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KCG Announces Third Quarter 2014 Results
KCG reported a GAAP net loss of $9.6 million; pre-tax loss from continuing operations of $15.2 million includes a net benefit of $4.3 million unrelated to core operations
KCG repurchased 3.6 million shares for approximately $42.1 million during the quarter

JERSEY CITY, N.J., Oct. 30, 2014 /PRNewswire/ -- KCG Holdings, Inc. (NYSE: KCG) today reported a GAAP net loss of $9.6 million, or $0.09 per share, for the third quarter of 2014.

The third quarter 2014 GAAP net loss from continuing operations was $9.4 million, or a loss of $0.09 per share. The third quarter pre-tax loss from continuing operations was $15.2 million which includes a $15.1 million net gain related to the Company's strategic investment in tradeMONSTER Group, Inc. ("tradeMONSTER"), which combined with OptionsHouse LLC ("OptionsHouse"), $10.5 million in compensation related to a reduction in workforce and other employee separations and a $0.3 million lease loss accrual. Excluding these items, on a non-GAAP basis, third quarter 2014 loss from continuing operations before income taxes was $19.5 million. A reconciliation of GAAP to non-GAAP results is included in Exhibit 4.

KCG was formed July 1, 2013 as a result of the merger between Knight Capital Group, Inc. and GETCO Holding Company, LLC. Financial results for the periods prior to the third quarter of 2013 contained herein solely represent the results of GETCO Holding Company, LLC as the accounting acquirer.

Select Financial Results

($ in thousands, except EPS)

From Continuing Operations

3Q14


2Q14


3Q13

Revenues

272,302


314,133


469,338

   Trading revenues, net

150,865


206,780


230,471

   Commissions and fees

102,663


104,776


109,079

   Gain on investment in Knight Capital Group, Inc.



127,972

GAAP pre-tax (loss) income

(15,235)


14,507


121,373

GAAP EPS

(0.09)


0.08


1.99

Non-GAAP pre-tax (loss) income*

(19,518)


21,512


19,047

* See Exhibit 4 for a reconciliation of GAAP to non-GAAP results.

 

Third Quarter Highlights

  • Grew market share of consolidated U.S. equity share volume executed by KCG market making from the second quarter
  • Increased algorithmic trading volumes and net revenues from institutional clients for the second consecutive quarter
  • Announced the sale of KCG's futures commission merchant (FCM)
  • Repurchased 3.6 million shares for $42.1 million

Daniel Coleman, Chief Executive Officer of KCG, said, "KCG's financial results for the third quarter of 2014 were impacted by the subdued market environment in U.S. equities. In particular, the muted retail trading activity and single-digit realized volatility within a heightened competitive environment cut into Market Making segment results. Consecutive quarters in a market cycle trough reaffirm the importance of reducing the cost structure while diversifying in select asset classes in ways that are scalable and non-capital intensive. During the quarter, KCG continued to carry out our strategic plan, pursue opportunities to unlock additional value and return capital to stockholders."

In the first quarter of 2014, the Company began to charge the Market Making and Global Execution Services segments for the cost of aggregate debt interest. The interest amount charged to each of the segments is based on capital limits and requirements. Historically, debt interest was included within the Corporate and Other segment. This change in the measurement of segment profitability, which has no impact to the consolidated results, is reported prospectively and, therefore, is not reflected in the financial results for any period prior to January 1, 2014.

Market Making
The Market Making segment encompasses direct-to-client and non-client, exchange-based market making across multiple asset classes and is an active participant in all major cash, options and futures markets in the U.S., Europe and Asia. During the third quarter of 2014, the segment generated total revenues of $166.6 million and a pre-tax loss of $8.0 million, which included a debt interest charge of $6.1 million. The results also included compensation related to a reduction in workforce and other employee separations of $2.8 million. Excluding this item, Market Making generated a pre-tax loss of $5.2 million in the third quarter.

In the second quarter of 2014, the segment generated total revenues of $218.4 million and pre-tax income of $36.0 million, which included a debt interest charge of $5.9 million. In the third quarter of 2013, the segment reported total revenues of $240.1 million and pre-tax income of $47.9 million.

During the third quarter of 2014, results from U.S. equity market making were adversely affected by the decline in retail trading activity, heightened competition for retail order flow and challenging market conditions late in the quarter. According to SEC Rule 605 data, average daily U.S. equity share volume handled by the leading market makers was 11 percent below the quarterly average over the past five years while price improvement on retail orders rose approximately 7.5 percent market-wide from the second quarter of 2014 and 27.5 percent from the third quarter of 2013. Results from non-U.S. equity market making were largely static quarter over quarter amid mixed market conditions in European and Asian equities, fixed income, currencies and commodities.

Mr. Coleman commented, "A number of factors coalesced to pressure revenues and revenue capture in U.S. equities during the quarter. The seasonally slow July and August were followed by an active yet challenging September. The elevated levels of price improvement put added pressure on revenue capture. Nonetheless, we grew market share of consolidated U.S. equity share volume during the quarter and made important progress in certain other strategic asset classes."

Select Trade Statistics: U.S. Equity Market Making


3Q14


2Q14


3Q13

Average daily dollar volume traded ($ millions)

24,726


25,143


25,365

Average daily trades (thousands)

3,326


3,620


3,809

Average daily shares traded (millions)

5,787


10,820


4,148

   NYSE and NASDAQ shares traded

727


758


805

   OTC Bulletin Board and OTC Market shares traded

5,060


10,061


3,343

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

0.75


1.07


1.01

Global Execution Services
The Global Execution Services segment comprises agency execution services and trading venues. During the third quarter of 2014, the segment generated total revenues of $79.2 million and a pre-tax loss of $1.7 million, which included a debt interest charge of $1.6 million. The results also included compensation related to a reduction in workforce and other employee separations of $3.6 million. Excluding this item, Global Execution Services generated pre-tax income of $1.9 million in the third quarter.

In the second quarter of 2014, the segment generated total revenues of $85.9 million and pre-tax income of $0.7 million, which included a debt interest charge of $1.8 million. The results also included compensation related to a reduction in workforce of $1.9 million. Excluding this item, Global Execution Services generated pre-tax income of $2.6 million in the second quarter of 2014.  In the third quarter of 2013, the segment reported total revenues of $91.4 million and a pre-tax loss of $16.4 million, which included $15.1 million in compensation charges related to a reduction in workforce. Excluding this item, Global Execution Services generated a pre-tax loss of $1.2 million in the third quarter of 2013.

During the third quarter of 2014, results were impacted by the quarter over quarter declines in market volumes of U.S. and European equities, offset in part by additional progress in algorithmic trading as well as a rise in market volumes of foreign exchange and ETFs. In algorithmic trading, the contributions from institutional clients grew for the second consecutive quarter to 24 percent of U.S. equity share volume and 63 percent of net revenues for the unit. KCG Hotspot benefitted from a 15 percent quarter over quarter rise in overall notional foreign exchange dollar volume among reporting venues. KCG's U.S. ETF trading team continued to build momentum amid an approximate 5 percent quarter over quarter increase in overall ETF share volume.

Mr. Coleman commented, "We have made steady progress to date in algorithmic trading. In the first half of the year, we introduced a new algorithm employing a market maker's approach and made several, targeted new hires. As a result of all the efforts, we've onboarded 50 new institutional clients through the third quarter. We continue to beta test new intuitive algorithms that leverage KCG's intellectual capital and technology to add to the product portfolio."

As KCG continues to evaluate how best to realize untapped value throughout the company, KCG has begun to explore strategic options for KCG Hotspot, with the goal of executing on opportunities if it creates additional value for our stockholders, clients and employees. KCG has not made a decision to enter into any transaction at this time, and there can be no assurance that KCG will enter into such a transaction in the future.

Select Trade Statistics: Agency Execution and Trading Venues


3Q14


2Q14


3Q13

Average daily KCG algorithmic trading and order routing

U.S. equities shares traded (millions)

248.2


265.3


269.7

Average daily KCG Hotspot notional foreign exchange

dollar value traded ($ billions)

30.3


26.2


28.4

Average daily KCG BondPoint fixed income par value

traded ($ millions)

126.0


133.7


129.1

KCG electronic execution average daily U.S. equities share volume includes U.S. exchange listed shares traded by algorithmic trading and order routing.

 

Corporate and Other
The Corporate and Other segment includes strategic investments and corporate overhead expenses. During the third quarter of 2014, the segment recorded total revenues of $26.5 million and a pre-tax loss of $5.5 million. Included in the results was a net gain of $15.1 million related to KCG's investment in tradeMONSTER, in conjunction with tradeMONSTER's combination with OptionsHouse in the third quarter, compensation related to a reduction in workforce and other employee separations of $4.2 million and a lease loss accrual of $0.3 million. Excluding these items, the Corporate and Other segment's pre-tax loss for the third quarter was $16.2 million.

In the second quarter of 2014, the segment recorded total revenues of $9.8 million and a pre-tax loss of $22.2 million. Included in the results was a $2.0 million writedown of capitalized debt costs related to the principal repayment of debt, $0.8 million in compensation related to a reduction in workforce, and a lease loss accrual of $1.5 million. Excluding these items, the Corporate and Other segment's pre-tax loss for the second quarter was $17.9 million.  In the third quarter of 2013, the segment recorded total revenues of $137.9 million and pre-tax income of $89.9 million. Included in the results was revenue of $128.0 million resulting from the gain on investment in Knight Capital Group, Inc. as well as professional and other fees related to the Mergers and August 1st technology issue of $7.3 million and lease loss accruals of $0.8 million.  Excluding these items, the Corporate and Other segment's pre-tax loss for the third quarter of 2013 was $30.0 million.

Financial Condition
As of September 30, 2014, KCG had $540.5 million in cash and cash equivalents. Total outstanding debt was $422.3 million, of which $117.3 million is due in March 2015. The Company had $1.5 billion in stockholders' equity equivalent to a book value of $12.68 per share and tangible book value of $11.05 per share based on total shares outstanding of 117.2 million, including restricted stock units.

KCG's headcount at September 30, 2014 was 1,153 full-time employees as compared to 1,207 full-time employees at June 30, 2014. Approximately 45 full-time employees will be affected by the announced sale of KCG's futures commission merchant (FCM), which is expected to close in the fourth quarter of 2014.

During the third quarter of 2014, KCG repurchased 3.6 million shares for approximately $42.1 million under the Company's initial $150.0 million stock repurchase program. As of September 30, 2014, KCG had approximately $55.0 million of remaining capacity available to repurchase additional shares under the program. The Company cautions that there are no assurances that any further repurchases may actually occur.

Conference Call
KCG will hold a conference call to discuss third quarter 2014 financial results starting at 9:00 a.m. Eastern Time today, October 30, 2014. To access the call, dial 888-263-2736 (domestic) or 913-905-3216 (international) and enter passcode 9791821. In addition, the call will be webcast at http://www.media-server.com/m/acs/41fae90442d481b1589c479d3013dbef. Following the conclusion of the call, a replay will be available by dialing 888-203-1112 in the U.S. or selecting a number based on location outside the U.S. from a list posted at https://replaynumbers.conferencinghub.com/index.aspx?confid=9791821&passcode=9791821 and entering passcode 9791821.

Additional information for investors, including a presentation of the third quarter financial results, can be found at http://investors.kcg.com.

Non-GAAP Financial Presentations
KCG believes that certain non-GAAP financial presentations, when taken into consideration with the corresponding GAAP financial presentations, are important in understanding operating results. Selected financial information is included in the non-GAAP financial presentations for the three months ended September 30, 2014, June 30, 2014 and September 30, 2013 and for the nine months ended September 30, 2014 and 2013. KCG believes the presentations provide a meaningful summary of results of operations for each of the three and nine month periods. Reconciliations of GAAP to non-GAAP results are included in the schedules in Exhibit 4.

About KCG
KCG is a leading independent securities firm offering investors and clients a range of services designed to address trading needs across asset classes, product types and time zones. The firm combines advanced technology with exceptional client service across market making, agency execution and venues. KCG has multiple access points to trade global equities, fixed income, currencies and commodities via voice or automated execution. www.kcg.com

Certain statements contained herein may constitute "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are typically identified by words such as "believe," "expect," "anticipate," "intend," "target," "estimate," "continue," "positions," "prospects" or "potential," by future conditional verbs such as "will," "would," "should," "could" or "may," or by variations of such words or by similar expressions. These "forward-looking statements" are not historical facts and are based on current expectations, estimates and projections about KCG's industry, management's beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Any forward-looking statement contained herein speaks only as of the date on which it is made. 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: (i) the strategic business combination (the "Mergers") of Knight Capital Group, Inc. ("Knight") and GETCO Holding Company, LLC ("GETCO"), including, among other things, (a) difficulties and delays in integrating the Knight and GETCO businesses or fully realizing cost savings and other benefits, (b) the inability to sustain revenue and earnings growth, and (c) customer and client reactions to the Mergers; (ii) the August 1, 2012 technology issue that resulted in Knight's broker-dealer subsidiary sending numerous erroneous orders in NYSE-listed and NYSE Arca securities into the market and the impact to Knight's business as well as actions taken in response thereto and consequences thereof; (iii) the sale of KCG's reverse mortgage origination and securitization business and the departure of the managers of KCG's listed derivatives group; (iv) changes in market structure, legislative, regulatory or financial reporting rules, including the increased focus by regulators, the New York Attorney General, Congress and the media on market structure issues, and in particular, the scrutiny of high frequency trading, alternative trading systems, market fragmentation, colocation, access to market data feeds, and remuneration arrangements such as payment for order flow and exchange fee structures; (v) past or future changes to organizational structure and management; (vi) KCG's ability to develop competitive new products and services in a timely manner and the acceptance of such products and services by KCG's customers and potential customers; (vii) KCG's ability to keep up with technological changes; (viii) KCG's ability to effectively identify and manage market risk, operational and technology risk, legal risk, liquidity risk, reputational risk, counterparty and credit risk, international risk, regulatory risk, and compliance risk; (ix) the cost and other effects of material contingencies, including litigation contingencies, and any adverse judicial, administrative or arbitral rulings or proceedings; and (x) the effects of increased competition and KCG's ability to maintain and expand market share. The list above is not exhaustive. Readers should carefully review the risks and uncertainties disclosed in KCG's reports with the SEC, including, without limitation, those detailed under "Risk Factors" in KCG's Annual Report on Form 10-K for the year-ended December 31, 2013, under "Certain Factors Affecting Results of Operations" in KCG's Quarterly Report on Form 10-Q for the period ended June 30, 2014, and other reports or documents KCG files with, or furnishes to, the SEC from time to time.

 

 

KCG HOLDINGS, INC.








Exhibit 1 

CONSOLIDATED STATEMENTS OF OPERATIONS






(Unaudited)












For the three months ended 





September 30, 2014



June 30, 2014



September 30, 2013




(In thousands, except per share amounts)












Revenues










Trading revenues, net

$

150,865


$

206,780


$

230,471


Commissions and fees


102,663



104,776



109,079


Interest, net


139



(289)



(177)


Investment income and other, net


18,635



2,866



129,965



Total revenues


272,302



314,133



469,338












Expenses










Employee compensation and benefits


95,307



103,430



129,631


Execution and clearance fees


74,058



73,242



81,023


Communications and data processing


38,576



38,279



44,046


Depreciation and amortization


20,298



19,823



20,091


Payments for order flow


15,377



18,076



16,431


Debt interest expense 


7,714



7,497



19,350


Occupancy and equipment rentals


7,672



8,235



8,898


Collateralized financing interest 


7,330



6,395



4,520


Professional fees


7,161



7,337



9,077


Business development


3,163



2,609



2,644


Writedown of assets and lease loss accrual, net


301



1,941



936


Writedown of capitalized debt costs 


-



1,995



-


Other


10,580



10,767



11,318



Total expenses


287,537



299,626



347,965












(Loss) Income from continuing operations before income taxes


(15,235)



14,507



121,373

Income tax (benefit) expense


(5,796)



5,520



(107,190)

(Loss) Income from continuing operations, net of tax


(9,439)



8,987



228,563

Loss from discontinued operations, net of tax


(177)



(67)



(784)












Net (loss) Income

$

(9,616)


$

8,920


$

227,779























Basic (loss) earnings per share from continuing operations

$

(0.09)


$

0.08


$

2.00












Diluted (loss) earnings per share from continuing operations

$

(0.09)


$

0.08


$

1.99












Basic loss per share from discontinued operations

$

-


$

-


$

(0.01)












Diluted loss per share from discontinued operations

$

-


$

-


$

(0.01)












Basic (loss) earnings per share

$

(0.09)


$

0.08


$

2.00












Diluted (loss) earnings per share

$

(0.09)


$

0.08


$

1.98












Shares used in computation of basic (loss) earnings per share


110,376



114,859



114,113












Shares used in computation of diluted (loss) earnings per share


110,376



117,601



114,773












 

 

KCG HOLDINGS, INC.




Exhibit 1 

CONSOLIDATED STATEMENTS OF OPERATIONS(1)




(Continued)

(Unaudited)









For the nine months ended 





September 30, 2014



September 30, 2013




(In thousands, except per share amounts)









Revenues







Trading revenues, net

$

615,942


$

415,495


Commissions and fees


319,696



164,391


Interest, net


798



(970)


Investment income and other, net


33,656



125,046



Total revenues


970,092



703,962









Expenses







Employee compensation and benefits


321,056



236,983


Execution and clearance fees


222,801



167,931


Communications and data processing


113,651



86,040


Depreciation and amortization


60,224



36,004


Payments for order flow


55,485



17,468


Debt interest expense 


24,735



21,995


Occupancy and equipment rentals


24,192



15,454


Collateralized financing interest 


19,887



4,520


Professional fees


19,900



38,928


Business development


7,455



2,686


Writedown of assets and lease loss accrual, net


2,508



4,248


Writedown of capitalized debt costs 


9,552



-


Other


29,990



30,028



Total expenses


911,436



662,285









Income from continuing operations before income taxes


58,656



41,677

Income tax expense (benefit)


22,191



(101,901)

Income from continuing operations, net of tax


36,465



143,578

Loss from discontinued operations, net of tax


(1,497)



(784)









Net income

$

34,968


$

142,794









Net loss allocated to preferred and participating units

$

-


$

(21,535)









Net income attributable to common shareholders

$

34,968


$

164,329









Basic earnings per share from continuing operations

$

0.32


$

2.41









Diluted earnings per share from continuing operations

$

0.31


$

2.40









Basic loss per share from discontinued operations

$

(0.01)


$

(0.01)









Diluted loss per share from discontinued operations

$

(0.01)


$

(0.01)









Basic earnings per share

$

0.31


$

2.39









Diluted earnings per share

$

0.30


$

2.39









Shares used in computation of basic earnings (loss) per share


113,680



68,632









Shares used in computation of diluted earnings (loss) per share


117,127



68,855









(1)  Nine months ended September 30, 2013 includes three months of results of KCG Holdings, Inc. plus six months of 

      GETCO Holding Company, LLC.




 

 

 

KCG HOLDINGS, INC.


Exhibit 2

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION




(Unaudited)



















September 30, 2014



December 31, 2013






(In thousands)

ASSETS








Cash and cash equivalents


$

540,457


$

674,281


Cash and cash equivalents segregated under federal and other regulations



15,805



183,082


Financial instruments owned, at fair value:









Equities



2,595,507



2,298,785



Listed options



130,931



339,798



Debt securities



123,151



83,256


Total financial instruments owned, at fair value



2,849,589



2,721,839


Collateralized agreements:









Securities borrowed 



1,711,214



1,357,387


Receivable from brokers, dealers and clearing organizations



969,018



1,257,251


Fixed assets and leasehold improvements, 







 less accumulated depreciation and amortization


138,892



146,668


Investments



101,746



125,413


Goodwill and Intangible assets, less accumulated amortization



190,601



208,806


Deferred tax asset, net



175,215



175,639


Assets held for sale



686,639



-


Other assets



136,070



146,638










Total assets


$

7,515,246


$

6,997,004










LIABILITIES & EQUITY 







Liabilities








Financial instruments sold, not yet purchased, at fair value:









Equities


$

2,057,849


$

1,851,006



Listed options



117,829



252,282



Debt securities



186,211



57,198



Other financial instruments



636



5,014


Total financial instruments sold, not yet purchased, at fair value



2,362,525



2,165,500


         Collateralized financings:









Securities loaned  



778,000



733,230



Financial instruments sold under agreements to repurchase



867,858



640,950


Total collateralized financings 



1,645,858



1,374,180











Payable to brokers, dealers and clearing organizations



611,426



474,108


Payable to customers



61,540



481,041


Accrued compensation expense



70,630



149,430


Accrued expenses and other liabilities



159,135



175,910


Capital lease obligations 


7,250



10,039


Liabilities held for sale 



688,802



-


Debt



422,259



657,259










Total liabilities



6,029,425



5,487,467










Equity








Class A Common Stock



1,277



1,233


Additional paid-in capital



1,357,613



1,306,549


Retained earnings



246,646



211,678


Treasury stock, at cost



(121,457)



(11,324)


Accumulated other comprehensive income 



1,742



1,401

Total equity



1,485,821



1,509,537










Total liabilities and equity


$

7,515,246


$

6,997,004

 

 

KCG HOLDINGS, INC.









Exhibit 3

PRE-TAX EARNINGS (LOSS) FROM CONTINUING OPERATIONS BY BUSINESS SEGMENT*


(In thousands)










(Unaudited)






















For the three months ended  




September 30, 2014



June 30, 2014



September 30, 2013

Market Making










Revenues


$

166,620


$

218,446


$

240,110

Expenses



174,653



182,442



192,257

Pre-tax (loss) earnings



(8,033)



36,004



47,853











Global Execution Services










Revenues



79,218



85,903



91,366

Expenses



80,882



85,167



107,720

Pre-tax (loss) earnings



(1,664)



736



(16,354)











Corporate and Other










Revenues



26,464



9,784



137,862

Expenses



32,002



32,017



47,988

Pre-tax (loss) earnings



(5,538)



(22,233)



89,874











Consolidated










Revenues



272,302



314,133



469,338

Expenses



287,537



299,626



347,965

Pre-tax (loss) earnings


$

(15,235)


$

14,507


$

121,373











* Totals may not add due to rounding.







 

 

 

KCG HOLDINGS, INC.









Exhibit 3

PRE-TAX EARNINGS (LOSS) FROM CONTINUING OPERATIONS BY BUSINESS SEGMENT*

(Continued)

(In thousands)










(Unaudited)






















For the nine months ended  







September 30, 2014



September 30, 2013




Market Making










Revenues


$

662,412


$

455,678




Expenses



558,409



400,016




Pre-tax earnings



104,003



55,662














Global Execution Services










Revenues



252,341



113,700




Expenses



251,253



135,002




Pre-tax earnings (loss)



1,088



(21,302)














Corporate and Other










Revenues



55,339



134,584




Expenses



101,774



127,267




Pre-tax (loss) earnings



(46,435)



7,317














Consolidated










Revenues



970,092



703,962




Expenses



911,436



662,285




Pre-tax earnings


$

58,656


$

41,677














* Totals may not add due to rounding.







Nine months ended September 30, 2013 includes three months of results of KCG Holdings, Inc. plus six months of 

GETCO Holding Company, LLC.
















 

 

KCG HOLDINGS, INC.








Exhibit 4

Regulation G Reconciliation of Non-GAAP financial measures (Continuing operations)














(in thousands)


















Three months ended September 30, 2014


Market Making


Global Execution Services


Corporate and Other


Consolidated










Reconciliation of GAAP Pre-Tax to Non-GAAP Pre-Tax:           









GAAP  Loss from continuing operations before income taxes


$              (8,033)


$              (1,664)


$              (5,538)


$            (15,235)

Net gain related to tradeMONSTER combination with OptionsHouse


-


-


(15,105)


(15,105)

Compensation related to reduction in workforce and other employee separations


2,786


3,577


4,158


10,521

Writedown of assets and lease loss accrual, net


-


-


301


301

Non GAAP (Loss) Income from continuing operations before income taxes


$              (5,247)


$                1,913


$            (16,184)


$            (19,518)










Three months ended June 30, 2014


Market Making


Global Execution Services


Corporate and Other


Consolidated










Reconciliation of GAAP Pre-Tax to Non-GAAP Pre-Tax:           









GAAP  Income (Loss) from continuing operations before income taxes


$              36,004


$                   736


$            (22,233)


$              14,507

Writedown of capitalized debt costs


-


-


1,995


1,995

Compensation related to reduction in workforce


383


1,886


800


3,069

Writedown of assets and lease loss accrual, net


452


-


1,489


1,941

Non GAAP Income (Loss) from continuing operations before income taxes


$              36,839


$                2,622


$            (17,949)


$              21,512










Three months ended September 30, 2013


Market Making


Global Execution Services


Corporate and Other


Consolidated










Reconciliation of GAAP Pre-Tax to Non-GAAP Pre-Tax:           









GAAP  Income (Loss) from continuing operations before income taxes


$              47,853


$            (16,354)


$              89,874


$            121,373

Gain on investment in Knight Capital Group, Inc.


-


-


(127,972)


(127,972)

Compensation and other expenses related to reduction in workforce


2,309


15,132


-


17,441

Professional and other fees related to Mergers and August 1st technology issue 


-


-


7,269


7,269

Writedown of assets and lease loss accrual


108


-


828


936

Non GAAP Income (Loss) from continuing operations before income taxes


$              50,270


$              (1,222)


$            (30,001)


$              19,047










* Totals may not add due to rounding









 

 

 

KCG HOLDINGS, INC.








Exhibit 4

Regulation G Reconciliation of Non-GAAP financial measures (Continuing operations)(1)




(Continued)










(in thousands)


















Nine months ended September 30, 2014


Market Making


Global Execution Services


Corporate and Other


Consolidated










Reconciliation of GAAP Pre-Tax to Non-GAAP Pre-Tax:           









GAAP Income (Loss) from continuing operations before income taxes


$            104,003


$                1,088


$            (46,435)


$              58,656

Net gain related to tradeMONSTER combination with OptionsHouse


-


-


(15,105)


(15,105)

Income resulting from the merger of BATS and Direct Edge, net


-


-


(9,644)


(9,644)

Compensation related to reduction in workforce and other employee separations


3,169


5,463


4,958


13,590

Writedown of capitalized debt costs


-


-


9,552


9,552

Writedown of assets and lease loss accrual, net


811


-


1,697


2,508

Non GAAP Income (Loss) from continuing operations before income taxes


$            107,983


$                6,551


$            (54,977)


$              59,557










Nine months ended September 30, 2013


Market Making


Global Execution Services


Corporate and Other


Consolidated










Reconciliation of GAAP Pre-Tax to Non-GAAP Pre-Tax:           









GAAP Income (Loss) from continuing operations before income taxes


$              55,662


$            (21,302)


$                7,317


$              41,677

Gain on investment in Knight Capital Group, Inc.


-


-


(127,972)


(127,972)

Professional and other fees related to Mergers and August 1st technology issue 


-


-


44,398


44,398

Compensation and other expenses related to reduction in workforce


6,264


15,997


-


22,261

Unit based compensation acceleration due to Mergers


-


-


22,031


22,031

Strategic asset impairment


-


-


9,184


9,184

Writedown of assets and lease loss accrual


108


-


4,525


4,633

Non GAAP Income (Loss) from continuing operations before income taxes


$              62,034


$              (5,305)


$            (40,517)


$              16,212










* Totals may not add due to rounding









(1) Nine months ended September 30, 2013 includes three months of results of KCG Holdings, Inc. plus six months of GETCO Holding Company, LLC.












 

 


SOURCE KCG Holdings, Inc.

Sophie Sohn, Communications & Marketing, 312-931-2299, media@kcg.com; Jonathan Mairs, Investor Relations, 201-356-1529, jmairs@kcg.com

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