2014

Knight Capital Group Announces Consolidated Earnings of $0.44 Per Diluted Share and Earnings From Continuing Operations of $0.45 Per Diluted Share for the Fourth Quarter 2009 Continuing operations generated fourth quarter 2009 revenues of $301.6 million and earnings of $42.5 million, or $0.45 per diluted share, which included a non-recurring tax benefit of $11.6 million, or $0.12 per diluted share

The Equities segment generated fourth quarter 2009 revenues of $232.0 million amid weaker market conditions, compared to fourth quarter 2008 revenues of $263.3 million

The Fixed Income, Currencies and Commodities (FICC) segment generated fourth quarter 2009 revenues of $70.2 million driven primarily by contributions from institutional fixed income as headcount more than doubled, compared to fourth quarter 2008 revenues of $35.2 million

Full-year results included a 24% increase in revenues year over year; Pre-tax margins of 20% from continuing operations impacted by ongoing investments in diversification across clients, order flow, products and services, asset classes and geographies

JERSEY CITY, N.J., Jan. 21 /PRNewswire-FirstCall/ -- Knight Capital Group, Inc. (Nasdaq: NITE) today reported earnings from continuing operations of $42.5 million, or $0.45 per diluted share, and a loss from discontinued operations, net of tax, of $655,000, or a $0.01 loss per diluted share. On a consolidated basis, the company reported earnings of $41.8 million, or $0.44 per diluted share, for the fourth quarter of 2009. The results include a non-recurring tax benefit of $0.12 per diluted share.

For the fourth quarter of 2008, the company reported earnings from continuing operations of $83.3 million, or $0.93 per diluted share, and a loss from discontinued operations, net of tax, of $3.6 million, or a $0.04 loss per diluted share. On a consolidated basis, the company reported earnings of $79.7 million, or $0.89 per diluted share for the fourth quarter of 2008.

Revenues from continuing operations for the fourth quarter of 2009 were $301.6 million, compared to $314.3 million for the fourth quarter of 2008.

"Knight recorded solid results in the fourth quarter of 2009 despite declining trading activity as the year drew to a close," said Thomas M. Joyce, Chairman and Chief Executive Officer, Knight Capital Group. "While the intense trading activity and historic market volatility produced outstanding results in the fourth quarter of 2008, revenues declined only four percent on a consolidated basis in the fourth quarter of 2009. Knight separated the Global Markets segment into two new segments, Equities and FICC, to reflect the growth and diversification of the firm over the past year. In Equities, the decrease in revenues was partially offset by market share gains in Listed and NASDAQ securities. In FICC, we continued to build momentum from new clients and increased trade volumes in fixed income and foreign exchange."

"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 Knight Libertas, Knight BondPoint and Hotspot FX. Corporate includes strategic investments 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.





Q4 2009


Q4 2008






Revenues ($ thousands)


301,611 


314,275 

Income from continuing operations, net of tax ($ thousands)


42,478 


83,257 

Loss from discontinued operations, net of tax ($ thousands)


(655)


(3,555)

Net income ($ thousands)


41,823 


79,702 

Diluted EPS from continuing operations ($)


0.45 


0.93 

Diluted EPS from discontinued operations ($)


(0.01)


(0.04)

Average daily U.S. equity dollar value traded ($ billions)


24.8 


22.5 

Average daily U.S. equity trades (thousands)


3,635.7 


3,990.3 

Nasdaq and Listed equity shares traded (billions)


73.8 


75.1 

OTC Bulletin Board and Pink Sheet shares traded (billions)


708.1 


166.8 

Average revenue capture per U.S. equity dollar value traded (bps)


1.2 


1.6 

Average daily Knight Direct equity trades (millions)


84.6 


49.7 

Average daily Hotspot FX notional dollar value traded ($ billions)


30.0 


16.1 













YTD 2009


YTD 2008






Revenues ($ thousands)


1,160,762 


938,857 

Income from continuing operations, net of tax ($ thousands)


150,796 


193,710 

Loss from discontinued operations, net of tax ($ thousands)


(34,883)


(15,799)

Net income ($ thousands)


115,913 


177,911 

Diluted EPS from continuing operations ($)


1.60 


2.11 

Diluted EPS from discontinued operations ($)


(0.37)


(0.17)

Average daily U.S. equity dollar value traded ($ billions)


23.0 


19.2 

Average daily U.S. equity trades (thousands)


3,904.5 


2,548.0 

Nasdaq and Listed equity shares traded (billions)


343.1 


195.7 

OTC Bulletin Board and Pink Sheet shares traded (billions)


2,170.7 


802.7 

Average revenue capture per U.S. equity dollar value traded (bps)


1.3 


1.5 

Average daily Knight Direct equity trades (millions)


69.1 


50.6 

Average daily Hotspot FX notional dollar value traded ($ billions)


22.8 


18.4 



"In 2009, Knight successfully increased revenues 24 percent year over year in executing our global growth strategy," said Mr. Joyce. "We extended gains in U.S. equities market share by deepening client relationships and expanding electronic products. Pre-tax margins narrowed due to increased investments across the firm as well as lower volatility, heightened activity in low-priced stocks and higher transaction costs. Knight Libertas added talent globally across research, sales and trading and grew trade volumes across several product areas. We made further investments in Europe and the Asia-Pacific region as well as in developing capital markets, options market-making and self-clearing capabilities. Finally, we closed the Asset Management segment."

Equities

During the fourth quarter of 2009, Equities generated total revenues of $232.0 million, compared to $263.3 million in the fourth quarter of 2008. In the fourth quarter of 2009, Equities reported pre-tax income of $56.7 million, compared to pre-tax income of $121.6 million in the fourth quarter of 2008. Equities had pre-tax margins of 24% in the fourth quarter of 2009, compared to pre-tax margins of 46% in the fourth quarter of 2008.

"In Equities, during the fourth quarter, Knight grew U.S. equity average daily dollar value traded and share volume despite decreased broad market volumes and lower volatility compared to the fourth quarter of 2008," said Mr. Joyce. "The results demonstrate the benefits of the initiatives to diversify revenue sources and our resiliency across market cycles. During the fourth quarter, we gained further market share in trading of Listed and NASDAQ securities. Knight Direct reported record average daily trade volume during the quarter. Knight Link grew average daily share volume and launched in Europe. In addition, we continued to build liquidity in European and Asian equities. Pre-tax margins in Equities declined in comparison to the fourth quarter of 2008 due to investments in new initiatives, weaker market conditions and continued high levels of activity in low-priced stocks."

Fixed Income, Currencies and Commodities

During the fourth quarter of 2009, FICC generated total revenues of $70.2 million, compared to $35.2 million in the fourth quarter of 2008. In the fourth quarter of 2009, FICC reported pre-tax income of $7.2 million, compared to pre-tax income of $5.7 million in the fourth quarter of 2008. FICC had pre-tax margins of 10% in the fourth quarter of 2009, compared to pre-tax margins of 16% in the fourth quarter of 2008.

"In FICC, Knight Libertas, Knight BondPoint and Hotspot FX all achieved growth during the fourth quarter reflected by the increased revenues year over year," said Mr. Joyce. "The aggressive expansion of Knight Libertas is the primary driver of overall revenue growth. During the quarter, Knight Libertas continued to attract talent and add clients while investing in new products. Knight BondPoint benefited from increased efficiencies of scale due to the onboarding of several major clients and enhanced connectivity. In foreign exchange, Hotspot FX reported record average daily volume during the quarter as a result of adding clients and deepening relationships. Pre-tax margins in FICC reflect investments in the growth of Knight Libertas and resulting increase in headcount."

Corporate

In the fourth quarter of 2009, the Corporate segment reported a pre-tax loss of $14.2 million, compared to pre-tax income of $19.5 million in the fourth quarter of 2008.

The company's corporate investment in funds formerly managed by Deephaven recognized a pre-tax loss of $1.7 million during the fourth quarter of 2009, compared to a pre-tax loss of $14.8 million during the fourth quarter of 2008.

During the fourth quarter of 2008, the company recorded a pre-tax gain of $51.6 million, or approximately $0.33 per diluted share, from the partial sale of the company's investment in Direct Edge Holdings. Consequently, of the $51.6 million pre-tax gain, $15.9 million is reported as Non-operating gain from subsidiary stock issuance, and $35.7 million is included in Investment income and other, net on the Consolidated Statements of Operations.

Headcount from continuing operations at December 31, 2009 was 1,126 full-time employees, as compared to 910 full-time employees at December 31, 2008, reflecting personnel additions related to prior acquisitions, new products, and geographic expansion throughout the year.

"Knight is evolving from a leading U.S. equities trade execution firm into a global capital markets firm," said Mr. Joyce. "The diversification of revenue sources as part of the growth strategy has proven successful. We've demonstrated an ability to compete against the larger firms, electronic trading platforms and boutiques. In 2010, we'll invest in new initiatives for future growth, from building liquidity in equities, fixed income, foreign exchange and options, to expanding our global presence and enhancing our overall capabilities."

As of December 31, 2009, the company had $427.1 million in cash and cash equivalents. The company had $1.2 billion in stockholders' equity as of December 31, 2009, equivalent to a book value of $12.87 per diluted share. The company had a book value of $11.53 per diluted share as of December 31, 2008.

During the fourth quarter of 2009, the company repurchased 1,000,000 shares for approximately $16.8 million under the company's $1.0 billion stock repurchase program. To date, the company has repurchased 68.3 million shares for $770.4 million. The company has approximately $229.6 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 fourth quarter of 2009, the company reported a pre-tax loss from discontinued operations of $1.5 million, or $655,000, net of tax, which primarily relates to the wind-down of the Asset Management segment. In the fourth quarter of 2008, the company reported a pre-tax loss from discontinued operations of $5.7 million, or $3.6 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 fourth quarter 2009 earnings conference call for analysts, investors and the media at 9:00 a.m. Eastern Time (ET) today, January 21, 2010. To access Knight's earnings conference call, please dial 888-282-4591 for domestic callers or 719-325-2133 for international callers. When prompted, please enter passcode 2442711. A replay of the fourth 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 2442711. 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 December 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 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, 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 ended
December 31,


For the years ended
December 31,





2009



2008



2009



2008




(In thousands, except per share amounts)















Revenues













Commissions and fees

$

166,874 


$

153,059 


$

670,406 


$

478,126 


Net trading revenue


132,225 



142,927 



486,684 



446,707 


Interest, net


975 



435 



(1,712)



7,644 


Investment income and other, net


1,537 



17,854 



5,384 



6,380 



Total revenues


301,611 



314,275 



1,160,762 



938,857 















Expenses













Employee compensation and benefits


142,890 



96,797 



527,025 



331,311 


Execution and clearance fees


47,852 



31,288 



169,805 



107,402 


Payments for order flow


13,816 



16,301 



71,629 



43,639 


Communications and data processing


17,221 



13,109 



61,071 



45,359 


Depreciation and amortization


9,145 



7,862 



34,368 



26,535 


Occupancy and equipment rentals


5,997 



5,306 



23,177 



19,642 


Business development


5,310 



5,328 



18,807 



17,279 


Professional fees


3,633 



2,729 



13,043 



14,749 


Interest expense


2,108 



1,590 



4,777 



5,052 


Writedown of assets and lease loss accrual (benefit), net


292 



592 



(9,704)



1,236 


Other


3,587 



2,495 



15,326 



8,969 



Total expenses


251,851 



183,397 



929,324 



621,173 















Other Income













Non-operating gain from subsidiary stock issuance




15,947 





15,947 















Income from continuing operations before income taxes


49,760 



146,825 



231,438 



333,631 

Income tax expense


7,282 



63,568 



80,642 



139,921 

Income from continuing operations, net of tax


42,478 



83,257 



150,796 



193,710 

Loss from discontinued operations, net of tax


(655)



(3,555)



(34,883)



(15,799)















Net income

$

41,823 


$

79,702 


$

115,913 


$

177,911 















Basic earnings per share from continuing operations

$

0.48 


$

0.97 


$

1.69 


$

2.19 















Diluted earnings per share from continuing operations

$

0.45 


$

0.93 


$

1.60 


$

2.11 















Basic earnings per share from discontinued operations

$

(0.01)


$

(0.04)


$

(0.39)


$

(0.18)















Diluted earnings per share from discontinued operations

$

(0.01)


$

(0.04)


$

(0.37)


$

(0.17)















Basic earnings per share

$

0.47 


$

0.93 


$

1.30 


$

2.01 















Diluted earnings per share

$

0.44 


$

0.89 


$

1.23 


$

1.94 















Shares used in computation of basic earnings per share


89,175 



86,025 



89,095 



88,407 















Shares used in computation of diluted earnings per share


94,255 



89,121 



94,504 



91,760 




KNIGHT CAPITAL GROUP, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited)





















December 31,
2009



December 31,
2008





(In thousands)

ASSETS








Cash and cash equivalents


$

427,106 


$

416,957 


Securities owned, held at clearing brokers, at fair value



926,589 



476,111 


Securities borrowed



394,417 



11,848 


Receivable from brokers and dealers



500,143 



329,502 


Fixed assets and leasehold improvements, at cost,








  less accumulated depreciation and amortization



98,696 



81,237 


Strategic investments



65,166 



83,697 


Goodwill



265,530 



232,197 


Intangible assets, less accumulated amortization



77,812 



90,477 


Deferred compensation investments



44,626 



41,637 


Assets within discontinued operations



12,455 



84,868 


Other assets



198,906 



176,895 










Total assets


$

3,011,446 


$

2,025,426 










LIABILITIES & EQUITY







Liabilities








Securities sold, not yet purchased, at fair value


$

639,259 


$

385,003 


Securities loaned



550,226 




Payable to brokers and dealers



155,148 



98,138 


Accrued compensation expense



204,936 



171,392 


Accrued expenses and other liabilities



93,858 



132,369 


Liabilities within discontinued operations



14,328 



63,988 


Credit facility



140,000 



140,000 










Total liabilities



1,797,755 



990,890 










Equity








Knight Capital Group, Inc. stockholders' equity








Class A common stock



1,587 



1,544 


Additional paid-in capital



747,770 



648,716 


Retained earnings



1,227,923 



1,112,010 


Treasury stock, at cost



(764,209)



(734,912)


Total Knight Capital Group, Inc. stockholders' equity



1,213,071 



1,027,358 


Noncontrolling interests



620 



7,178 

Total equity



1,213,691 



1,034,536 










Total liabilities and equity


$

3,011,446 


$

2,025,426 


KNIGHT CAPITAL GROUP, INC.

PRE-TAX EARNINGS BY BUSINESS SEGMENT*

Amounts in millions

(Unaudited)















For the three months ended
December 31,


For the years ended
December 31,




2009



2008



2009



2008

Equities













Revenues


$

232.0 


$

263.3 


$

891.0 


$

851.5 

Expenses



175.3 



141.8 



663.7 



505.0 

Pre-tax earnings



56.7 



121.6 



227.3 



346.4 














Fixed Income, Currencies and Commodities    













Revenues



70.2 



35.2 



266.7 



79.3 

Expenses



63.0 



29.4 



218.8 



67.0 

Pre-tax earnings



7.2 



5.7 



47.8 



12.3 














Corporate













Revenues



(0.7)



15.8 



3.1 



8.1 

Expenses



13.6 



12.2 



46.8 



49.1 

Other income





15.9 





15.9 

Pre-tax earnings



(14.2)



19.5 



(43.7)



(25.1)














Consolidated













Revenues



301.6 



314.3 



1,160.8 



938.9 

Expenses



251.9 



183.4 



929.3 



621.2 

Other income





15.9 





15.9 

Pre-tax earnings


$

49.8 


$

146.8 


$

231.4 


$

333.6 














* Totals may not add due to rounding.




SOURCE Knight Capital Group, Inc.



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