net of tax ($ thousands) 30,479 41,101 Loss from
discontinued operations, net of tax ($ thousands) (1,253) (4,806)
Net income ($ thousands) 29,226 36,295 Diluted EPS from continuing
operations ($) 0.32 0.46 Diluted EPS from discontinued operations
($) (0.01) (0.05) Average daily U.S. equity dollar value traded ($
billions) 24.2 20.0 Average daily U.S. equity trades (thousands)
3,947.2 2,581.6 Nasdaq and Listed equity shares traded (billions)
89.9 52.1 OTC Bulletin Board and Pink Sheet shares traded
(billions) 755.5 264.8 Average revenue capture per U.S. equity
dollar value traded (bps) 1.2 1.5 -------- -------- YTD 2009 YTD
2008 -------- -------- Revenues ($ thousands) 859,151 624,582
Income from continuing operations, net of tax ($ thousands) 108,318
110,453 Loss from discontinued operations, net of tax ($ thousands)
(34,228) (12,244) Net income ($ thousands) 74,090 98,209 Diluted
EPS from continuing operations ($) 1.16 1.20 Diluted EPS from
discontinued operations ($) (0.37) (0.13) Average daily U.S. equity
dollar value traded ($ billions) 22.4 18.0 Average daily U.S.
equity trades (thousands) 3,994.6 2,066.0 Nasdaq and Listed equity
shares traded (billions) 269.3 120.6 OTC Bulletin Board and Pink
Sheet shares traded (billions) 1,462.5 636.0 Average revenue
capture per U.S. equity dollar value traded (bps) 1.4 1.4 Global
Markets During the third quarter of 2009, Global Markets generated
total revenues of $295.2 million, compared to $250.1 million in the
third quarter of 2008. In the third quarter of 2009, Global Markets
reported pre-tax income of $58.5 million, compared to pre-tax
income of $88.3 million in the third quarter of 2008. Global
Markets had pre-tax margins of 20% in the third quarter of 2009,
compared to pre-tax margins of 35% in the third quarter of 2008.
"In equities, third quarter revenues and trade volumes held up
despite signs of softness in overall U.S. equities volumes," said
Mr. Joyce. "Year-over-year, average daily shares traded at Knight
rose 165 percent - predominantly in Bulletin Boards and Pink Sheets
- while shares traded in the U.S. equities markets declined two
percent. Over the same period, Knight's net trading revenues
increased along with the costs associated with rebates and
execution quality as measured by SEC Rule 605 metrics as we worked
to retain market share. Despite the shrinking overall institutional
equity commission wallet and lower market volatility, commissions
from institutional clients rose." "In fixed income, we continued to
selectively acquire talent, expand product coverage and grow dollar
volumes. For example, the recently hired European credit sales and
trading team made a significant contribution to revenues. We will
continue to keep a close watch as credit spreads tighten. We're
also attentive to the fact the larger firms are rebuilding sales
and trading teams and redeploying their balance sheets in trading.
At the same time, in foreign exchange, we reached a new high in
average daily volumes since the acquisition due to refocused sales
efforts and new clients," Mr. Joyce added. Corporate In the third
quarter of 2009, the Corporate segment reported a pre-tax loss of
$8.8 million, compared to a pre-tax loss of $18.8 million in the
third quarter of 2008. The company's corporate investment in funds
formerly managed by Deephaven recognized a pre-tax gain of $1.1
million during the third quarter of 2009, compared to a pre-tax
loss of $8.5 million during the third quarter of 2008. Headcount
from continuing operations at September 30, 2009 was 1,098
full-time employees, as compared to 877 full-time employees at
September 30, 2008, reflecting personnel additions related to prior
acquisitions and new products throughout the year. "The upheaval on
Wall Street created an historic opportunity to acquire talent, win
clients, gain market share and target new opportunities," said Mr.
Joyce. "We're continually making investments in order to build and
protect market share. I believe Knight evolved faster in the market
turmoil of the past year, than we could have in normal market
conditions over the course of several years. During the third
quarter, we made progress in recent initiatives that include global
expansion, capital markets, options market-making and self
clearing." As of September 30, 2009, the company had $402.7 million
in cash and cash equivalents as well as a $16.8 million corporate
investment in funds formerly managed by Deephaven. The company had
$1.2 billion in stockholders' equity as of September 30, 2009,
equivalent to a book value of $12.55 per diluted share. The company
had a book value of $10.49 per diluted share as of September 30,
2008. During the third quarter of 2009, the company repurchased
180,000 shares for approximately $3.2 million under the company's
$1.0 billion stock repurchase program. To date, the company has
repurchased 67.3 million shares for $753.6 million. The company has
approximately $246.4 million available to repurchase shares under
the program. The company cautions that there are no assurances that
any further repurchases may actually occur. Discontinued Operations
In the third quarter of 2009, the company reported a pre-tax loss
from discontinued operations of $1.9 million, or $1.3 million, net
of tax, which relates to the wind-down of the Asset Management
segment. In the third quarter of 2008, the company reported a
pre-tax loss from discontinued operations of $7.7 million, or $4.8
million, net of tax. Deephaven was designated a discontinued
operation for financial reporting purposes as of the close of
business on March 31, 2009. 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
2009 earnings conference call for analysts, investors and the media
at 9:00 a.m. Eastern Time (ET) today, October 21, 2009. To access
Knight's earnings conference call, please dial 888-428-9506 for
domestic callers or 719-457-2731 for international callers. When
prompted, please enter passcode 2675465. A replay of the third
quarter 2009 earnings conference call will be available by dialing
888-203-1112 for domestic callers or 719-457-0820 for international
callers. When prompted, enter passcode 2675465. The conference call
will be webcast live at 9:00 a.m. ET for all investors and
interested parties on Knight's website. In addition, the company
will release its monthly volume statistics for September 2009 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 global capital markets firm that provides market
access and trade execution services across multiple asset classes
to buy- and sell-side firms. Knight's hybrid market model features
complementary electronic and voice trade execution services in
global equities and fixed income as well as foreign exchange,
futures and options. The firm is consistently ranked as the leading
source of off-exchange liquidity in U.S. equities. Knight also
provides capital markets services to corporate issuers. Knight is
headquartered in Jersey City, NJ with a growing global presence
across North America, Europe and the Asia-Pacific region. For more
information, please go to 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 related to the costs and expenses associated with
the Company's exit from the 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, 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, 2008, 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 months For the nine months ended
September 30, ended September 30, --------------------
------------------- 2009 2008 2009 2008 ---- ---- ---- ---- (In
thousands, except per share amounts) Revenues Commissions and fees
$177,025 $132,317 $503,532 $325,067 Net trading revenue 119,595
116,830 354,459 303,780 Interest, net (1,050) 1,518 (2,687) 7,209
Investment income (loss) and other, net 4,360 (9,890) 3,847
(11,474) ----- ------ ----- ------- Total revenues 299,930 240,775
859,151 624,582 ------- ------- ------- ------- Expenses Employee
compensation and benefits 139,334 94,269 384,135 234,514 Execution
and clearance fees 50,430 27,062 121,953 76,114 Payments for order
flow 17,737 10,112 57,813 27,338 Communications and data processing
15,781 11,551 43,850 32,250 Depreciation and amortization 8,777
7,198 25,223 18,673 Occupancy and equipment rentals 5,930 5,405
17,180 14,336 Business development 4,058 4,084 13,497 11,951
Professional fees 3,410 4,071 9,410 12,020 Interest expense 713
1,476 2,669 3,462 Writedown of assets and lease loss accrual
(benefit), net - 2,516 (9,996) 644 Other 4,003 3,478 11,739 6,474
----- ----- ------ ----- Total expenses 250,173 171,222 677,473
437,776 ------- ------- ------- ------- Income from continuing
operations before income taxes 49,757 69,553 181,678 186,806 Income
tax expense 19,278 28,452 73,360 76,353 ------ ------ ------ ------
Income from continuing operations, net of tax 30,479 41,101 108,318
110,453 Loss from discontinued operations, net of tax (1,253)
(4,806) (34,228) (12,244) ------ ------ ------- ------- Net income
$29,226 $36,295 $74,090 $98,209 ======= ======= ======= =======
Basic earnings per share from continuing operations $0.34 $0.47
$1.22 $1.24 ===== ===== ===== ===== Diluted earnings per share from
continuing operations $0.32 $0.46 $1.16 $1.20 ===== ===== =====
===== Basic earnings per share from discontinued operations $(0.01)
$(0.05) $(0.38) $(0.14) ====== ====== ====== ====== Diluted
earnings per share from discontinued operations $(0.01) $(0.05)
$(0.37) $(0.13) ====== ====== ====== ====== Basic earnings per
share $0.33 $0.41 $0.83 $1.10 ===== ===== ===== ===== Diluted
earnings per share $0.31 $0.40 $0.79 $1.07 ===== ===== ===== =====
Shares used in computation of basic earnings per share 89,278
87,612 88,919 89,207 ====== ====== ====== ====== Shares used in
computation of diluted earnings per share 93,958 90,076 93,532
92,069 ====== ====== ====== ====== KNIGHT CAPITAL GROUP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)
------------------ ----------------- September 30, 2009 December
31, 2008 ------------------ ----------------- (In thousands) ASSETS
Cash and cash equivalents $402,706 $416,957 Securities owned, held
at clearing brokers, at fair value 997,169 476,111 Receivable from
brokers and dealers 704,222 341,350 Investment in Deephaven funds
16,830 47,152 Fixed assets and leasehold improvements, at cost,
less accumulated depreciation and amortization 95,903 81,237
Strategic investments 62,812 83,697 Goodwill 265,530 232,197
Intangible assets, less accumulated amortization 79,966 90,477
Deferred compensation investments 45,012 41,637 Assets within
discontinued operations 16,594 84,868 Other assets 133,727 129,743
------- ------- Total assets $2,820,471 $2,025,426 ==========
========== LIABILITIES & EQUITY Liabilities Securities sold,
not yet purchased, at fair value $737,144 $385,003 Payable to
brokers and dealers 479,393 98,138 Accrued compensation expense
172,879 171,392 Accrued expenses and other liabilities 93,347
132,369 Liabilities within discontinued operations 17,515 63,988
Long term debt 140,000 140,000 ------- ------- Total liabilities
1,640,278 990,890 --------- ------- Equity Knight Capital Group,
Inc. stockholders' equity Class A common stock 1,585 1,544
Additional paid-in capital 736,185 648,716 Retained earnings
1,186,100 1,112,010 Treasury stock, at cost (744,303) (734,912)
-------- -------- Total Knight Capital Group, Inc. stockholders'
equity 1,179,567 1,027,358 Noncontrolling interests 626 7,178 ---
----- Total equity 1,180,193 1,034,536 --------- --------- Total
liabilities and equity $2,820,471 $2,025,426 ========== ==========
KNIGHT CAPITAL GROUP, INC. PRE-TAX EARNINGS BY BUSINESS SEGMENT*
Amounts in millions (Unaudited) For the three months For the nine
months ended September 30, ended September 30, --------------------
------------------- 2009 2008 2009 2008 ---- ---- ---- ---- Global
Markets Revenues $295.2 $250.1 $855.7 $637.9 Expenses 236.7 161.8
637.3 406.2 ----- ----- ----- ----- Pre-tax earnings 58.5 88.3
218.4 231.7 ---- ---- ----- ----- Corporate Revenues 4.7 (9.3) 3.5
(13.3) Expenses 13.5 9.4 40.2 31.6 ---- --- ---- ---- Pre-tax
earnings (8.8) (18.8) (36.7) (44.9) ---- ----- ----- -----
Consolidated Revenues 299.9 240.8 859.2 624.6 Expenses 250.2 171.2
677.5 437.8 ----- ----- ----- ----- Pre-tax earnings $49.8 $69.6
$181.7 $186.8 ===== ===== ====== ====== * Totals may not add due to
rounding. DATASOURCE: Knight Capital Group, Inc. CONTACT: Margaret
Wyrwas, 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/
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