JERSEY CITY, N.J., Oct. 30, 2014 /PRNewswire/ -- KCG
Holdings, Inc. (NYSE: KCG) today reported a GAAP net loss of
$9.6 million, or $0.09 per share, for the third quarter of
2014.
The third quarter 2014 GAAP net loss from continuing operations
was $9.4 million, or a loss of
$0.09 per share. The third quarter
pre-tax loss from continuing operations was $15.2 million which includes a $15.1 million net gain related to the Company's
strategic investment in tradeMONSTER Group, Inc. ("tradeMONSTER"),
which combined with OptionsHouse LLC ("OptionsHouse"), $10.5 million in compensation related to a
reduction in workforce and other employee separations and a
$0.3 million lease loss accrual.
Excluding these items, on a non-GAAP basis, third quarter 2014 loss
from continuing operations before income taxes was $19.5 million. A reconciliation of GAAP to
non-GAAP results is included in Exhibit 4.
KCG was formed July 1, 2013 as a
result of the merger between Knight Capital Group, Inc. and GETCO
Holding Company, LLC. Financial results for the periods prior to
the third quarter of 2013 contained herein solely represent the
results of GETCO Holding Company, LLC as the accounting
acquirer.
Select Financial
Results
|
($ in thousands,
except EPS)
|
From Continuing
Operations
|
3Q14
|
|
2Q14
|
|
3Q13
|
Revenues
|
272,302
|
|
314,133
|
|
469,338
|
Trading
revenues, net
|
150,865
|
|
206,780
|
|
230,471
|
Commissions and fees
|
102,663
|
|
104,776
|
|
109,079
|
Gain on
investment in Knight Capital Group, Inc.
|
−
|
|
−
|
|
127,972
|
GAAP pre-tax (loss)
income
|
(15,235)
|
|
14,507
|
|
121,373
|
GAAP EPS
|
(0.09)
|
|
0.08
|
|
1.99
|
Non-GAAP pre-tax
(loss) income*
|
(19,518)
|
|
21,512
|
|
19,047
|
* See Exhibit 4
for a reconciliation of GAAP to non-GAAP results.
|
Third Quarter Highlights
- Grew market share of consolidated U.S. equity share volume
executed by KCG market making from the second quarter
- Increased algorithmic trading volumes and net revenues from
institutional clients for the second consecutive quarter
- Announced the sale of KCG's futures commission merchant
(FCM)
- Repurchased 3.6 million shares for $42.1
million
Daniel Coleman, Chief Executive
Officer of KCG, said, "KCG's financial results for the third
quarter of 2014 were impacted by the subdued market environment in
U.S. equities. In particular, the muted retail trading activity and
single-digit realized volatility within a heightened competitive
environment cut into Market Making segment results. Consecutive
quarters in a market cycle trough reaffirm the importance of
reducing the cost structure while diversifying in select asset
classes in ways that are scalable and non-capital intensive. During
the quarter, KCG continued to carry out our strategic plan, pursue
opportunities to unlock additional value and return capital to
stockholders."
In the first quarter of 2014, the Company began to charge the
Market Making and Global Execution Services segments for the cost
of aggregate debt interest. The interest amount charged to each of
the segments is based on capital limits and requirements.
Historically, debt interest was included within the Corporate and
Other segment. This change in the measurement of segment
profitability, which has no impact to the consolidated results, is
reported prospectively and, therefore, is not reflected in the
financial results for any period prior to January 1, 2014.
Market Making
The Market Making segment encompasses
direct-to-client and non-client, exchange-based market making
across multiple asset classes and is an active participant in all
major cash, options and futures markets in the U.S., Europe and Asia. During the third quarter of 2014, the
segment generated total revenues of $166.6
million and a pre-tax loss of $8.0
million, which included a debt interest charge of
$6.1 million. The results also
included compensation related to a reduction in workforce and other
employee separations of $2.8 million.
Excluding this item, Market Making generated a pre-tax loss of
$5.2 million in the third
quarter.
In the second quarter of 2014, the segment generated total
revenues of $218.4 million and
pre-tax income of $36.0 million,
which included a debt interest charge of $5.9 million. In the third quarter of 2013, the
segment reported total revenues of $240.1
million and pre-tax income of $47.9
million.
During the third quarter of 2014, results from U.S. equity
market making were adversely affected by the decline in retail
trading activity, heightened competition for retail order flow and
challenging market conditions late in the quarter. According to SEC
Rule 605 data, average daily U.S. equity share volume handled by
the leading market makers was 11 percent below the quarterly
average over the past five years while price improvement on retail
orders rose approximately 7.5 percent market-wide from the second
quarter of 2014 and 27.5 percent from the third quarter of 2013.
Results from non-U.S. equity market making were largely static
quarter over quarter amid mixed market conditions in European and
Asian equities, fixed income, currencies and commodities.
Mr. Coleman commented, "A number of factors coalesced to
pressure revenues and revenue capture in U.S. equities during the
quarter. The seasonally slow July and August were followed by an
active yet challenging September. The elevated levels of price
improvement put added pressure on revenue capture. Nonetheless, we
grew market share of consolidated U.S. equity share volume during
the quarter and made important progress in certain other strategic
asset classes."
Select Trade
Statistics: U.S. Equity Market Making
|
|
3Q14
|
|
2Q14
|
|
3Q13
|
Average daily dollar
volume traded ($ millions)
|
24,726
|
|
25,143
|
|
25,365
|
Average daily trades
(thousands)
|
3,326
|
|
3,620
|
|
3,809
|
Average daily shares
traded (millions)
|
5,787
|
|
10,820
|
|
4,148
|
NYSE and
NASDAQ shares traded
|
727
|
|
758
|
|
805
|
OTC
Bulletin Board and OTC Market shares traded
|
5,060
|
|
10,061
|
|
3,343
|
Average revenue
capture per U.S. equity dollar value traded (bps)
|
0.75
|
|
1.07
|
|
1.01
|
Global Execution Services
The Global Execution
Services segment comprises agency execution services and trading
venues. During the third quarter of 2014, the segment generated
total revenues of $79.2 million and a
pre-tax loss of $1.7 million, which
included a debt interest charge of $1.6
million. The results also included compensation related to a
reduction in workforce and other employee separations of
$3.6 million. Excluding this item,
Global Execution Services generated pre-tax income of $1.9 million in the third quarter.
In the second quarter of 2014, the segment generated total
revenues of $85.9 million and pre-tax
income of $0.7 million, which
included a debt interest charge of $1.8
million. The results also included compensation related to a
reduction in workforce of $1.9
million. Excluding this item, Global Execution Services
generated pre-tax income of $2.6
million in the second quarter of 2014. In the third
quarter of 2013, the segment reported total revenues of
$91.4 million and a pre-tax loss of
$16.4 million, which included
$15.1 million in compensation charges
related to a reduction in workforce. Excluding this item, Global
Execution Services generated a pre-tax loss of $1.2 million in the third quarter of 2013.
During the third quarter of 2014, results were impacted by the
quarter over quarter declines in market volumes of U.S. and
European equities, offset in part by additional progress in
algorithmic trading as well as a rise in market volumes of foreign
exchange and ETFs. In algorithmic trading, the contributions from
institutional clients grew for the second consecutive quarter to 24
percent of U.S. equity share volume and 63 percent of net revenues
for the unit. KCG Hotspot benefitted from a 15 percent quarter over
quarter rise in overall notional foreign exchange dollar volume
among reporting venues. KCG's U.S. ETF trading team continued to
build momentum amid an approximate 5 percent quarter over quarter
increase in overall ETF share volume.
Mr. Coleman commented, "We have made steady progress to date in
algorithmic trading. In the first half of the year, we introduced a
new algorithm employing a market maker's approach and made several,
targeted new hires. As a result of all the efforts, we've onboarded
50 new institutional clients through the third quarter. We continue
to beta test new intuitive algorithms that leverage KCG's
intellectual capital and technology to add to the product
portfolio."
As KCG continues to evaluate how best to realize untapped value
throughout the company, KCG has begun to explore strategic options
for KCG Hotspot, with the goal of executing on opportunities if it
creates additional value for our stockholders, clients and
employees. KCG has not made a decision to enter into any
transaction at this time, and there can be no assurance that KCG
will enter into such a transaction in the future.
Select Trade
Statistics: Agency Execution and Trading Venues
|
|
3Q14
|
|
2Q14
|
|
3Q13
|
Average daily KCG
algorithmic trading and order routing
U.S. equities shares
traded (millions)
|
248.2
|
|
265.3
|
|
269.7
|
Average daily KCG
Hotspot notional foreign exchange
dollar value traded
($ billions)
|
30.3
|
|
26.2
|
|
28.4
|
Average daily KCG
BondPoint fixed income par value
traded ($
millions)
|
126.0
|
|
133.7
|
|
129.1
|
KCG electronic
execution average daily U.S. equities share volume includes U.S.
exchange listed shares traded by algorithmic trading and order
routing.
|
Corporate and Other
The Corporate and Other segment
includes strategic investments and corporate overhead expenses.
During the third quarter of 2014, the segment recorded total
revenues of $26.5 million and a
pre-tax loss of $5.5 million.
Included in the results was a net gain of $15.1 million related to KCG's investment in
tradeMONSTER, in conjunction with tradeMONSTER's combination with
OptionsHouse in the third quarter, compensation related to a
reduction in workforce and other employee separations of
$4.2 million and a lease loss accrual
of $0.3 million. Excluding these
items, the Corporate and Other segment's pre-tax loss for the third
quarter was $16.2 million.
In the second quarter of 2014, the segment recorded total
revenues of $9.8 million and a
pre-tax loss of $22.2 million.
Included in the results was a $2.0
million writedown of capitalized debt costs related to the
principal repayment of debt, $0.8
million in compensation related to a reduction in workforce,
and a lease loss accrual of $1.5
million. Excluding these items, the Corporate and Other
segment's pre-tax loss for the second quarter was $17.9 million. In the third quarter of
2013, the segment recorded total revenues of $137.9 million and pre-tax income of $89.9 million. Included in the results was
revenue of $128.0 million resulting
from the gain on investment in Knight Capital Group, Inc. as well
as professional and other fees related to the Mergers and
August 1st technology
issue of $7.3 million and lease loss
accruals of $0.8 million.
Excluding these items, the Corporate and Other segment's
pre-tax loss for the third quarter of 2013 was $30.0 million.
Financial Condition
As of September 30, 2014, KCG had $540.5 million in cash and cash equivalents.
Total outstanding debt was $422.3
million, of which $117.3
million is due in March 2015.
The Company had $1.5 billion in
stockholders' equity equivalent to a book value of $12.68 per share and tangible book value of
$11.05 per share based on total
shares outstanding of 117.2 million, including restricted stock
units.
KCG's headcount at September 30,
2014 was 1,153 full-time employees as compared to 1,207
full-time employees at June 30, 2014.
Approximately 45 full-time employees will be affected by the
announced sale of KCG's futures commission merchant (FCM), which is
expected to close in the fourth quarter of 2014.
During the third quarter of 2014, KCG repurchased 3.6 million
shares for approximately $42.1
million under the Company's initial $150.0 million stock repurchase program. As of
September 30, 2014, KCG had
approximately $55.0 million of
remaining capacity available to repurchase additional shares under
the program. The Company cautions that there are no assurances that
any further repurchases may actually occur.
Conference Call
KCG will hold a conference call to
discuss third quarter 2014 financial results starting at
9:00 a.m. Eastern Time today,
October 30, 2014. To access the call,
dial 888-263-2736 (domestic) or 913-905-3216 (international) and
enter passcode 9791821. In addition, the call will be webcast at
http://www.media-server.com/m/acs/41fae90442d481b1589c479d3013dbef.
Following the conclusion of the call, a replay will be available by
dialing 888-203-1112 in the U.S. or selecting a number based
on location outside the U.S. from a list posted at
https://replaynumbers.conferencinghub.com/index.aspx?confid=9791821&passcode=9791821 and
entering passcode 9791821.
Additional information for investors, including a presentation
of the third quarter financial results, can be found at
http://investors.kcg.com.
Non-GAAP Financial Presentations
KCG believes that
certain non-GAAP financial presentations, when taken into
consideration with the corresponding GAAP financial presentations,
are important in understanding operating results. Selected
financial information is included in the non-GAAP financial
presentations for the three months ended September 30, 2014, June
30, 2014 and September 30,
2013 and for the nine months ended September 30, 2014 and 2013. KCG believes the
presentations provide a meaningful summary of results of operations
for each of the three and nine month periods. Reconciliations of
GAAP to non-GAAP results are included in the schedules in Exhibit
4.
About KCG
KCG is a leading independent securities firm
offering investors and clients a range of services designed to
address trading needs across asset classes, product types and time
zones. The firm combines advanced technology with exceptional
client service across market making, agency execution and venues.
KCG has multiple access points to trade global equities, fixed
income, currencies and commodities via voice or automated
execution. www.kcg.com
Certain statements contained herein may
constitute "forward-looking statements" within the meaning of the
safe harbor provisions of the U.S. Private Securities Litigation
Reform Act of 1995. Forward-looking statements are typically
identified by words such as "believe," "expect," "anticipate,"
"intend," "target," "estimate," "continue," "positions,"
"prospects" or "potential," by future conditional verbs such as
"will," "would," "should," "could" or "may," or by variations of
such words or by similar expressions. These "forward-looking
statements" are not historical facts and are based on current
expectations, estimates and projections about KCG's industry,
management's beliefs and certain assumptions made by management,
many of which, by their nature, are inherently uncertain and beyond
our control. Any forward-looking statement contained herein speaks
only as of the date on which it is made. 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: (i) the
strategic business combination (the "Mergers") of Knight Capital
Group, Inc. ("Knight") and GETCO Holding Company, LLC ("GETCO"),
including, among other things, (a) difficulties and delays in
integrating the Knight and GETCO businesses or fully realizing cost
savings and other benefits, (b) the inability to sustain revenue
and earnings growth, and (c) customer and client reactions to the
Mergers; (ii) the August 1, 2012 technology issue that resulted in
Knight's broker-dealer subsidiary sending numerous erroneous orders
in NYSE-listed and NYSE Arca securities into the market and the
impact to Knight's business as well as actions taken in response
thereto and consequences thereof; (iii) the sale of KCG's reverse
mortgage origination and securitization business and the departure
of the managers of KCG's listed derivatives group; (iv) changes in
market structure, legislative, regulatory or financial reporting
rules, including the increased focus by regulators, the New York
Attorney General, Congress and the media on market structure
issues, and in particular, the scrutiny of high frequency trading,
alternative trading systems, market fragmentation, colocation,
access to market data feeds, and remuneration arrangements such as
payment for order flow and exchange fee structures; (v) past or
future changes to organizational structure and management; (vi)
KCG's ability to develop competitive new products and services in a
timely manner and the acceptance of such products and services by
KCG's customers and potential customers; (vii) KCG's ability to
keep up with technological changes; (viii) KCG's ability to
effectively identify and manage market risk, operational and
technology risk, legal risk, liquidity risk, reputational risk,
counterparty and credit risk, international risk, regulatory risk,
and compliance risk; (ix) the cost and other effects of material
contingencies, including litigation contingencies, and any adverse
judicial, administrative or arbitral rulings or proceedings; and
(x) the effects of increased competition and KCG's ability to
maintain and expand market share. The list above is not exhaustive.
Readers should carefully review the risks and uncertainties
disclosed in KCG's reports with the SEC, including, without
limitation, those detailed under "Risk Factors" in KCG's Annual
Report on Form 10-K for the year-ended December 31, 2013, under
"Certain Factors Affecting Results of Operations" in KCG's
Quarterly Report on Form 10-Q for the period ended June 30, 2014,
and other reports or documents KCG files with, or furnishes to, the
SEC from time to time.
KCG HOLDINGS,
INC.
|
|
|
|
|
|
|
|
Exhibit
1
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
For the three
months ended
|
|
|
|
|
September 30,
2014
|
|
|
June 30,
2014
|
|
|
September 30,
2013
|
|
|
|
(In thousands,
except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
Trading revenues,
net
|
$
|
150,865
|
|
$
|
206,780
|
|
$
|
230,471
|
|
Commissions and
fees
|
|
102,663
|
|
|
104,776
|
|
|
109,079
|
|
Interest,
net
|
|
139
|
|
|
(289)
|
|
|
(177)
|
|
Investment income and
other, net
|
|
18,635
|
|
|
2,866
|
|
|
129,965
|
|
|
Total
revenues
|
|
272,302
|
|
|
314,133
|
|
|
469,338
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
Employee compensation
and benefits
|
|
95,307
|
|
|
103,430
|
|
|
129,631
|
|
Execution and
clearance fees
|
|
74,058
|
|
|
73,242
|
|
|
81,023
|
|
Communications and
data processing
|
|
38,576
|
|
|
38,279
|
|
|
44,046
|
|
Depreciation and
amortization
|
|
20,298
|
|
|
19,823
|
|
|
20,091
|
|
Payments for order
flow
|
|
15,377
|
|
|
18,076
|
|
|
16,431
|
|
Debt interest
expense
|
|
7,714
|
|
|
7,497
|
|
|
19,350
|
|
Occupancy and
equipment rentals
|
|
7,672
|
|
|
8,235
|
|
|
8,898
|
|
Collateralized
financing interest
|
|
7,330
|
|
|
6,395
|
|
|
4,520
|
|
Professional
fees
|
|
7,161
|
|
|
7,337
|
|
|
9,077
|
|
Business
development
|
|
3,163
|
|
|
2,609
|
|
|
2,644
|
|
Writedown of assets
and lease loss accrual, net
|
|
301
|
|
|
1,941
|
|
|
936
|
|
Writedown of
capitalized debt costs
|
|
-
|
|
|
1,995
|
|
|
-
|
|
Other
|
|
10,580
|
|
|
10,767
|
|
|
11,318
|
|
|
Total
expenses
|
|
287,537
|
|
|
299,626
|
|
|
347,965
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) Income from
continuing operations before income taxes
|
|
(15,235)
|
|
|
14,507
|
|
|
121,373
|
Income tax (benefit)
expense
|
|
(5,796)
|
|
|
5,520
|
|
|
(107,190)
|
(Loss) Income from
continuing operations, net of tax
|
|
(9,439)
|
|
|
8,987
|
|
|
228,563
|
Loss from
discontinued operations, net of tax
|
|
(177)
|
|
|
(67)
|
|
|
(784)
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)
Income
|
$
|
(9,616)
|
|
$
|
8,920
|
|
$
|
227,779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) earnings
per share from continuing operations
|
$
|
(0.09)
|
|
$
|
0.08
|
|
$
|
2.00
|
|
|
|
|
|
|
|
|
|
|
|
Diluted (loss)
earnings per share from continuing operations
|
$
|
(0.09)
|
|
$
|
0.08
|
|
$
|
1.99
|
|
|
|
|
|
|
|
|
|
|
|
Basic loss per share
from discontinued operations
|
$
|
-
|
|
$
|
-
|
|
$
|
(0.01)
|
|
|
|
|
|
|
|
|
|
|
|
Diluted loss per
share from discontinued operations
|
$
|
-
|
|
$
|
-
|
|
$
|
(0.01)
|
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) earnings
per share
|
$
|
(0.09)
|
|
$
|
0.08
|
|
$
|
2.00
|
|
|
|
|
|
|
|
|
|
|
|
Diluted (loss)
earnings per share
|
$
|
(0.09)
|
|
$
|
0.08
|
|
$
|
1.98
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in
computation of basic (loss) earnings per share
|
|
110,376
|
|
|
114,859
|
|
|
114,113
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in
computation of diluted (loss) earnings per share
|
|
110,376
|
|
|
117,601
|
|
|
114,773
|
|
|
|
|
|
|
|
|
|
|
|
KCG HOLDINGS,
INC.
|
|
|
|
Exhibit
1
|
CONSOLIDATED
STATEMENTS OF OPERATIONS(1)
|
|
|
|
(Continued)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
For the nine
months ended
|
|
|
|
|
September 30,
2014
|
|
|
September 30,
2013
|
|
|
|
(In thousands,
except per share amounts)
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
Trading revenues,
net
|
$
|
615,942
|
|
$
|
415,495
|
|
Commissions and
fees
|
|
319,696
|
|
|
164,391
|
|
Interest,
net
|
|
798
|
|
|
(970)
|
|
Investment income and
other, net
|
|
33,656
|
|
|
125,046
|
|
|
Total
revenues
|
|
970,092
|
|
|
703,962
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
Employee compensation
and benefits
|
|
321,056
|
|
|
236,983
|
|
Execution and
clearance fees
|
|
222,801
|
|
|
167,931
|
|
Communications and
data processing
|
|
113,651
|
|
|
86,040
|
|
Depreciation and
amortization
|
|
60,224
|
|
|
36,004
|
|
Payments for order
flow
|
|
55,485
|
|
|
17,468
|
|
Debt interest
expense
|
|
24,735
|
|
|
21,995
|
|
Occupancy and
equipment rentals
|
|
24,192
|
|
|
15,454
|
|
Collateralized
financing interest
|
|
19,887
|
|
|
4,520
|
|
Professional
fees
|
|
19,900
|
|
|
38,928
|
|
Business
development
|
|
7,455
|
|
|
2,686
|
|
Writedown of assets
and lease loss accrual, net
|
|
2,508
|
|
|
4,248
|
|
Writedown of
capitalized debt costs
|
|
9,552
|
|
|
-
|
|
Other
|
|
29,990
|
|
|
30,028
|
|
|
Total
expenses
|
|
911,436
|
|
|
662,285
|
|
|
|
|
|
|
|
|
Income from
continuing operations before income taxes
|
|
58,656
|
|
|
41,677
|
Income tax expense
(benefit)
|
|
22,191
|
|
|
(101,901)
|
Income from
continuing operations, net of tax
|
|
36,465
|
|
|
143,578
|
Loss from
discontinued operations, net of tax
|
|
(1,497)
|
|
|
(784)
|
|
|
|
|
|
|
|
|
Net
income
|
$
|
34,968
|
|
$
|
142,794
|
|
|
|
|
|
|
|
|
Net loss allocated to
preferred and participating units
|
$
|
-
|
|
$
|
(21,535)
|
|
|
|
|
|
|
|
|
Net income
attributable to common shareholders
|
$
|
34,968
|
|
$
|
164,329
|
|
|
|
|
|
|
|
|
Basic earnings per
share from continuing operations
|
$
|
0.32
|
|
$
|
2.41
|
|
|
|
|
|
|
|
|
Diluted earnings per
share from continuing operations
|
$
|
0.31
|
|
$
|
2.40
|
|
|
|
|
|
|
|
|
Basic loss per share
from discontinued operations
|
$
|
(0.01)
|
|
$
|
(0.01)
|
|
|
|
|
|
|
|
|
Diluted loss per
share from discontinued operations
|
$
|
(0.01)
|
|
$
|
(0.01)
|
|
|
|
|
|
|
|
|
Basic earnings per
share
|
$
|
0.31
|
|
$
|
2.39
|
|
|
|
|
|
|
|
|
Diluted earnings per
share
|
$
|
0.30
|
|
$
|
2.39
|
|
|
|
|
|
|
|
|
Shares used in
computation of basic earnings (loss) per share
|
|
113,680
|
|
|
68,632
|
|
|
|
|
|
|
|
|
Shares used in
computation of diluted earnings (loss) per share
|
|
117,127
|
|
|
68,855
|
|
|
|
|
|
|
|
|
(1) Nine
months ended September 30, 2013 includes three months of results of
KCG Holdings, Inc. plus six months of
|
GETCO Holding Company,
LLC.
|
|
|
|
KCG HOLDINGS,
INC.
|
|
Exhibit
2
|
CONSOLIDATED
STATEMENTS OF FINANCIAL CONDITION
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2014
|
|
|
December 31,
2013
|
|
|
|
|
|
(In
thousands)
|
ASSETS
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
540,457
|
|
$
|
674,281
|
|
Cash and cash
equivalents segregated under federal and other
regulations
|
|
|
15,805
|
|
|
183,082
|
|
Financial instruments
owned, at fair value:
|
|
|
|
|
|
|
|
|
Equities
|
|
|
2,595,507
|
|
|
2,298,785
|
|
|
Listed
options
|
|
|
130,931
|
|
|
339,798
|
|
|
Debt
securities
|
|
|
123,151
|
|
|
83,256
|
|
Total financial
instruments owned, at fair value
|
|
|
2,849,589
|
|
|
2,721,839
|
|
Collateralized
agreements:
|
|
|
|
|
|
|
|
|
Securities
borrowed
|
|
|
1,711,214
|
|
|
1,357,387
|
|
Receivable from
brokers, dealers and clearing organizations
|
|
|
969,018
|
|
|
1,257,251
|
|
Fixed assets and
leasehold improvements,
|
|
|
|
|
|
|
less
accumulated depreciation and amortization
|
|
138,892
|
|
|
146,668
|
|
Investments
|
|
|
101,746
|
|
|
125,413
|
|
Goodwill and
Intangible assets, less accumulated amortization
|
|
|
190,601
|
|
|
208,806
|
|
Deferred tax asset,
net
|
|
|
175,215
|
|
|
175,639
|
|
Assets held for
sale
|
|
|
686,639
|
|
|
-
|
|
Other
assets
|
|
|
136,070
|
|
|
146,638
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
7,515,246
|
|
$
|
6,997,004
|
|
|
|
|
|
|
|
|
|
LIABILITIES &
EQUITY
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Financial instruments
sold, not yet purchased, at fair value:
|
|
|
|
|
|
|
|
|
Equities
|
|
$
|
2,057,849
|
|
$
|
1,851,006
|
|
|
Listed
options
|
|
|
117,829
|
|
|
252,282
|
|
|
Debt
securities
|
|
|
186,211
|
|
|
57,198
|
|
|
Other financial
instruments
|
|
|
636
|
|
|
5,014
|
|
Total financial
instruments sold, not yet purchased, at fair value
|
|
|
2,362,525
|
|
|
2,165,500
|
|
Collateralized financings:
|
|
|
|
|
|
|
|
|
Securities
loaned
|
|
|
778,000
|
|
|
733,230
|
|
|
Financial instruments
sold under agreements to repurchase
|
|
|
867,858
|
|
|
640,950
|
|
Total collateralized
financings
|
|
|
1,645,858
|
|
|
1,374,180
|
|
|
|
|
|
|
|
|
|
|
Payable to brokers,
dealers and clearing organizations
|
|
|
611,426
|
|
|
474,108
|
|
Payable to
customers
|
|
|
61,540
|
|
|
481,041
|
|
Accrued compensation
expense
|
|
|
70,630
|
|
|
149,430
|
|
Accrued expenses and
other liabilities
|
|
|
159,135
|
|
|
175,910
|
|
Capital lease
obligations
|
|
7,250
|
|
|
10,039
|
|
Liabilities held for
sale
|
|
|
688,802
|
|
|
-
|
|
Debt
|
|
|
422,259
|
|
|
657,259
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
6,029,425
|
|
|
5,487,467
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
Class A Common
Stock
|
|
|
1,277
|
|
|
1,233
|
|
Additional paid-in
capital
|
|
|
1,357,613
|
|
|
1,306,549
|
|
Retained
earnings
|
|
|
246,646
|
|
|
211,678
|
|
Treasury stock, at
cost
|
|
|
(121,457)
|
|
|
(11,324)
|
|
Accumulated other
comprehensive income
|
|
|
1,742
|
|
|
1,401
|
Total
equity
|
|
|
1,485,821
|
|
|
1,509,537
|
|
|
|
|
|
|
|
|
|
Total liabilities
and equity
|
|
$
|
7,515,246
|
|
$
|
6,997,004
|
KCG HOLDINGS,
INC.
|
|
|
|
|
|
|
|
|
Exhibit
3
|
PRE-TAX EARNINGS
(LOSS) FROM CONTINUING OPERATIONS BY BUSINESS
SEGMENT*
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three
months ended
|
|
|
|
September 30,
2014
|
|
|
June 30,
2014
|
|
|
September 30,
2013
|
Market
Making
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
166,620
|
|
$
|
218,446
|
|
$
|
240,110
|
Expenses
|
|
|
174,653
|
|
|
182,442
|
|
|
192,257
|
Pre-tax (loss)
earnings
|
|
|
(8,033)
|
|
|
36,004
|
|
|
47,853
|
|
|
|
|
|
|
|
|
|
|
Global Execution
Services
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
79,218
|
|
|
85,903
|
|
|
91,366
|
Expenses
|
|
|
80,882
|
|
|
85,167
|
|
|
107,720
|
Pre-tax (loss)
earnings
|
|
|
(1,664)
|
|
|
736
|
|
|
(16,354)
|
|
|
|
|
|
|
|
|
|
|
Corporate and
Other
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
26,464
|
|
|
9,784
|
|
|
137,862
|
Expenses
|
|
|
32,002
|
|
|
32,017
|
|
|
47,988
|
Pre-tax (loss)
earnings
|
|
|
(5,538)
|
|
|
(22,233)
|
|
|
89,874
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
272,302
|
|
|
314,133
|
|
|
469,338
|
Expenses
|
|
|
287,537
|
|
|
299,626
|
|
|
347,965
|
Pre-tax (loss)
earnings
|
|
$
|
(15,235)
|
|
$
|
14,507
|
|
$
|
121,373
|
|
|
|
|
|
|
|
|
|
|
* Totals may not add
due to rounding.
|
|
|
|
|
|
|
KCG HOLDINGS,
INC.
|
|
|
|
|
|
|
|
|
Exhibit
3
|
PRE-TAX EARNINGS
(LOSS) FROM CONTINUING OPERATIONS BY BUSINESS
SEGMENT*
|
(Continued)
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine
months ended
|
|
|
|
|
|
|
September 30,
2014
|
|
|
September 30,
2013
|
|
|
|
Market
Making
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
662,412
|
|
$
|
455,678
|
|
|
|
Expenses
|
|
|
558,409
|
|
|
400,016
|
|
|
|
Pre-tax
earnings
|
|
|
104,003
|
|
|
55,662
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global Execution
Services
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
252,341
|
|
|
113,700
|
|
|
|
Expenses
|
|
|
251,253
|
|
|
135,002
|
|
|
|
Pre-tax earnings
(loss)
|
|
|
1,088
|
|
|
(21,302)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and
Other
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
55,339
|
|
|
134,584
|
|
|
|
Expenses
|
|
|
101,774
|
|
|
127,267
|
|
|
|
Pre-tax (loss)
earnings
|
|
|
(46,435)
|
|
|
7,317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
970,092
|
|
|
703,962
|
|
|
|
Expenses
|
|
|
911,436
|
|
|
662,285
|
|
|
|
Pre-tax
earnings
|
|
$
|
58,656
|
|
$
|
41,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Totals may not add
due to rounding.
|
|
|
|
|
|
|
Nine months ended
September 30, 2013 includes three months of results of KCG
Holdings, Inc. plus six months of
|
GETCO Holding
Company, LLC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KCG HOLDINGS,
INC.
|
|
|
|
|
|
|
|
Exhibit
4
|
Regulation G
Reconciliation of Non-GAAP financial measures (Continuing
operations)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
September 30, 2014
|
|
Market
Making
|
|
Global Execution
Services
|
|
Corporate and
Other
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
Reconciliation of
GAAP Pre-Tax to Non-GAAP
Pre-Tax:
|
|
|
|
|
|
|
|
|
GAAP Loss
from continuing operations before income taxes
|
|
$
(8,033)
|
|
$
(1,664)
|
|
$
(5,538)
|
|
$
(15,235)
|
Net gain related to
tradeMONSTER combination with OptionsHouse
|
|
-
|
|
-
|
|
(15,105)
|
|
(15,105)
|
Compensation related
to reduction in workforce and other employee separations
|
|
2,786
|
|
3,577
|
|
4,158
|
|
10,521
|
Writedown of assets
and lease loss accrual, net
|
|
-
|
|
-
|
|
301
|
|
301
|
Non GAAP (Loss)
Income from continuing operations before income
taxes
|
|
$
(5,247)
|
|
$
1,913
|
|
$
(16,184)
|
|
$
(19,518)
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30, 2014
|
|
Market
Making
|
|
Global Execution
Services
|
|
Corporate and
Other
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
Reconciliation of
GAAP Pre-Tax to Non-GAAP
Pre-Tax:
|
|
|
|
|
|
|
|
|
GAAP Income
(Loss) from continuing operations before income
taxes
|
|
$
36,004
|
|
$
736
|
|
$
(22,233)
|
|
$
14,507
|
Writedown of
capitalized debt costs
|
|
-
|
|
-
|
|
1,995
|
|
1,995
|
Compensation related
to reduction in workforce
|
|
383
|
|
1,886
|
|
800
|
|
3,069
|
Writedown of assets
and lease loss accrual, net
|
|
452
|
|
-
|
|
1,489
|
|
1,941
|
Non GAAP Income
(Loss) from continuing operations before income
taxes
|
|
$
36,839
|
|
$
2,622
|
|
$
(17,949)
|
|
$
21,512
|
|
|
|
|
|
|
|
|
|
Three months ended
September 30, 2013
|
|
Market
Making
|
|
Global Execution
Services
|
|
Corporate and
Other
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
Reconciliation of
GAAP Pre-Tax to Non-GAAP
Pre-Tax:
|
|
|
|
|
|
|
|
|
GAAP Income
(Loss) from continuing operations before income
taxes
|
|
$
47,853
|
|
$
(16,354)
|
|
$
89,874
|
|
$
121,373
|
Gain on investment in
Knight Capital Group, Inc.
|
|
-
|
|
-
|
|
(127,972)
|
|
(127,972)
|
Compensation and
other expenses related to reduction in workforce
|
|
2,309
|
|
15,132
|
|
-
|
|
17,441
|
Professional and
other fees related to Mergers and August 1st technology
issue
|
|
-
|
|
-
|
|
7,269
|
|
7,269
|
Writedown of assets
and lease loss accrual
|
|
108
|
|
-
|
|
828
|
|
936
|
Non GAAP Income
(Loss) from continuing operations before income
taxes
|
|
$
50,270
|
|
$
(1,222)
|
|
$
(30,001)
|
|
$
19,047
|
|
|
|
|
|
|
|
|
|
* Totals may not
add due to rounding
|
|
|
|
|
|
|
|
|
KCG HOLDINGS,
INC.
|
|
|
|
|
|
|
|
Exhibit
4
|
Regulation G
Reconciliation of Non-GAAP financial measures (Continuing
operations)(1)
|
|
|
|
(Continued)
|
|
|
|
|
|
|
|
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended
September 30, 2014
|
|
Market
Making
|
|
Global Execution
Services
|
|
Corporate and
Other
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
Reconciliation of
GAAP Pre-Tax to Non-GAAP
Pre-Tax:
|
|
|
|
|
|
|
|
|
GAAP Income (Loss)
from continuing operations before income taxes
|
|
$
104,003
|
|
$
1,088
|
|
$
(46,435)
|
|
$
58,656
|
Net gain related to
tradeMONSTER combination with OptionsHouse
|
|
-
|
|
-
|
|
(15,105)
|
|
(15,105)
|
Income resulting from
the merger of BATS and Direct Edge, net
|
|
-
|
|
-
|
|
(9,644)
|
|
(9,644)
|
Compensation related
to reduction in workforce and other employee separations
|
|
3,169
|
|
5,463
|
|
4,958
|
|
13,590
|
Writedown of
capitalized debt costs
|
|
-
|
|
-
|
|
9,552
|
|
9,552
|
Writedown of assets
and lease loss accrual, net
|
|
811
|
|
-
|
|
1,697
|
|
2,508
|
Non GAAP Income
(Loss) from continuing operations before income
taxes
|
|
$
107,983
|
|
$
6,551
|
|
$
(54,977)
|
|
$
59,557
|
|
|
|
|
|
|
|
|
|
Nine months ended
September 30, 2013
|
|
Market
Making
|
|
Global Execution
Services
|
|
Corporate and
Other
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
Reconciliation of
GAAP Pre-Tax to Non-GAAP
Pre-Tax:
|
|
|
|
|
|
|
|
|
GAAP Income (Loss)
from continuing operations before income taxes
|
|
$
55,662
|
|
$
(21,302)
|
|
$
7,317
|
|
$
41,677
|
Gain on investment in
Knight Capital Group, Inc.
|
|
-
|
|
-
|
|
(127,972)
|
|
(127,972)
|
Professional and
other fees related to Mergers and August 1st technology
issue
|
|
-
|
|
-
|
|
44,398
|
|
44,398
|
Compensation and
other expenses related to reduction in workforce
|
|
6,264
|
|
15,997
|
|
-
|
|
22,261
|
Unit based
compensation acceleration due to Mergers
|
|
-
|
|
-
|
|
22,031
|
|
22,031
|
Strategic asset
impairment
|
|
-
|
|
-
|
|
9,184
|
|
9,184
|
Writedown of assets
and lease loss accrual
|
|
108
|
|
-
|
|
4,525
|
|
4,633
|
Non GAAP Income
(Loss) from continuing operations before income
taxes
|
|
$
62,034
|
|
$
(5,305)
|
|
$
(40,517)
|
|
$
16,212
|
|
|
|
|
|
|
|
|
|
* Totals may not
add due to rounding
|
|
|
|
|
|
|
|
|
(1) Nine months ended
September 30, 2013 includes three months of results of KCG
Holdings, Inc. plus six months of GETCO Holding Company,
LLC.
|
|
|
|
|
|
|
|
|
|
|
|
SOURCE KCG Holdings, Inc.