Investment Technology Group Inc. (ITG, Financial) filed Quarterly Report for the period ended 2010-09-30.
Investment Technology Group Inc. has a market cap of $654.9 million; its shares were traded at around $15.33 with a P/E ratio of 16.1 and P/S ratio of 1. Investment Technology Group Inc. had an annual average earning growth of 1.7% over the past 10 years.ITG is in the portfolios of Third Avenue Management, David Dreman of Dreman Value Management, John Keeley of Keeley Fund Management, Columbia Wanger of Columbia Wanger Asset Management, Steven Cohen of SAC Capital Advisors, Jim Simons of Renaissance Technologies LLC, George Soros of Soros Fund Management LLC, Chuck Royce of Royce& Associates.
Consolidated expenses during the third quarter of $119.0 million were down 9% compared to 2009 levels of $130.4 million. The 11% reduction in U.S. expenses relate primarily to lower compensation and benefits from our 2009 restructuring, reduced incentive compensation, reduced telecommunication costs from the consolidation of our third-party network providers and reduced transaction processing costs, offset in part by higher general and administrative costs from capitalized software amortization. International expenses were down 4% compared to the third quarter of 2009 related primarily to decreases in transaction processing costs from reduced activity and from clearing cost saving initiatives in Europe and Canada, offset in part by increases in infrastructure costs in Europe and Asia Pacific.
The ongoing redirection of funds from domestic equities into other asset classes continues to significantly curtail the equity trading activity of our core institutional client base. The exodus from domestic equity funds accelerated during the third quarter, with an estimated $41 billion being withdrawn from domestic equity funds (according to the Investment Company Institute), eclipsing the $22 billion of outflows in the second quarter. Significant beneficiaries of the 2010 outflows included bond funds, which are
Due to the lack of visibility as to when market conditions will improve for equity trading, part of our strategy has been to expand our addressable market by providing research to our client base. With more than half of the available domestic equity commission pool dedicated for research and advisory services according to Greenwich Associates, penetrating this commission pool represents a natural target for us. In April 2010, we announced our minority investment in Disclosure Insight, Inc., a provider of independent fundamental research and diligence to the investment community. In October 2010, we announced our full acquisition of Majestic, an independent provider of data-driven equity research for the institutional investment community. Majestic helps investors gain independent perspectives on companies and their sectors based on proprietary data sources and rigorous analysis, providing coverage of 17 industry verticals as well as macroeconomics and customized research reports. Majestics revenues for 2010, which are largely in the form of subscriptions, are expected to be approximately $26 million, 25% higher than 2009. Going forward, these revenues will either be reflected in our consolidated statement of income in recurring, if clients are paying through hard dollars or through soft dollar arrangements (including through ITG), or as commission income if such payments are in the form of an overall commission arrangement. We believe this transaction has significant revenue synergy opportunities through our distribution channels and our execution capabilities. Additionally, in connection with the integration of Majestic, we have decided to close our Rye Brook, NY office and relocate the staff, primarily sales traders and support, to our midtown Manhattan office. A one-time charge estimated at $2 million is expected during the fourth quarter of 2010 related to this plan with associated cost reductions for 2011 estimated at $0.8 million.
In Asia Pacific, market turnover was down compared to the third quarter of 2009 despite higher equity prices. While Asia Pacific revenues were positively impacted by the shift in the attribution of $0.8 million of ITG Net revenue from our European Operations, market turnover decreased and third quarter revenues declined 7% from the third quarter of 2009 to $8.1 million. Through various cost saving initiatives, we were able to reduce costs in the region by 11% compared to the third quarter of 2009 and as a result reduced our pre-tax loss in the region by 19%.
Currency translation increased total Canadian revenues and expenses by $0.9 million and $0.7 million, respectively, resulting in a $0.2 million benefit to pre-tax income.
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Investment Technology Group Inc. has a market cap of $654.9 million; its shares were traded at around $15.33 with a P/E ratio of 16.1 and P/S ratio of 1. Investment Technology Group Inc. had an annual average earning growth of 1.7% over the past 10 years.ITG is in the portfolios of Third Avenue Management, David Dreman of Dreman Value Management, John Keeley of Keeley Fund Management, Columbia Wanger of Columbia Wanger Asset Management, Steven Cohen of SAC Capital Advisors, Jim Simons of Renaissance Technologies LLC, George Soros of Soros Fund Management LLC, Chuck Royce of Royce& Associates.
Highlight of Business Operations:
While second quarter volatility was increased by the European sovereign debt crisis and the May 6th flash crash, the third quarter was a period of significantly reduced market activity for equity trading in North America and Europe. While we have made significant strides in reducing our cost base, as evidenced by the 11% reduction in U.S. costs from the third quarter of 2009 described below, this reduced market activity, coupled with the leverage of our largely fixed cost structure weighed on our results. Our net income for the quarter was $6.2 million, or $0.14 per diluted share, compared to net income of $17.5 million, or $0.40 per diluted share for the third quarter of 2009. Consolidated revenues were down 18% to $130.4 million compared to $158.4 million for the third quarter of 2009, reflecting a $26.5 million (23%) decline in U.S. revenues, coupled with a $1.5 million (4%) decrease in international revenues to $42.3 million.Consolidated expenses during the third quarter of $119.0 million were down 9% compared to 2009 levels of $130.4 million. The 11% reduction in U.S. expenses relate primarily to lower compensation and benefits from our 2009 restructuring, reduced incentive compensation, reduced telecommunication costs from the consolidation of our third-party network providers and reduced transaction processing costs, offset in part by higher general and administrative costs from capitalized software amortization. International expenses were down 4% compared to the third quarter of 2009 related primarily to decreases in transaction processing costs from reduced activity and from clearing cost saving initiatives in Europe and Canada, offset in part by increases in infrastructure costs in Europe and Asia Pacific.
The ongoing redirection of funds from domestic equities into other asset classes continues to significantly curtail the equity trading activity of our core institutional client base. The exodus from domestic equity funds accelerated during the third quarter, with an estimated $41 billion being withdrawn from domestic equity funds (according to the Investment Company Institute), eclipsing the $22 billion of outflows in the second quarter. Significant beneficiaries of the 2010 outflows included bond funds, which are
Due to the lack of visibility as to when market conditions will improve for equity trading, part of our strategy has been to expand our addressable market by providing research to our client base. With more than half of the available domestic equity commission pool dedicated for research and advisory services according to Greenwich Associates, penetrating this commission pool represents a natural target for us. In April 2010, we announced our minority investment in Disclosure Insight, Inc., a provider of independent fundamental research and diligence to the investment community. In October 2010, we announced our full acquisition of Majestic, an independent provider of data-driven equity research for the institutional investment community. Majestic helps investors gain independent perspectives on companies and their sectors based on proprietary data sources and rigorous analysis, providing coverage of 17 industry verticals as well as macroeconomics and customized research reports. Majestics revenues for 2010, which are largely in the form of subscriptions, are expected to be approximately $26 million, 25% higher than 2009. Going forward, these revenues will either be reflected in our consolidated statement of income in recurring, if clients are paying through hard dollars or through soft dollar arrangements (including through ITG), or as commission income if such payments are in the form of an overall commission arrangement. We believe this transaction has significant revenue synergy opportunities through our distribution channels and our execution capabilities. Additionally, in connection with the integration of Majestic, we have decided to close our Rye Brook, NY office and relocate the staff, primarily sales traders and support, to our midtown Manhattan office. A one-time charge estimated at $2 million is expected during the fourth quarter of 2010 related to this plan with associated cost reductions for 2011 estimated at $0.8 million.
In Asia Pacific, market turnover was down compared to the third quarter of 2009 despite higher equity prices. While Asia Pacific revenues were positively impacted by the shift in the attribution of $0.8 million of ITG Net revenue from our European Operations, market turnover decreased and third quarter revenues declined 7% from the third quarter of 2009 to $8.1 million. Through various cost saving initiatives, we were able to reduce costs in the region by 11% compared to the third quarter of 2009 and as a result reduced our pre-tax loss in the region by 19%.
Currency translation increased total Canadian revenues and expenses by $0.9 million and $0.7 million, respectively, resulting in a $0.2 million benefit to pre-tax income.
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