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Knight Capital Group Inc.$20.44($.87)(4.08%)

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 Knight Capital Group Announces Consolidated Earnings of $0.30 per Diluted Share for the First Quarter 2010
   Wednesday, April 21, 2010 6:00:00 AM ET

Knight Capital Group, Inc. (NITE ) today reported consolidated earnings of $27.8 million, or $0.30 per diluted share. The company reported earnings from continuing operations of $28.1 million, or $0.30 per diluted share, and a loss from discontinued operations, net of tax, of $0.3 million.

For the first quarter of 2009, the company reported consolidated earnings of $9.4 million, or $0.10 per diluted share. The company reported earnings from continuing operations of $29.9 million, or $0.33 per diluted share, and a loss from discontinued operations, net of tax, of $20.5 million, or a $0.23 loss per diluted share.

Revenues from continuing operations for the first quarter of 2010 were $284.2 million, compared to $245.4 million for the first quarter of 2009.

"Knight recorded solid results in the first quarter of 2010 despite unfavorable market conditions," said Thomas M. Joyce, Chairman and Chief Executive Officer, Knight Capital Group. "Consolidated revenues increased 16 percent, compared to the first quarter of 2009, reflecting a rise in contributions from both the Equities and FICC segments. The gains defied a period of subdued activity among institutional and retail investors caused by recent economic and political uncertainty. During the quarter, Knight continued to invest in new initiatives to expand the offering, increase scale and maximize efficiencies. In addition, Knight completed a $375 million offering of convertible notes to repay short-term bank debt, fund new initiatives and enhance the capital structure."

"Continuing operations" includes the company’s Equities, FICC and Corporate operating segments. Equities includes all global equities market-making and institutional sales and trading, such as Knight Direct and Knight Link. FICC includes all global trade execution services in fixed income, foreign exchange and commodities, such as fixed income sales, trading and research, Knight BondPoint and Hotspot FX. Corporate includes strategic investments primarily in financial services-related ventures, corporate overhead expenses and all other expenses that are not attributable to the Equities and FICC segments. Amounts reported as "discontinued operations" primarily 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.



                                                                    Q1
                                                  Q1 2010          2009
                                                  -------        -----

    Revenues ($ thousands)                        284,239        245,354
    Income from continuing operations, net of
     tax ($ thousands)                             28,118         29,881
    Loss from discontinued operations, net of
     tax ($ thousands)                               (306)       (20,514)
    Net income ($ thousands)                       27,812          9,367
    Diluted EPS from continuing operations ($)       0.30           0.33
    Diluted EPS from discontinued operations ($)    (0.00)         (0.23)
    Average daily U.S. equity dollar value
     traded ($ billions)                             26.6           19.9
    Average daily U.S. equity trades (thousands)  3,696.3        3,842.3
    Nasdaq and Listed equity shares traded
     (billions)                                      71.7           79.3
    OTC Bulletin Board and Pink Sheet shares
     traded (billions)                              553.3          259.2
    Average revenue capture per U.S. equity
     dollar value traded (bps)                        1.1            1.5
    Average daily Knight Direct equity shares
     (millions)                                     111.2           52.3
    Average daily Hotspot FX notional dollar
     value traded ($ billions)                       32.6           17.0


Equities

During the first quarter of 2010, Equities generated total revenues of $219.4 million, compared to $198.2 million in the first quarter of 2009. In the first quarter of 2010, Equities reported pre-tax income of $56.6 million, compared to pre-tax income of $59.0 million in the first quarter of 2009. Equities had pre-tax margins of 26% in the first quarter of 2010, compared to pre-tax margins of 30% in the first quarter of 2009.

"In Equities, during the first quarter, Knight grew revenues amid a 20 percent decline in broad U.S. equity market volumes year-over-year and a decrease in volatility with the VIX dipping below 17 during intraday trading in mid-March," said Mr. Joyce. "During the first quarter, Knight increased industry-leading market share among U.S. broker-dealers in the face of heightened competition and electronic trading products Knight Link, Knight Direct and Knight Match grew trade volumes. We also experienced a modest increase in market share among U.S. institutions and continued to add clients in Europe and the Asia-Pacific region. In aggregate, Knight increased average daily volumes from the first quarter 2009 and maintained the number one AutEx rankings in Listed, NASDAQ, Bulletin Boards and ETFs among securities firms. Algorithmic principal trading models performed well despite the low volatility."

FICC

During the first quarter of 2010, FICC generated total revenues of $67.8 million, compared to $52.0 million in the first quarter of 2009. In the first quarter of 2010, FICC reported pre-tax income of $8.1 million, compared to pre-tax income of $10.2 million in the first quarter of 2009. FICC had pre-tax margins of 12% in the first quarter of 2010, compared to pre-tax margins of 20% in the first quarter of 2009.

"In FICC, during the first quarter, Knight continued the rapid expansion of fixed income and foreign exchange," said Mr. Joyce. "Knight’s fixed income business grew revenues even as credit spreads tightened, offsetting a rise in broad market volumes of Corporate bonds. The performance is attributable to the experienced team, product coverage and in-depth research. The pending acquisition of Urban Financial will create an integrated origination-securitization-trading model for Ginnie Mae HMBS, a reverse-mortgage MBS guaranteed by the U.S. government. During the quarter, FICC pre-tax margins were impacted by narrowing credit spreads as well as expenses from hiring and retention activities. In foreign exchange, Hotspot FX turned in a record quarter in terms of average daily notional value traded, revenues and pre-tax income as a result of market conditions and continued gains in market share."

Corporate

In the first quarter of 2010, the Corporate segment reported a pre-tax loss of $18.7 million, compared to a pre-tax loss of $18.1 million in the first quarter of 2009.

The company’s corporate investment in funds formerly managed by Deephaven recognized a pre-tax gain of $0.3 million during the first quarter of 2010, compared to a pre-tax loss of $3.9 million during the first quarter of 2009.

Headcount from continuing operations at March 31, 2010 was 1,150 full-time employees, as compared to 966 full-time employees at March 31, 2009, resulting from our international expansion and expanded product offerings.

"During the first quarter of 2010, Knight continued to perform well due to diversification across clients, products and services, and asset classes," said Mr. Joyce. "As a firm, we’ve demonstrated an ability to compete in any environment against an array of competitors. During the quarter, Knight also made further progress in important new initiatives including self clearing and options market making."

As of March 31, 2010, the company had $513.2 million in cash and cash equivalents. The company had $1.25 billion in stockholders’ equity as of March 31, 2010, equivalent to a book value of $13.41 per diluted share. The company had a book value of $11.50 per diluted share as of March 31, 2009.

In March 2010, the company issued $375 million in Cash Convertible Senior Subordinated Notes, which mature in five years and carry a 3.5% coupon.

During the first quarter of 2010, the company repurchased 502,000 shares for approximately $7.7 million under the company’s $1.0 billion stock repurchase program. To date, the company has repurchased 68.8 million shares for $778.1 million. The company has approximately $221.9 million of availability 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 first quarter of 2010, the company reported a loss from discontinued operations of $0.3 million, net of tax, compared to a loss of $20.5 million, net of tax in the first quarter of 2009. These losses primarily relate to the wind-down of the Asset Management segment which 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 first quarter 2010 earnings conference call for analysts, investors and the media at 9:00 a.m. Eastern Time (ET) today, April 21, 2010. To access Knight’s earnings conference call, please dial 800-967-7138 for domestic callers or 719-457-1529 for international callers. When prompted, please enter passcode 6426154. A replay of the first quarter 2010 earnings conference call will be available by dialing 888-203-1112 for domestic callers or 719-457-0820 for international callers. When prompted, please enter passcode 6426154. 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 March 2010 on its website at http://www.knight.com /ourfirm/volumestats.asp before the start of trading today.

About Knight

Knight Capital Group, Inc. (NITE ) is a global financial services 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 the leading source of liquidity in U.S. equities by share volume. Knight also offers 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 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 changes in market structure, legislative or regulatory rule changes, the costs, integration, performance and operation of businesses recently acquired or developed organically, 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, 2009, 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, 2009, 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
                                                        ended
                                                     March 31,
                                                     ---------
                                                  2010                 2009
                                                  ----                 ----
                                                (In thousands, except
                                                 per share amounts)

    Revenues
      Commissions and fees                    $159,513             $150,710
      Trading revenue                          124,964               99,460
      Interest, net                                624                 (597)
      Investment loss and other, net              (862)              (4,219)
                                                  ----               ------
        Total revenues                         284,239              245,354
                                               -------              -------

    Expenses
      Employee compensation and benefits       138,350              109,187
      Execution and clearance fees              42,462               29,091
      Communications and data processing        16,058               13,788
      Payments for order flow                   11,025               17,027
      Depreciation and amortization              9,235                8,187
      Occupancy and equipment rentals            6,341                5,361
      Professional fees                          4,753                2,902
      Business development                       4,228                4,346
      Interest expense                           2,474                  981
      Writedown of assets and lease loss
       accrual                                       -                  699
      Other                                      3,355                2,756
                                                 -----                -----
        Total expenses                         238,281              194,325
                                               -------              -------

    Income from continuing operations before
     income taxes                               45,958               51,029
    Income tax expense                          17,840               21,148
                                                ------               ------
    Income from continuing operations, net of
     tax                                        28,118               29,881
    Loss from discontinued operations, net of
     tax                                          (306)             (20,514)
                                                  ----              -------

    Net income                                 $27,812               $9,367
                                               =======               ======

    Basic earnings per share from continuing
     operations                                  $0.31                $0.34
                                                 =====                =====

    Diluted earnings per share from
     continuing operations                       $0.30                $0.33
                                                 =====                =====

    Basic earnings per share from
     discontinued operations                    $(0.00)              $(0.24)
                                                ======               ======

    Diluted earnings per share from
     discontinued operations                    $(0.00)              $(0.23)
                                                ======               ======

    Basic earnings per share                     $0.31                $0.11
                                                 =====                =====

    Diluted earnings per share                   $0.30                $0.10
                                                 =====                =====

    Shares used in computation of basic
     earnings per share                         89,463               86,911
                                                ======               ======

    Shares used in computation of diluted
     earnings per share                         93,478               91,309
                                                ======               ======


    KNIGHT CAPITAL GROUP, INC.
    CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
    (Unaudited)



                                         March 31,            December 31,
                                            2010                   2009
                                        ----------           -------------
                                                   (In thousands)
    ASSETS
      Cash and cash equivalents            $513,161                $427,106
      Financial instruments owned, at
       fair value                         1,052,858                 926,589
      Securities borrowed                   943,800                 394,417
      Receivable from brokers and
       dealers                              491,962                 500,143
      Fixed assets and leasehold
       improvements, at cost, less
       accumulated depreciation and
       amortization                         101,539                  98,696
      Investments                            78,049                 110,120
      Goodwill                              266,530                 265,530
      Intangible assets, less
       accumulated amortization              76,168                  77,812
      Other assets                          195,002                 213,611
                                            -------                 -------

           Total assets                  $3,719,069              $3,014,024
                                         ==========              ==========

    LIABILITIES & EQUITY
    Liabilities
      Financial instruments sold, not
       yet purchased, at fair value        $965,695                $639,259
      Securities loaned                     690,208                 550,226
      Payable to brokers and dealers        288,987                 155,148
      Accrued compensation expense           74,599                 205,282
      Accrued expenses and other
       liabilities                          143,735                 109,987
      Credit facility                             -                 140,000
      Long-term debt                        301,736                       -
                                            -------                     ---

           Total liabilities              2,464,960               1,799,902
                                          ---------               ---------

    Equity
    Knight Capital Group, Inc.
     stockholders’ equity
      Class A common stock                    1,613                   1,586
      Additional paid-in capital            779,115                 746,778
      Retained earnings                   1,256,924               1,229,112
      Treasury stock, at cost              (779,825)               (763,974)
      Cumulative translation
       adjustment                            (4,338)                      -
                                             ------                     ---
     Total Knight Capital Group,
      Inc. stockholders’ equity           1,253,489               1,213,502
     Noncontrolling interests                   620                     620
                                                ---                     ---
           Total equity                   1,254,109               1,214,122
                                          ---------               ---------

           Total liabilities and equity  $3,719,069              $3,014,024
                                         ==========              ==========


    KNIGHT CAPITAL GROUP, INC.
    PRE-TAX EARNINGS BY BUSINESS SEGMENT*
    Amounts in millions
    (Unaudited)

                                        For the three months
                                           ended March 31,
                                        --------------------
                                         2010              2009
                                         ----              ----
    Equities
    Revenues                           $219.4            $198.2
    Expenses                            162.8             139.2
                                        -----             -----
    Pre-tax earnings                     56.6              59.0
                                         ----              ----

    FICC
    Revenues                             67.8              52.0
    Expenses                             59.7              41.9
                                         ----
    Pre-tax earnings                      8.1              10.2
                                          ---              ----

    Corporate
    Revenues                             (2.9)             (4.9)
    Expenses                             15.8              13.2
                                         ----              ----
    Pre-tax earnings                    (18.7)            (18.1)
                                        -----             -----

    Consolidated
    Revenues                            284.2             245.4
    Expenses                            238.3             194.3
    Pre-tax earnings                    $46.0             $51.0
                                        =====             =====



    * Totals may not add due to rounding.


SOURCE Knight Capital Group, Inc.



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