EX-99.1 3 a2115474zex-99_1.htm EXHIBIT 99.1
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Exhibit 99.1

Investment Technology Group, Inc. 380 Madison Avenue, New York, NY 10017 (212) 588-4000

GRAPHIC   FOR IMMEDIATE RELEASE
  
Contacts:
Howard C. Naphtali
Chief Financial Officer
(212) 444-6160		     
  
  
Elise Wilkinson
Director of Investor Relations
(212) 444-6245


ITG REPORTS SECOND QUARTER RESULTS
STRONG OPERATING LEVERAGE ON RECENT VOLUME RECOVERY

New York, NY, July 17, 2003—Investment Technology Group, Inc. (NYSE: ITG), a leading provider of technology-based equity trading services, today announced that for the second quarter ended June 27, 2003, revenues were $88.6 million, net income was $11.8 million and diluted earnings per share were $0.25.

An improved institutional trading environment in May and June led to an increase of 21% in revenues, 82% in net income and 79% in diluted earnings per share compared to the first quarter of 2003. However, compared to last year's second quarter during which ITG achieved record U.S. trading volumes (and which preceded ITG's acquisition of Hoenig in September 2002), revenues, net income and diluted earnings per share decreased 11%, 43% and 40% respectively.

"While we are encouraged by the recent increase in trading volumes, we maintain a cautious outlook in the current environment as significant economic uncertainty remains," said Robert J. Russel, ITG President and Chief Executive Officer. "Our second quarter profit growth reflects improvement over first quarter performance in all domestic and international business units, and clearly illustrates the leverage built into our business model which can benefit us as the market recovers. In the meantime, we will continue to enhance our product offering to maintain strong market share, diversify our client base and manage our cost structure."

Compared to the first quarter of 2003, revenues per trading day were up in all three business lines. POSIT® increased by 32%, the Electronic Trading Desk by 11% and Client-Site Trading Products by 1%. Revenue per trading day compared to last year's second quarter declined 16% for POSIT and 35% for Client-Site Trading Products, while increasing 35% for the Electronic Trading Desk due to ITG's acquisition of Hoenig in September 2002.

Performance of ITG's international operations was significantly improved. Record revenues of $14.5 million represented a 41% increase over the $10.3 million for the prior year period. European revenues climbed to $6.2 million in the second quarter of 2003 versus $5.1 million in the second quarter of 2002. Second quarter revenues in Canada were a record $5.6 million compared to $3.7 million in the prior year period. Revenues in Australia were $1.5 million, unchanged from the prior year period while revenues in Asia (where ITG commenced trading in the second quarter of 2002) were $1.2 million.

Pre-tax losses from international operations were reduced by more than 50% to $1.2 million for the second quarter of 2003 ($0.03 per share) versus $2.7 million ($0.06 share) in the previous quarter. International pre-tax losses in the second quarter of 2002 were $2.3 million ($0.05 per share).


Excluding Hoenig, ITG's total U.S. trading volume was almost 5.0 billion shares (averaging 79.1 million shares per trading day) compared to 4.3 billion shares in the first quarter of 2003 (averaging 71.0 million shares per trading day) and 6.5 billion shares in the second quarter of 2002 (averaging 100.9 million shares per trading day). On a consolidated basis including both Hoenig and international operations, ITG's total trading volume was 10.2 billion shares for the second quarter of 2003 compared to 8.7 billion shares for the second quarter of 2002 and 8.2 billion shares in the first quarter of 2003.

For ITG overall, pre-tax margins were 23% compared to 17% in the first quarter of 2003 and 36% in second quarter 2002. In the U.S., ITG's pre-tax margins of 29% were up from the trailing quarter's level of 26% but down from 43% a year ago due to the reduction in trading activity. Reflecting operating leverage similar to that of ITG, Hoenig's pre-tax margins increased to 30% versus 12% in the first quarter of 2003.

Year-To-Date Results

For the six months ended June 27, 2003, revenues decreased 18% over the prior year period to $162.2 million, net income decreased 57% to $18 million and diluted earnings per share decreased 55% to $0.39.

Conference Call

ITG has scheduled a conference call today at 11:00 a.m. EDT to discuss second quarter results. Those wishing to listen to the call should dial (800) 314-7867 at least 10 minutes prior to the start of the call to ensure connection. For those unable to listen to the live broadcast of the call, a week-long replay will be available by dialing 888-203-1112 and entering the pass code 246504, and a two week-long replay will be available on ITG's website at http://www.itginc.com starting approximately 2 hours after the completion of the call.

About ITG

ITG is headquartered in New York with offices in Boston, Los Angeles, Dublin, Hong Kong, London, Melbourne, Sydney, Tel Aviv and Toronto. As a leading provider of technology-based equity-trading services and transaction research to institutional investors and brokers, ITG services help clients to access liquidity, execute trades more efficiently, and make better trading decisions. ITG generates superior trading results for its clients through three lines of business. POSIT, the world's largest equity matching system, allows clients to trade confidentially. The Electronic Trading Desk is recognized as one of the leading program trading operations in the U.S. ITG's leading-edge Client Site Trading Products allow users to implement their own trading strategies by providing direct electronic access to most sources of market liquidity. For additional information, visit http://www.itginc.com.

In addition to historical information, this press release may contain "forward-looking" statements, as defined in the Private Securities Litigation Reform Act of 1995, that reflect management's expectations for the future. A variety of important factors could cause results to differ materially from such statements. These factors include the company's ability to achieve expected future levels of sales; the actions of both current and potential new competitors; rapid changes in technology; financial market volatility; general economic conditions in the United States and elsewhere; evolving industry regulation; cash flows into or redemption from equity funds; effects of inflation; customer trading patterns; and new products and services. These and other risks are described in greater detail in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2002 and other documents filed with the Securities and Exchange Commission and available on the company's web site.

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INVESTMENT TECHNOLOGY GROUP, INC.
Consolidated Statements of Income (unaudited)
(In thousands, except per share amounts)

 
   Three Months Ended
   Six Months Ended
 
   June 27,
2003
   June 30,
2002
   June 27,
2003
   June 30,
2002
Revenues:                        
  Commissions:                        
    POSIT   $ 34,343   $ 41,600   $ 59,063   $ 88,186
    Electronic Trading Desk     31,791     23,880     59,123     46,916
    Client Site Direct Access     20,128     31,410     39,124     57,422
  Other     2,380     2,508     4,843     4,612
   
 
 
 
      Total revenues     88,642     99,398     162,153     197,136
   
 
 
 
Expenses:                        
  Compensation and employee benefits     30,438     29,474     59,206     55,635
  Transaction processing     11,965     11,664     22,059     23,572
  Software royalties     4,530     5,387     7,646     11,308
  Occupancy and equipment     8,093     6,851     15,755     13,132
  Telecommunications and data processing services     4,757     4,040     9,247     8,286
  Other general and administrative     8,746     6,196     15,886     11,633
   
 
 
 
      Total expenses     68,529     63,612     129,799     123,566
   
 
 
 
Income before income tax expense     20,113     35,786     32,354     73,570
Income tax expense     8,298     14,985     14,050     30,601
   
 
 
 
Net income   $ 11,815   $ 20,801   $ 18,304   $ 42,969
   
 
 
 
Earnings per share:                        
Basic   $ 0.25   $ 0.43   $ 0.39   $ 0.88
   
 
 
 
Diluted   $ 0.25   $ 0.42   $ 0.39   $ 0.87
   
 
 
 
Basic weighted average number of common shares outstanding     47,227     48,941     47,282     48,917
   
 
 
 
Diluted weighted average number of common shares outstanding     47,237     49,597     47,296     49,659
   
 
 
 

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INVESTMENT TECHNOLOGY GROUP, INC.
Consolidated Statements of Financial Condition
(In thousands, except share amounts)

 
   June 27,
2003
   December 31,
2002
  
 
   (unaudited)

    
  
Assets              
Cash and cash equivalents   $ 195,169   $ 180,970  
Cash restricted or segregated under regulations and other     13,078     12,302  
Securities owned, at fair value     83,559     75,644  
Receivables from brokers, dealers and other, net     302,788     159,293  
Investments in limited partnerships     26,653     26,104  
Premises and equipment     24,664     28,999  
Capitalized software     8,035     6,582  
Goodwill and other intangibles     82,531     82,567  
Deferred taxes     9,929     9,740  
Other assets     12,016     12,053  
   
 
 
Total assets   $ 758,422   $ 594,254  
   
 
 

Liabilities and Stockholders' Equity
 
 
 
 
 
 
 
Liabilities:              
Accounts payable and accrued expenses   $ 89,358   $ 83,350  
Payables to brokers, dealers and other     273,432     139,138  
Software royalties payable     4,753     4,122  
Securities sold, not yet purchased, at fair value     176     37  
Income taxes payable     16,633     11,098  
   
 
 
  Total liabilities     384,352     237,745  
   
 
 
Commitments and contingencies              
Stockholders' Equity:              
Preferred stock, par value $0.01; shares authorized: 1,000,000; shares issued: none     —     —  
Common stock, par value $0.01; shares authorized: 100,000,000; shares issued: 51,237,705 and 51,220,201 at June 27, 2003 and December 31, 2002, respectively     512     512  
Additional paid-in capital     156,030     155,085  
Retained earnings     310,329     292,025  
Common stock held in treasury, at cost; shares: 3,996,583 and 3,689,722 at June 27, 2003 and December 31, 2002, respectively     (96,882 )   (92,471 )
Accumulated other comprehensive income:              
  Currency translation adjustment     4,081     1,358  
   
 
 
  Total stockholders' equity     374,070     356,509  
   
 
 
Total liabilities and stockholders' equity   $ 758,422   $ 594,254  
   
 
 

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ITG REPORTS SECOND QUARTER RESULTS STRONG OPERATING LEVERAGE ON RECENT VOLUME RECOVERY
INVESTMENT TECHNOLOGY GROUP, INC. Consolidated Statements of Income (unaudited) (In thousands, except per share amounts)
INVESTMENT TECHNOLOGY GROUP, INC. Consolidated Statements of Financial Condition (In thousands, except share amounts)