GFI Group Inc. Announces Second Quarter 2013 Results; Declares Quarterly Cash Dividend

NEW YORK, July 25, 2013 /PRNewswire/ --

-- GAAP Total Revenues: $242.3 Million; Non-GAAP Total Revenues: $241.1 Million

-- GAAP Net Revenues: $198.4 Million; Non-GAAP Net Revenues: $197.3 Million

-- Software, Analytics and Market Data revenues: $21.8 Million, up 6.5% year-over-year

-- GAAP Net Income: $6.7 Million or $0.05 per Diluted Share

-- Non-GAAP Net Income: $7.1 Million or $0.06 per Diluted Share

-- Cash Earnings: $27.6 Million or $0.22 per Diluted Share

GFI Group Inc. (NYSE: GFIG), a leading provider of wholesale brokerage services, clearing services, and electronic execution and trading support products for global financial markets,  reported today its financial results for the second quarter ended June 30, 2013.

Highlights

  • Non-GAAP net revenues increased 0.8% to $197.3 million in the second quarter of 2013, from $195.8 million in the second quarter of 2012.
  • Brokerage revenues for the second quarter of 2013 declined 0.8% to $174.0 million, from $175.4 million in the second quarter of 2012.  Revenues from trading software, analytics and market data products for the second quarter of 2013 were $21.8 million, up 6.5% from $20.5 million in the second quarter of 2012.
  • Compensation and employee benefits expense in the second quarter of 2013 was 68.2% of net revenues on a non-GAAP basis, as compared to 68.8% in the second quarter of 2012.
  • Non-compensation expenses were 27.2% on a non-GAAP basis in the second quarter of 2013 compared with 28.9% in the second quarter of 2012.
  • Net income for the second quarter of 2013 was $7.1 million, or $0.06 per diluted share, on a non-GAAP basis compared with $2.7 million or $0.02 per diluted share, in the second quarter of 2012.
  • Cash earnings for the three month period ended June 30, 2013 were $27.6 million, or $0.22 per diluted share, compared with $22.8 million, or $0.19 per diluted share, for the same period in 2012.
  • For the six months ended June 30, 2013, non-GAAP net revenues decreased 6.0% to $397.1 million, from $422.3 million in 2012.  Net income on a non-GAAP basis was $14.3 million, or $0.11 per diluted share, for the six months ended June 30, 2013, compared to $11.1 million, or $0.09 per diluted share, for the same period in 2012. 

Colin Heffron, Chief Executive Officer commented: "GFI's non-GAAP net revenues increased over the previous year for the first time since the fourth quarter of 2011 aided by heightened market volatility, strength in emerging markets and fixed income products, continued growth in non-brokerage revenues and increased activity on GFI's hybrid-electronic trading platforms.  These growth areas offset weakness in equity and commodity product revenues.

"We remain focused on reducing GFI's cost base and expect our cost initiatives to continue to improve GFI's profitability in future periods.  We are on track to reach in excess of $60 million in total 2013 cost savings, as compared to 2011 expense levels. 

"Last week we filed our application with the Commodities Futures Trading Commission ("CFTC") to become a multi-asset Swap Execution Facility ("SEF") under the CFTC's recently announced SEF rules.  Our commitment to technology innovation and investment enabled us to be one of the first to file for SEF designation with the CFTC. 

"GFI's preliminary July 2013 total revenues are tracking down approximately 5% compared with July last year.

"GFI's cash earnings were $0.22 per diluted share or approximately $28 million in the second quarter of 2013.  We are pleased to declare a quarterly cash dividend to GFI shareholders of $0.05 per share."

GAAP Results

GAAP net revenues were $198.4 million in the second quarter of 2013, compared with $202.8 million in the second quarter of 2012.  GAAP net income was $6.7 million, or $0.05 per diluted share, in the second quarter of 2013, compared with $5.3 million, or $0.04 per diluted share, in the second quarter of 2012.  Compensation and employee benefits expense in the second quarter of 2013 was 67.8% on a GAAP basis, as compared with 66.9% in the second quarter of 2012.  Non-compensation expenses, on a GAAP basis, for the second quarter of 2013 were $56.2 million, or 28.3% of net revenues, compared with $59.5 million, or 29.4% of net revenues, in the second quarter of 2012.

Revenues

Net revenues were $197.3 million on a non-GAAP basis in the second quarter of 2013, as compared with $195.8 million in the second quarter of 2012.

Brokerage revenues were $174.0 million compared with $175.4 million in the second quarter of 2012.  Revenues from fixed income and financial products were up 10.6% and 13.4%, respectively, compared with the second quarter of 2012, while equity and commodity product revenues were down 15.1% and 14.8%, respectively, over the same period.  By geographic region, brokerage revenues for the second quarter of 2013 increased 2.2% in the Americas and 7.7% in Asia-Pacific, while decreasing 5.3% in Europe, Middle East and Africa, as compared with the same quarter of 2012.

Revenues from trading software, analytics and market data products for the second quarter of 2013 were $21.8 million, up 6.5% from $20.5 million in the second quarter of 2012.

Expenses

For the second quarter of 2013, non-GAAP compensation and employee benefits expense was $134.6 million compared with $134.7 million in the second quarter of 2012.  Compensation and employee benefits expense was 68.2% of net revenues on a non-GAAP basis in the second quarter of 2013, compared with 68.8% of net revenues in the second quarter of 2012.  Non-compensation expenses, on a non-GAAP basis, for the second quarter of 2013 were $53.6 million, or 27.2% of net revenues, compared with $56.6 million, or 28.9% of net revenues, in the second quarter of 2012.

Earnings

Non-GAAP net income for the second quarter of 2013 was $7.1 million, or $0.06 per diluted share, compared with $2.7 million, or $0.02 per diluted share, in the second quarter of 2012.

GFI's effective non-GAAP tax rate for the first half of 2013 was 20.0% as compared to a full year rate of 11.9% for 2012.  The increase is primarily driven by a release of a tax liability in 2012, creating an unusually low rate for that year.

Six Month Results

GAAP net revenues were $399.9 million for the six months ended June 30, 2013, compared with $429.5 million for the same period 2012.  GAAP net income was $11.4 million, or $0.09 per diluted share, in the first half of 2013, compared with $10.1 million, or $0.08 per diluted share, in the prior year period.  Compensation and employee benefits expense in the first half of 2013 was 67.9% on a GAAP basis, in-line with the prior year results for the same period.  Non-compensation expenses, on a GAAP basis, for the six months ended June 30, 2013 were $120.6 million, or 30.2% of net revenues, compared with $122.7 million, or 28.6% of net revenues, in the first half of 2012.

On a non-GAAP basis, net revenues for the six months ended June 30, 2013 were $397.1 million, compared to $422.3 million for the same period in 2012.  Net income was $14.3 million on a non-GAAP basis, or $0.11 per diluted share, for the six months ended June 30, 2013, compared with net income of $11.1 million, or $0.09 per diluted share, for the same period in 2012. 

Dividend Declaration

The Board of Directors of GFI has declared a quarterly cash dividend of $0.05 per share payable on August 30, 2013 to shareholders of record as of August 15, 2013.

Non-GAAP Financial Measures

To supplement GFI's unaudited financial statements presented in accordance with GAAP, the Company uses certain non-GAAP measures of financial performance. The presentation of these non-GAAP financial measures is not intended to be considered in isolation from, as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP, and may be different from non-GAAP financial measures used by other companies.  In addition, these non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the Company's results of operations as determined in accordance with GAAP. The non-GAAP financial measures used by GFI include non-GAAP total revenues, non-GAAP net revenues, non-GAAP provision for or benefit from income taxes, non-GAAP net income, non-GAAP diluted earnings per share, cash earnings and cash earnings per share.  These non-GAAP financial measures currently exclude from the Company's statement of income amortization of acquired intangibles and certain other items that management views as non-operating, non-recurring or non-cash as detailed in the reconciliation included in the financial tables attached to this release.

In addition, GFI may consider whether other significant non-operating, non-recurring or non-cash items that arise in the future should also be excluded in calculating the non-GAAP financial measures it uses.  The non-GAAP financial measures also take into account estimated adjustments to income tax expense with respect to the excluded items.

GFI believes that these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding the Company's performance by excluding certain items that may not be indicative of the Company's core business, operating results or future outlook. GFI's management uses, and believes that investors benefit from referring to, these non-GAAP financial measures in assessing the Company's operating results, as well as when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate comparisons of the Company's performance to prior periods.

In addition to the reasons stated above, which are generally applicable to each of the items GFI excludes from its non-GAAP financial measures, the Company believes it is appropriate to exclude amortization of acquired intangibles because when analyzing the operating performance of an acquired business, GFI's management focuses on the total return provided by the investment (i.e., operating profit generated from the acquired entity, as compared to the purchase price paid) without taking into consideration any charges for allocations made for accounting purposes. Further, because the purchase price for an acquisition necessarily reflects the accounting value assigned to intangible assets, when analyzing the operating performance of an acquisition in subsequent periods, the Company's management excludes the GAAP impact of acquired intangible assets on its financial results. GFI believes that such an approach is useful in understanding the long-term return provided by an acquisition and that investors benefit from a supplemental non-GAAP financial measure that excludes the accounting expense associated with acquired intangible assets.

A reconciliation of these non-GAAP financial measures to GAAP is included in the financial tables attached to this release.

Conference Call

GFI has scheduled an investor conference call to discuss its second quarter results at 8:30 a.m. (Eastern Time) on Friday, July 26, 2013. Those wishing to listen to the live conference call via telephone should dial 1-800-860-2442 in North America and +1-412-858-4600 outside of North America, and ask for "GFI".

A live audio web cast of the conference call will be available on the Investor Relations section of GFI's Website. For web cast registration information, please visit: http://www.gfigroup.com. Following the conference call, an archived recording will be available.

Supplementary Financial Information

GFI has posted details of its historical monthly brokerage revenues on the Investor Relations page of its web site under the heading Supplementary Financial Information. The Company currently plans to post this information quarterly in conjunction with its announcement of earnings, but does not undertake a responsibility to continue to provide or update such information.

About GFI Group Inc.

GFI Group Inc. (NYSE: "GFIG") is a leading provider of wholesale brokerage services, clearing services, electronic execution and trading support products for global financial markets. GFI Group Inc. provides brokerage services, market data, trading platform and analytics software products to institutional clients in markets for a range of fixed income, financial, equity and commodity instruments.

Headquartered in New York, GFI was founded in 1987 and employs more than 2,000 people with additional offices in London, Paris, Nyon, Hong Kong, Seoul, Singapore, Manila, Tokyo, Sydney, Cape Town, Santiago, Bogota, Buenos Aires, Lima, Mexico City, Dubai, Dublin, Tel Aviv, and Sugar Land (TX). GFI Group Inc. provides services and products to over 2,600 institutional clients, including leading investment and commercial banks, corporations, insurance companies and hedge funds. Its brands include GFISM, GFInet®, CreditMatch®, GFI ForexMatch®, EnergyMatch®, FENICS®, Starsupply®, Amerex®, Trayport® and Kyte®.

Forward-looking Statement

Certain matters discussed in this press release contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this press release, the words "anticipate," "believe," "estimate," "may," "might," "intend," "expect" and similar expressions identify such forward-looking statements. Actual results, performance or achievements could differ materially from those contemplated, expressed or implied by the forward-looking statements contained herein. These forward-looking statements are based largely on the expectations of GFI Group Inc. (the "Company") and are subject to a number of risks and uncertainties. These include, but are not limited to, risks and uncertainties associated with: economic, political and market factors affecting trading volumes; securities prices or demand for the Company's brokerage services; competition from current and new competitors; the Company's ability to attract and retain key personnel, including highly-qualified brokerage personnel; the Company's ability to identify and develop new products and markets; changes in laws and regulations governing the Company's business and operations or permissible activities; the Company's ability to manage its international operations; financial difficulties experienced by the Company's customers or key participants in the markets in which the Company focuses its brokerage services; the Company's ability to keep up with technological changes; uncertainties relating to litigation and the Company's ability to assess and integrate acquisition prospects. Further information about factors that could affect the Company's financial and other results is included in the Company's filings with the Securities and Exchange Commission. The Company does not undertake to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

- FINANCIAL TABLES FOLLOW -

GFI Group Inc. and Subsidiaries

Consolidated Statements of Operations (unaudited)

(In thousands except share and per share data)

















Three Months Ended


Six Months Ended



June 30,


June 30,



2013


2012


2013


2012

Revenues









Agency commissions 

$        122,476


$        123,457


$        249,048


$        268,037


Principal transactions 

51,562


51,964


101,627


114,552


 Total brokerage revenues

174,038


175,421


350,675


382,589


Clearing services revenues

39,439


29,635


77,503


57,762


Interest income from clearing services

431


382


1,168


903


Equity in net earnings of unconsolidated businesses

2,300


2,478


5,359


3,898


Software, analytics and market data

21,808


20,468


43,966


40,467


Other income

4,262


9,346


7,999


12,286


    Total revenues

242,278


237,730


486,670


497,905










Interest and transaction-based expenses









Transaction fees on clearing services

38,424


28,606


75,332


55,568


Transaction fees on brokerage services

5,335


6,153


11,142


12,278


Interest expense from clearing services

87


158


247


598


Total interest and transaction-based expenses

43,846


34,917


86,721


68,444


Revenues, net of interest and transaction-based expenses

198,432


202,813


399,949


429,461










Expenses









Compensation and employee benefits

134,613


135,650


271,628


291,428


Communications and market data

13,743


15,694


27,330


31,360


Travel and promotion

7,857


9,285


15,918


19,374


Rent and occupancy

7,039


6,884


14,251


13,676


Depreciation and amortization

8,334


9,108


16,642


18,256


Professional fees

6,385


5,377


13,112


11,545


Interest on borrowings

7,175


6,527


14,863


13,342


Other expenses

5,699


6,671


18,523


15,144


   Total other expenses

190,845


195,196


392,267


414,125










Income before provision for (benefit from) income taxes

7,587


7,617


7,682


15,336










Provision for (benefit from) income taxes

719


2,282


(4,140)


5,061










Net income before attribution to non-controlling stockholders

6,868


5,335


11,822


10,275










Less: Net income attributable to non-controlling interests

177


15


457


163

GFI's net income

$             6,691


$             5,320


$           11,365


$           10,112



















Basic earnings per share 

$               0.06


$               0.05


$               0.10


$               0.09

Diluted earnings per share

$               0.05


$               0.04


$               0.09


$               0.08










Weighted average shares outstanding - basic

118,646,703


117,186,760


117,024,375


116,342,469










Weighted average shares outstanding - diluted

126,603,146


122,978,459


126,080,497


124,164,300




























GFI Group Inc. and Subsidiaries

Consolidated Statements of Operations (unaudited)

As a Percentage of Net Revenues



















Three Months Ended


Six Months Ended



June 30,


June 30,



2013


2012


2013


2012

Revenues









Agency commissions 

61.7%


60.9%


62.3%


62.4%


Principal transactions 

26.0%


25.6%


25.4%


26.7%


 Total brokerage revenues

87.7%


86.5%


87.7%


89.1%


Clearing services revenues

19.9%


14.6%


19.4%


13.4%


Interest income from clearing services

0.2%


0.2%


0.3%


0.2%


Equity in net earnings of unconsolidated businesses

1.2%


1.2%


1.3%


0.9%


Software, analytics and market data

11.0%


10.1%


11.0%


9.4%


Other income

2.1%


4.6%


2.0%


2.9%


    Total revenues

122.1%


117.2%


121.7%


115.9%










Interest and transaction-based expenses









Transaction fees on clearing services

19.4%


14.1%


18.8%


12.9%


Transaction fees on brokerage services

2.7%


3.0%


2.8%


2.9%


Interest expense from clearing services

0.0%


0.1%


0.1%


0.1%


Total interest and transaction-based expenses

22.1%


17.2%


21.7%


15.9%


Revenues, net of interest and transaction-based expenses

100.0%


100.0%


100.0%


100.0%










Expenses









Compensation and employee benefits

67.8%


66.9%


67.9%


67.9%


Communications and market data

6.9%


7.7%


6.8%


7.3%


Travel and promotion

4.0%


4.6%


4.0%


4.5%


Rent and occupancy

3.5%


3.4%


3.6%


3.2%


Depreciation and amortization

4.2%


4.5%


4.2%


4.2%


Professional fees

3.2%


2.7%


3.3%


2.7%


Interest on borrowings

3.6%


3.2%


3.7%


3.1%


Other expenses

2.9%


3.3%


4.6%


3.5%


   Total other expenses

96.1%


96.3%


98.1%


96.4%










Income before provision for (benefit from) income taxes

3.9%


3.7%


1.9%


3.6%










Provision for (benefit from) income taxes

0.4%


1.1%


-1.0%


1.2%










Net income before attribution to non-controlling stockholders

3.5%


2.6%


2.9%


2.4%










Less: Net income attributable to non-controlling interests

0.1%


0.0%


0.1%


0.0%

GFI's net income

3.4%


2.6%


2.8%


2.4%










 

GFI Group Inc. and Subsidiaries

Selected Financial Data (unaudited)

(Dollars in thousands except per share data)





























Three Months Ended




Six Months Ended





June 30,




June 30,





2013


2012




2013


2012














Brokerage Revenues by Product Categories:











Fixed Income



$            48,578


$            43,904




$            95,320


$          105,415


Financial



54,414


47,977




106,330


98,132


Equity



31,106


36,645




64,322


74,178


Commodity



39,940


46,895




84,703


104,864















   Total brokerage revenues


$         174,038


$         175,421




$          350,675


$          382,589



























Brokerage Revenues by Geographic Region:












Americas



$            72,704


$            71,130




$          141,483


$          153,206


Europe, Middle East, and Africa


79,912


84,408




169,254


187,016


Asia-Pacific



21,422


19,883




39,938


42,367















   Total brokerage revenues


$         174,038


$         175,421




$          350,675


$          382,589

























































June 30,


December 31,











2013


2012




















Consolidated Statement of Financial Condition Data:











Cash and cash equivalents


$         179,123


$         227,441








Cash held at clearing organizations, net of customer cash

53,661


19,636








GFI's total balance sheet cash



232,784


247,077








Balance sheet cash per share


1.93


2.11





















Total assets (1)



1,629,489


1,180,061








Total debt



250,000


250,000








Stockholders' equity



426,707


425,082

































Selected Statistical Data:













Brokerage personnel headcount (2)

1,162


1,188








Employees



2,053


2,062








Broker productivity for the period (3)

$                 150


$                 125



























































(1)

Total assets include receivables from brokers, dealers and clearing organizations of $722.3 million and $252.7 million at June 30, 2013 and December 31, 2012, respectively. These receivables primarily represent securities transactions entered into in connection with our matched principal business which have not settled as of their stated settlement dates, as well as balances with clearing organizations. These receivables are substantially offset by corresponding payables to brokers, dealers and clearing organizations and to clearing customers, for these unsettled transactions.





(2)

Brokerage personnel headcount includes brokers, traders, trainees and clerks.





(3)

Broker productivity is calculated as brokerage revenues divided by average monthly brokerage personnel headcount for the quarter.




















 

GFI Group Inc. and Subsidiaries

Reconciliation of GAAP to Non-GAAP Financial Measures (unaudited)

(In thousands except share and per share data)

















Three Months Ended


Six Months Ended



June 30,


June 30,



2013


2012


2013


2012










GAAP revenues


$     242,278


$     237,730


$     486,670


$     497,905

Mark-to-market loss (gain) on forward hedges of future foreign currency revenues

319


(1,625)


(650)


(321)

Fair value mark-to-market gain on future purchase commitment 


(1,459)


(5,190)


(2,203)


(7,017)

Fair value mark-to-market (gain) loss on warrants on investee shares


-


(188)


22


128

Total Non-GAAP Revenues


241,138


230,727


483,839


490,695










GAAP interest and transaction-based expenses


43,846


34,917


86,721


68,444










Non-GAAP revenues, net of interest and transaction-based expenses


197,292


195,810


397,118


422,251










GAAP other expenses


190,845


195,196


392,267


414,125

Amortization of intangibles


(2,471)


(2,934)


(4,969)


(5,840)

Closure of certain desks in Asia


-


(941)


-


(941)

Writedown of available for sale securities


-


-


-


(2,700)

Expenses from start-up operations


(160)


-


(8,573)


-

Non-GAAP other expenses


188,214


191,321


378,725


404,644










Non-GAAP pre-tax income 


9,078


4,489


18,393


17,607










Income tax impact on Non-GAAP items


1,097


(534)


5,164


1,278

Plus: Non-operating adjustment for the recognition of a tax benefit related to interest income between international affiliates


-


-


2,655


-

Non-GAAP provision for income taxes


1,816


1,748


3,679


6,339










Less: Net income attributable to non-controlling interests


177


15


457


163










GFI's Non-GAAP net income


$          7,085


$          2,726


$       14,257


$       11,105










Non-GAAP diluted net income per share


$            0.06


$            0.02


$            0.11


$            0.09










Pre-tax adjustments to arrive at cash earnings









Amortization of RSUs


7,360


7,830


15,502


16,882

Amortization of prepaid sign-on and retention bonuses


7,278


6,041


13,390


12,636

Depreciation and other amortization


5,863


6,174


11,673


12,416

Total pre-tax adjustments to cash earnings


20,501


20,045


40,565


41,934










Non-GAAP pre-tax cash earnings from ongoing operations


29,579


24,534


58,958


59,541










Non-GAAP provision for income taxes


1,816


1,748


3,679


6,339










Less: Net income attributable to non-controlling interests


177


15


457


163










GFI's Non-GAAP net cash earnings from ongoing operations


$       27,586


$       22,771


$       54,822


$       53,039










Non-GAAP cash earnings per share


$            0.22


$            0.19


$            0.43


$            0.43










Weighted average shares outstanding - diluted


126,603,146


122,978,459


126,080,497


124,164,300










 

GFI Group Inc.










Adjusted EBITDA























($ in '000's, except share and per share amounts)


2Q12


3Q12


4Q12


1Q13


2Q13


Last twelve months (LTM)














Net income (loss) per U.S. GAAP before attribution to non-controlling interests


$          5,335


$        (8,805)


$      (11,114)


$          4,954


$          6,868
















Plus: Net (income) loss attributable to non-controlling interests


(15)


112


(258)


(280)


(177)



GFI's net income (loss)


5,320


(8,693)


(11,372)


4,674


6,691
















Plus: Extraordinary and other non-recurring pretax items (i.e., non-GAAP adjustments)


(3,128)


6,457


3,013


9,220


1,491
















Plus: Interest expense


6,685


6,820


7,098


7,848


7,262
















Less: Interest income


(622)


(614)


(849)


(928)


(579)
















Plus: Income tax expense (benefit) 


2,282


1,638


1,688


(4,859)


719
















Plus: Depreciation and amortization expense (excluding intangibles)


6,174


6,324


6,591


5,810


5,863
















Plus: Amortization of RSUs


7,830


7,751


7,732


8,142


7,360
















Plus: Amortization of prepaid sign-on and retention bonuses


6,041


6,296


6,540


6,112


7,278
















Adjusted EBITDA


$        30,582


$        25,979


$        20,441


$        36,019


$        36,085


$         118,524














Weighted average shares outstanding - diluted












126,080,497














Adjusted EBITDA per share (pre-tax)












$               0.94














 

SOURCE GFI Group Inc.



RELATED LINKS
http://www.gfigroup.com

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