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Independent electronic trade execution and research broker ITG (NYSE:ITG) today reported results for the quarter ended June 30, 2014.
The publishing of the company’s most recent quarterly results comes just one day after yesterday’s announcement by the firm that it is purchasing RFQ-hub, a multi-asset platform for global listed and OTC (Over-the-Counter) assets, representing another example of high-value mergers and acquisitions among North American market participants looking to expand their services and global footprint.
RFQ-hub connects buy-side trading desks and portfolio managers with a large network of sell-side market makers, allowing them to place requests for quotes (RFQs) in OTC-negotiated equities, futures, options, swaps, convertible bonds, structured products and commodities. Going forward, the platform will be rebranded as ITG RFQ-hub. It will remain available as a standalone platform and will also be integrated into ITG’s Triton execution management system.
In terms of the company’s financial results, highlights for the second quarter 2014 highlights included:
Net income of $12.9 million, or $0.35 per diluted share compared to net income of $5.1 million, or $0.13 per diluted share and adjusted net income of $10.3 million, or $0.27 per diluted share for the second quarter of 2013. Adjusted net income for the second quarter of 2013 excludes duplicate rent and office closing charges associated with the move to ITG’s new headquarters and wind-down charges and tax charges related to the closing of ITG’s Israel development center, offset by accrual reversals related to restructurings in prior years.
Revenues of $138.5 million, compared to revenues of $139.3 million in the second quarter of 2013.
Expenses of $121.8 million, compared to expenses of $128.5 million and adjusted expenses of $123.5 million in the second quarter of 2013.
Average daily trading volume in the U.S. of 149 million shares versus 179 million shares in the second quarter of 2013. POSIT average daily U.S. volume was 67 million shares compared to 75 million shares in the second quarter of 2013. Total average daily volume traded through POSIT Alert was 15.0 million shares compared to 17.7 million in the second quarter of 2013.
In Europe, average daily value traded in POSIT was $1.024 billion, compared with $674 million in the second quarter of 2013. Total average daily value traded through POSIT Alert rose more than 150% in the second quarter of 2014 compared with the prior-year period.
An annualized return on average equity of 12.4%, compared with 5.1% in the second quarter of 2013. On a year-to-date basis, annualized return on average equity is 12.7% compared to 6.8% for the six months ended June 30, 2013.
The repurchase of 770,800 shares of common stock under ITG’s authorized share repurchase program for a total of $14.3 million, or 111% of second quarter 2014 net income. Repurchases since the first quarter of 2010 have totaled $167.9 million for a total of 12.1 million shares, resulting in a decrease in shares outstanding, net of issuances, of 20%.
Revenues from U.S. operations were $77.3 million in the second quarter of 2014 compared to $84.6 million in the second quarter of 2013. ITG’s U.S. operations reported net income of $2.6 million in the second quarter of 2014 compared to net income of $2.2 million and adjusted net income of $4.5 million in the second quarter of 2013. The overall revenue capture rate per share in the U.S. was $0.0050, up from $0.0048 in the second quarter of 2013, marking the highest level since the second quarter of 2011.
ITG’s International revenues were $61.1 million in the second quarter of 2014 compared to $54.7 million in the second quarter of 2013. European revenues were $31.1 million, up 43% from the second quarter of 2013. Canadian revenues were $17.9 million, down 11% versus the second quarter of 2013 while Asia Pacific revenues were $12.1 million, down 5% from the second quarter of 2013. ITG’s International operations reported net income of $10.3 million in the second quarter of 2014 versus net income of $2.9 million and adjusted net income of $5.8 million in the second quarter of 2013, an increase of 77% over the adjusted net income amount.
“ITG posted strong results in the second quarter of 2014 despite lower trading volumes in most of our operating regions,” said Bob Gasser, ITG’s Chief Executive Officer and President. “We performed extremely well in Europe again, moved closer to profitability in Asia Pacific and pushed our average U.S. revenue per share to the highest level in nearly three years thanks primarily to increased rates on high-touch trading. Our investments in research helped push revenues for our global Research, Sales and Trading offering up 8% over last year’s second quarter.”
“We believe ITG is well positioned to succeed as we work to grow our client base, broaden our international reach and expand our capabilities in asset classes beyond equities,” added Mr. Gasser.
The discussion of results above includes adjusted net income and related per share amounts, in addition to adjusted expense amounts, which are non-GAAP financial measures that are described in the attached table along with a reconciliation of these non-GAAP financial measures to GAAP results.
Making a corporate statement on the acquisition of RFQ-hub, Mr. Gasser explained yesterday that “RFQ-hub is a welcome addition to our global technology platform.”
“This acquisition enhances the multi-asset services we are able to provide to our institutional investor clients in Europe and beyond. In the post- Dodd Frank world, clients are challenged increasingly by operational complexity across all asset classes and derivative instruments. We believe the team at RFQ-hub has built the best-in-class solution to simplify these work and trade flows” he concluded.
David Sagnier, CEO of RFQ-hub, said, “My colleagues and I are excited to join the ITG team. Together, we are dedicated to providing industry-leading tools and services to assist clients in sourcing quality liquidity and help them to seek best execution across all relevant asset classes.”
Privately-held RFQ-hub was founded in France in 2008. The firm has 25 employees, with headquarters in Paris and representatives in London and Hong Kong. ITG management will discuss the acquisition in more detail on the Second Quarter 2014 earnings which is scheduled to take place today.