Press Release

KCG Announces Second Quarter 2013 Results For GETCO And Knight
GETCO recorded a net loss of $72.9 million, which included $60.7 million in merger-related pre-tax charges for professional fees and compensation, writedowns, restructuring charges and financing commitment fees
Knight recorded a net loss from continuing operations of $23.6 million, which included $76.5 million in merger-related pre-tax expenses for compensation and professional fees as well as a goodwill writedown
Strategic combination between GETCO and Knight completed July 1, 2013

JERSEY CITY, N.J., Aug. 7, 2013 /PRNewswire/ -- KCG Holdings, Inc. (NYSE: KCG) the company formed by the strategic combination of GETCO Holding Company, LLC (GETCO) and Knight Capital Group, Inc. (Knight) completed July 1, 2013, today reported second quarter 2013 results for the companies on a standalone basis.

"The second quarter of 2013 was a period of intense activity during which the two firms together built the foundation for KCG," said Daniel Coleman, Chief Executive Officer of KCG. "The teams deepened working relationships at all levels and collaborated to accomplish the steps necessary to complete the transaction. Of critical importance, individuals worked tirelessly to meet and exceed the levels of service that clients expect from an industry leader."

During the second quarter, integration planning involved an estimated 10 percent of the collective workforce at GETCO and Knight across areas including technology, market making, agency brokerage, finance, legal and risk. The firms worked to secure the necessary approvals from the respective unitholder and stockholder bases as well as regulators in the U.S. and U.K.

At the same time, GETCO and Knight continued to provide clients with innovative trading solutions while contributing to the overall efficiency of the markets. GETCO continued to upgrade trading technology infrastructure in U.S. equities, grew the revenue contribution from market making in commodities, fixed income and options, and gained further traction among institutional clients. Knight recorded double digit revenue growth year over year, outperformed in critical market segments, and completed the sale of institutional fixed income. Subsequent to the second quarter, Knight announced the sale of subsidiary Urban Financial Group.

Mr. Coleman added, "The two firms performed well during the quarter despite enormous additional demands. KCG starts from a position of strength in terms of core capabilities. As a global, pure-play securities firm, we'll leverage advanced technologies to reduce trading friction in the markets and deliver quality, low-cost executions to clients. At the same time, we'll allocate capital to promote growth and create value for stockholders."

GETCO Second Quarter 2013 Results

During the second quarter of 2013, GETCO recorded a GAAP consolidated loss of $72.9 million.

GETCO's pre-tax loss of $69.6 million during the three months ended June 30, 2013 includes $60.7 million of professional fees and compensation expenses related to the merger, which covers costs related to unit vesting, as well as writedowns, restructuring charges and finance commitment fees. Excluding these items, the pre-tax loss on a non-GAAP basis was $8.9 million.

For the second quarter of 2012, GETCO reported consolidated pre-tax earnings of $6.0 million.

GETCO's consolidated revenues were $118.1 million in the second quarter of 2013 compared to $141.1 million in the second quarter of 2012.

For GETCO's second quarter 2013 financial information, please see Exhibit 1 below. A reconciliation of GAAP to non-GAAP pre-tax results is included in Exhibit 1A.


GETCO's Market Making segment principally consists of market making in securities such as global equities, futures, options, fixed income, commodities, and foreign currencies. The Execution Services segment offers clients access to markets and self-directed trading through its electronic agency-based platforms and customizable suite of trading tools. GETCO's Corporate and Other segment invests in strategic financial services-oriented opportunities, allocates, deploys and monitors all capital, and maintains corporate overhead expenses and all other income and expenses that are not attributable to the other segments.

Market Making
During the second quarter 2013, GETCO's Market Making segment generated revenues of $118.4 million and a pre-tax loss of $2.0 million. During the quarter, GETCO further refined activity on global stock exchanges as well as non-equity markets primarily covering money market securities, options and corporate bonds. The year over year declines in consolidated equity volumes and market volatility across the U.S. and Europe, however, weighed on results. In the second quarter of 2012, GETCO's Market Making revenues were $135.7 million and pre-tax earnings were $9.7 million.

Execution Services
During the second quarter 2013, GETCO's Execution Services segment generated revenues of $13.0 million and a pre-tax loss of $2.9 million. During the quarter, GETCO continued to develop inroads in to institutional clients. Agency-based algorithmic trade volumes more than doubled from the second quarter 2012 and the firm's dark pool ranked among the top 12 in the U.S. In the second quarter of 2012, GETCO's Execution Services revenues were $9.2 million and the pre-tax loss was $1.5 million.

Corporate and Other
During the second quarter 2013, GETCO's Corporate and Other segment generated net negative revenues of $8.8 million and a pre-tax loss of $64.7 million. The results were impacted by merger-related professional fees and compensation, writedowns of strategic investments, restructuring charges and finance commitment fees. In the second quarter of 2012, GETCO's Corporate and Other revenues were $398,000 and the pre-tax loss was $2.1 million.

GETCO's headcount at June 30, 2013 was 396 full-time employees, compared to 398 full-time employees a year earlier.

As of June 30, 2013, GETCO had $466.5 million in cash and cash equivalents. The firm had $903.0 million in unitholders' equity at the end of the second quarter 2013.

Knight Second Quarter 2013 Results

For the second quarter of 2013, Knight recorded a GAAP net loss of $30.8 million.

Knight's GAAP net loss of $30.8 million during the three months ended June 30, 2013 includes a pre-tax loss from continuing operations of $21.8 million and a net loss from discontinued operations of $7.2 million. The pre-tax loss from continuing operations includes $76.5 million of merger-related expenses for compensation and professional fees as well as a goodwill writedown and a reserve for legal proceedings. After adjusting for these items, Knight's non-GAAP pre-tax income from continuing operations was $54.8 million for the three months ended June 30, 2013.

These adjustments incorporate the effects of professional and other fees related to the merger with GETCO on July 1, 2013 and professional fees related to the August 1, 2012 technology issue. In conjunction with the merger, certain change in control provisions to Knight's stock plan required full vesting and an acceleration of expenses related to certain stock-based compensation awards, which were recognized in the second quarter. The adjustments also include the results of our annual review for impairment of goodwill, in which the company determined that the fair value related to its reverse mortgage business was below book value and led to the impairment charge. Additionally, Knight recorded a reserve for legal proceedings as well as compensation expenses related to a reduction in workforce.

For the second quarter of 2012, Knight reported GAAP consolidated pre-tax earnings of $7.6 million. Knight's second quarter 2012 consolidated earnings included pre-tax trading losses of $35.4 million related to the Facebook IPO and a one-time $10.0 million gain from a strategic investment accounted for under the equity method of accounting.

Knight's consolidated revenues from continuing operations were $315.4 million in the second quarter of 2013 compared to $252.1 million in the second quarter of 2012, which includes the losses related to the Facebook IPO and gain from a strategic investment previously noted.

For Knight's second quarter 2013 financial information, please see Exhibit 2 below. A reconciliation of GAAP to non-GAAP pre-tax results is included in Exhibit 2A.

"Continuing operations" includes Knight's Market Making, Global Execution Services, and Corporate and Other segments. In the first quarter of 2013, to reflect Knight's client offering, changes in senior management, the combination of the institutional equities sales teams and how the businesses are managed, the company changed its reporting segments from (i) Market Making, (ii) Institutional Sales and Trading, (iii) Electronic Execution Services, and (iv) Corporate and Other to (i) Market Making, (ii) Global Execution Services and (iii) Corporate and Other. Knight's Market Making segment consists of all global market making including Knight Link and the company's activities as a Designated Market Maker at the NYSE. The Global Execution Services segment includes Knight Direct, equity sales and trading, Knight Hotspot FX, Knight BondPoint, Knight Futures, and reverse mortgage origination and securitization. Knight's Corporate and Other segment invests in strategic financial services-oriented opportunities, allocates, deploys and monitors all capital, and maintains corporate overhead expenses and all other income and expenses that are not attributable to the other segments. The Corporate and Other segment houses functions that support the Company's other segments such as self-clearing services, including stock lending activities.

During the second quarter of 2013, Knight decided to close subsidiary Astor Asset Management. Accordingly, the results of its operations have been reported as discontinued operations. Discontinued operations also include institutional fixed income sales and trading, which was sold to Stifel Financial Corp. in the second quarter of 2013, and correspondent clearing, which the company announced it was closing in the first quarter of 2013.










Q2 2013


Q2 2012







Revenues ($ thousands)


315,387


252,094

Pre-tax (loss) income from continuing operations - GAAP basis ($ thousands)


(21,778)


7,609

Pre-tax income from continuing operations - Non-GAAP basis ($ thousands)


54,756


33,055

U.S. equity Market Making statistics:






Average daily dollar value traded ($ billions)


23.3


20.9


Average daily trades (thousands) 


3,178.5


3,290.4


Nasdaq and Listed shares traded (billions)


45.7


45.7


FINRA OTC Bulletin Board and Other shares traded (billions)


173.7


166.9


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


1.06


0.77


Average revenue capture per U.S. equity dollar value traded, excluding               






   impact of Facebook IPO (bps) *


1.06


0.97

Average daily Knight Direct equity shares (millions) (U.S. exchange listed shares)

184.9


188.0

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


33.3


28.1










YTD 2013


YTD 2012







Revenues ($ thousands)


599,690


553,026

Pre-tax (loss) income from continuing operations - GAAP basis ($ thousands)


(3,315)


58,599

Pre-tax income from continuing operations - Non-GAAP basis ($ thousands)


91,387


84,045

U.S. equity Market Making statistics:






Average daily dollar value traded ($ billions)


22.7


21.4


Average daily trades (thousands) 


3,079.2


3,312.3


Nasdaq and Listed shares traded (billions)


88.7


93.0


FINRA OTC Bulletin Board and Other shares traded (billions)


356.8


338.1


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


1.03


0.88


Average revenue capture per U.S. equity dollar value traded, excluding               


1.03


0.98


   impact of Facebook IPO (bps) *





Average daily Knight Direct equity shares (millions) (U.S. exchange listed shares)

184.7


185.4

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


30.6


28.0







*

Statistic excludes $26.0 million in trading losses related to the Facebook IPO for 2012 periods.



Market Making
During the second quarter 2013, Knight's Market Making segment generated revenues of $167.9 million and pre-tax earnings of $49.5 million. During the quarter, Knight remained the wholesale market making leader and recorded strong year over year revenue growth along with wider pre-tax margins. Despite the continued weak U.S. equity market conditions, results benefited from rises in both retail trading activity and broad market valuations from the second quarter 2012. In the second quarter of 2012, Knight's Market Making revenues were $113.5 million and pre-tax earnings were $5.9 million. Excluding the losses related to the Facebook IPO, second quarter 2012 pre-tax earnings were $31.9 million.

Global Execution Services
During the second quarter 2013, Knight's Global Execution Services segment generated revenues of $133.7 million and pre-tax earnings of $714,000. During the quarter, Knight received stronger and more balanced contributions from the firm's multi-asset class execution venues, institutional trading in U.S. equities and ETFs, and reverse mortgages. Contributing to the positive results were inflows to U.S. equity mutual funds as well as strong volumes of ETFs and spot foreign exchange. The results included a goodwill writedown associated with the firm's reverse mortgage business of $17.8 million plus compensation from severance of $3.3 million. Excluding these charges, pre-tax earnings from Knight's Global Execution Services segment were $21.8 million. In the second quarter of 2012, Knight's Global Execution Services revenues were $118.9 million and pre-tax earnings were $6.3 million. Excluding the losses related to the Facebook IPO, second quarter 2012 pre-tax earnings were $15.8 million.

Corporate and Other
During the second quarter 2013, Knight's Corporate and Other segment generated revenues of $13.8 million and a pre-tax loss of $72.0 million. Corporate expenses included accelerated stock-based awards related to the merger, professional and other fees related to the merger and Knight's August 1st technology issue, a reserve for legal proceedings and other items which totaled $55.4 million. In the second quarter of 2012, Knight's Corporate and Other revenues were $19.7 million and the pre-tax loss was $4.7 million.

Knight's headcount at June 30, 2013 was 1,211 full-time employees, which excludes employees affected by the closure of Astor, sale of institutional fixed income, closure of correspondent clearing and exit from equity research and equity capital markets, compared to 1,341 full-time employees a year earlier.

As of June 30, 2013, Knight had $522.3 million in cash and cash equivalents. The firm had $1.5 billion in stockholders' equity at the end of the second quarter 2013, equivalent to a book value of $3.97 per share prior to the transaction close and three-for-one conversion of Knight Class A Common Stock into KCG Class A Common Stock. Knight had $1.5 billion in stockholders' equity at the end of the second quarter 2012.

During the second quarter of 2013, Knight did not repurchase any shares under the company's stock repurchase program. As a result of the merger, the repurchase program has been terminated.

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 and six months ended June 30, 2013 and three and six months ended June 30, 2012 for GETCO and Knight. KCG believes this presentation provides comparability for GETCO's and Knight's results of operations for the three and six months ended June 30, 2013 to the respective results for the three and six months ended June 30, 2012. Reconciliations of GAAP to non-GAAP results are included in Exhibits 1A and 2A below.

The second quarter 2013 earnings press release and other financial information on KCG can be obtained at http://investors.kcg.com. Considering GETCO and Knight operated as independent firms up to the transaction close on July 1, 2013, KCG will not host a conference call on second quarter 2013 earnings. KCG expects to initiate conference calls for all interested parties starting with third quarter 2013 earnings.

Subsequent to the second quarter 2013, KCG announced the sale of subsidiary Urban Financial Group to an investor group. Until the transaction close, which is expected in the fourth quarter of 2013, the results of operations from Urban will be reported as discontinued operations beginning in the third quarter 2013. Urban's headcount at June 30, 2013 was 208 full-time employees.

KCG will release July trade volumes on August 14, 2013 at https://www.kcg.com/access-performance/liquidity along with historical trade volumes on a monthly basis dating back to the start of 2012.

Daniel Coleman, Chief Executive Officer of KCG, is scheduled to present at the Barclays Global Financial Services Conference in New York on September 11, 2013. Mr. Coleman's remarks will be webcast live as well as archived for replay at http://investors.kcg.com.

About KCG
KCG is a leading independent securities firm offering investors 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 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. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.  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 combination 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; (ii) the August 1, 2012 technology issue at Knight 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 capital structure and business as well as actions taken in response thereto and consequences thereof; (iii) the costs and risks associated with KCG's sale of its reverse mortgage business; (iv) the ability of KCG's broker-dealer subsidiary to recover all or a portion of the damages that are attributable to the manner in which NASDAQ OMX handled the Facebook IPO; (v) changes in market structure, legislative, regulatory or financial reporting rules, including the continuing legislative and regulatory scrutiny of high-frequency trading;  (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 risk, legal risk, liquidity risk, reputational risk, counterparty 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 and Knight's reports with the SEC, including, without limitation, those detailed under "Certain Factors Affecting Results of Operations" and "Risk Factors" in Knight's Annual Report on Form 10-K for the year-ended December 31, 2012, and in KCG's Registration Statement on Form S-4/A filed May 24, 2013, and in other reports or documents KCG files with, or furnishes to, the SEC from time to time.

 

GETCO






EXHIBIT 1

CONSOLIDATED STATEMENTS OF OPERATIONS






(Unaudited)










For the three months ended June 30,


For the six months ended June 30,




2013


2012


2013


2012




(in thousands)

Revenues









Trading gains and losses, net

$                127,176


$                141,714


$                239,661


$                294,935


Interest and dividends, net

582


(809)


546


(967)


Loss from investments, net

(9,184)


-


(8,817)


-


Other (loss) income, net

(457)


211


(421)


730




118,117


141,116


230,969


294,698

Expenses









Employee compensation and related benefits

69,041


39,571


101,661


81,121


Regulatory, exchange and execution fees

45,950


52,587


86,908


102,390


Colocation and data line expenses

20,365


21,750


40,041


42,719


Professional fees

23,230


4,046


30,264


8,669


Depreciation and amortization

7,746


7,728


15,913


19,606


Occupancy, communication, and office

4,239


3,848


8,184


7,535


Restructuring costs and lease loss

1,074


-


3,697


-


Travel and entertainment

1,645


2,754


3,031


5,799


Computer supplies and maintenance

882


1,190


1,832


2,592


Order flow expense

806


675


1,701


1,470


Interest expense on corporate borrowings









and capital lease obligations

2,172


531


2,645


1,296


Other expenses

10,578


404


12,008


1,189




187,728


135,084


307,885


274,386











(Loss) income before income taxes

(69,611)


6,032


(76,916)


20,312

Provision for income taxes

3,315


2,279


5,289


5,563











Net (loss) income


$               (72,926)


$                   3,753


$               (82,205)


$                 14,749





















 

GETCO



CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION



(Unaudited)






June 30, 2013


December 31, 2012




(in thousands)

ASSETS





Cash and cash equivalents

$                             466,502


$                             427,631


Restricted cash and cash equivalents

308,081


-


Receivables from exchanges

20,259


11,544


Receivables from clearing brokers and clearing organizations

290,038


85,282


Deposits with clearing organizations and exchanges

40,394


43,245


Securities and options owned, at fair value:






Equity securities

434,308


381,991



Listed equity options

111,587


92,305



Debt securities

21,455


183,637


Total securities and options owned, at fair value

567,350


657,933


Securities borrowed 

97,123


55,141


Exchange memberships, at cost 

6,267


6,267


Investments

240,854


245,398


Intangibles and goodwill, net of amortization

48,009


50,768


Fixed assets and leasehold improvements, net

81,357


83,341


Other receivables and other assets

28,140


20,986








Total assets

$                          2,194,374


$                          1,687,536







LIABILITIES AND MEMBERS' EQUITY




Liabilities





Securities and options sold, not yet purchased, at fair value:






Equity securities

$                             645,700


$                              423,740



Listed equity options

80,496


69,757



Debt securities

16,465


19,056


Total securities and options sold, not yet purchased, at fair value

742,661


512,553


Payables to clearing brokers and clearing organizations

34,101


24,185


Compensation payable

39,140


30,197


Capital lease obligation

15,466


24,191


Notes payable

320,000


15,000


Accounts payable and accrued expenses

137,826


115,492


Distributions payable

2,136


107








Total liabilities

1,291,330


721,725







Members' equity

903,044


965,811








Total liabilities and members' equity

$                           2,194,374


$                           1,687,536













 

GETCO





PRE-TAX EARNINGS BY BUSINESS SEGMENT





(In thousands)





(Unaudited)






For the three months ended
 June 30,


For the six months ended
 June 30,


2013


2012


2013


2012

Market Making








Revenues

$           118,367


$           135,745


$           225,384


$           285,075

Expenses

120,335


126,083


222,207


258,061

Pre-Tax (Loss) Earnings

(1,968)


9,662


3,177


27,014









Execution Services








Revenues

13,024


9,173


22,228


16,905

Expenses

15,943


10,715


26,560


20,003

Pre-Tax Loss

(2,919)


(1,542)


(4,332)


(3,098)









Corporate & Other








Revenues

(8,802)


398


(7,598)


1,118

Expenses

55,922


2,486


68,163


4,722

Pre-Tax Loss

(64,724)


(2,088)


(75,761)


(3,604)









Eliminations 








Revenues/Expenses

(4,472)


(4,200)


(9,045)


(8,400)









Consolidated








Revenues

118,117


141,116


230,969


294,698

Expenses

187,728


135,084


307,885


274,386

Pre-Tax (Loss) Earnings

$           (69,611)


$               6,032


$           (76,916)


$             20,312









* Totals may not add due to rounding.















 

GETCO





EXHIBIT 1A

Regulation G Reconciliation of Non-GAAP financial measures 




(in thousands)









Three months ended June 30, 2013


Market Making


Execution Services


Corporate and Other 


Consolidated










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









GAAP pre-tax loss:


$              (1,968)


$              (2,919)


$            (64,724)


$            (69,611)

Merger - professional fees, bank fees, interest expense, and other


-


-


33,299


33,299

Merger - unit and deferred compensation acceleration 


-


-


14,931


14,931

Strategic investment impairment


-


-


9,184


9,184

Severance and non-compete


1,852


335


-


2,187

Restructuring and lease loss


-


-


1,074


1,074

Non-GAAP loss from operations before income taxes


$                 (116)


$              (2,584)


$              (6,235)


$              (8,936)





































Six months ended June 30, 2013


Market Making


Execution Services


Corporate and Other 


Consolidated










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









GAAP pre-tax income (loss):


$                3,177


$              (4,332)


$            (75,761)


$            (76,916)

Merger - professional fees, bank fees, interest expense, and other


-


-


38,876


38,876

Merger - unit and deferred compensation acceleration 


-


-


14,931


14,931

Strategic investment impairment


-


-


9,184


9,184

Severance and non-compete


3,955


865


-


4,820

Restructuring and lease loss


-


-


3,697


3,697

Non-GAAP income (loss) from operations before income taxes


$                7,132


$              (3,467)


$              (9,072)


$              (5,407)










* Totals may not add due to rounding.


















 

KNIGHT CAPITAL GROUP, INC.









EXHIBIT 2


CONSOLIDATED STATEMENTS OF OPERATIONS











(Unaudited)














For the three months ended June 30, 


For the six months ended June 30,






2013



2012



2013



2012





(In thousands, except per share amounts)
















Revenues














Commissions and fees

$

126,169


$

139,838


$

250,546


$

279,599



Net trading revenue


176,499



96,222



325,337



249,356



Interest, net


5,813



4,227



12,202



9,837



Investment income and other, net


6,906



11,807



11,605



14,234




Total revenues


315,387



252,094



599,690



553,026

















Expenses














Employee compensation and benefits


135,992



100,964



243,070



212,412



Execution and clearance fees


51,518



52,276



101,881



104,493



Payments for order flow


29,499



20,155



64,592



41,843



Communications and data processing


23,242



22,342



45,377



42,543



Professional fees


22,459



4,334



35,438



9,196



Interest 


13,273



13,659



26,325



26,813



Depreciation and amortization


10,057



11,573



19,632



23,031



Occupancy and equipment rentals


5,356



5,324



10,682



10,682



Business development


3,892



4,934



7,730



9,048



Writedown of assets


17,787



-



17,787



-



Other


24,090



8,924



30,491



14,366




Total expenses


337,165



244,485



603,005



494,427

















(Loss) income from continuing operations before income taxes


(21,778)



7,609



(3,315)



58,599


Income tax expense 


1,851



2,853



7,982



22,693


(Loss) income from continuing operations, net of tax


(23,629)



4,756



(11,297)



35,906


(Loss) income from discontinued operations, net of tax


(7,213)



(1,465)



(28,901)



491

















Net (loss) income

$

(30,842)


$

3,291


$

(40,198)


$

36,397
































Basic (loss) earnings per share from continuing operations

$

(0.07)


$

0.05


$

(0.04)


$

0.40

















Diluted (loss) earnings per share from continuing operations

$

(0.07)


$

0.05


$

(0.04)


$

0.39

















Basic (loss) earnings per share from discontinued operations

$

(0.02)


$

(0.02)


$

(0.09)


$

0.01

















Diluted (loss) earnings  per share from discontinued operations

$

(0.02)


$

(0.02)


$

(0.09)


$

0.01

















Basic (loss) earnings per share

$

(0.09)


$

0.04


$

(0.13)


$

0.41

















Diluted (loss) earnings per share

$

(0.09)


$

0.04


$

(0.13)


$

0.39

















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


359,955



89,624



306,879



89,685

















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


359,955



92,682



306,879



93,167
































KNIGHT CAPITAL GROUP, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited)





















June 30, 2013



December 31, 2012 






(In thousands)

ASSETS








Cash and cash equivalents


$

522,318


$

413,926


Cash and securities segregated under federal and other regulations



203,045



166,992


Financial instruments owned, at fair value:









Equities



1,609,957



1,463,916



Debt securities



138,730



111,157



Listed equity options



188,166



202,091



Loan inventory



130,635



191,712



Other financial instruments



1,076



237



Securitized HECM loan inventory



5,327,418



4,054,905


Total financial instruments owned, at fair value



7,395,982



6,024,018


Collateralized agreements:









Securities borrowed 



1,158,981



1,008,720


Receivable from brokers, dealers and clearing organizations



1,366,974



868,805


Fixed assets and leasehold improvements, 







          at cost, less accumulated depreciation and amortization



90,535



94,226


Investments



80,281



78,348


Goodwill



196,113



213,900


Intangible assets, less accumulated amortization



49,645



55,654


Income taxes receivable



6,486



152,576


Assets of business held for sale



-



449,509


Assets within discontinued operations 



108,804



-


Other assets



253,847



251,773










Total assets


$

11,433,011


$

9,778,447










LIABILITIES, CONVERTIBLE PREFERRED STOCK & EQUITY 







Liabilities








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









Equities


$

1,290,401


$

1,164,999



Debt securities



90,421



118,991



Listed equity options



132,161



155,942



Other financial instruments



-



5,505


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



1,512,983



1,445,437


         Collateralized financings:









Securities loaned  



626,891



504,082



Financial instruments sold under agreements to repurchase



545,000



355,000



Other secured financings



95,912



146,330



Liability to GNMA trusts, at fair value



5,284,303



4,002,704


Total collateralized financings 



6,552,106



5,008,116











Payable to brokers, dealers and clearing organizations



635,914



378,724


Payable to customers



527,918



388,676


Accrued compensation expense



109,453



141,794


Accrued expenses and other liabilities



181,938



186,746


Liabilities of business held for sale 



-



357,661


Liabilities within discontinued operations 



84,535



-


Long-term debt 



346,449



388,753










Total liabilities



9,951,296



8,295,907










Convertible Preferred Stock



-



229,857

Equity









Class A common stock



4,492



2,748



Additional paid-in capital



1,683,390



1,400,317



Retained earnings



670,423



710,621



Treasury stock, at cost



(870,819)



(858,907)



Accumulated other comprehensive loss



(5,771)



(2,096)

Total equity



1,481,715



1,252,683








Total liabilities, convertible preferred stock and equity


$

11,433,011


$

9,778,447




























KNIGHT CAPITAL GROUP, INC.









PRE-TAX EARNINGS FROM CONTINUING OPERATIONS BY BUSINESS SEGMENT*


(In thousands)










(Unaudited)

























For the three months ended           
June 30,


For the six months ended                 
June 30,




2013



2012 (1)



2013



2012 (1)

Market Making













Revenues


$

167,878


$

113,490


$

318,607


$

265,655

Expenses



118,418



107,557



232,597



214,592

Pre-tax earnings



49,460



5,933



86,010



51,063














Global Execution Services













Revenues



133,741



118,876



255,261



257,607

Expenses



133,027



112,535



243,272



227,528

Pre-tax earnings



714



6,341



11,989



30,079














Corporate and Other













Revenues



13,768



19,728



25,822



29,764

Expenses



85,720



24,393



127,136



52,307

Pre-tax loss



(71,952)



(4,665)



(101,314)



(22,543)














Consolidated













Revenues



315,387



252,094



599,690



553,026

Expenses



337,165



244,485



603,005



494,427

Pre-tax (loss) earnings


$

(21,778)


$

7,609


$

(3,315)


$

58,599














* Totals may not add due to rounding.










(1) - Prior period amounts have been recast to conform with current period segment presentation. 















 

 

KNIGHT CAPITAL GROUP, INC.








EXHIBIT 2A

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





(in thousands)


















Three months ended June 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


$              49,460


$                   714


$            (71,952)


$            (21,778)

Accelerated stock-based compensation expense due to Mergers


-


-


22,497


22,497

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


-


-


22,171


22,171

Writedown of goodwill related to reverse mortgage business


-


17,787


-


17,787

Reserve for legal proceedings


-


-


10,000


10,000

Compensation and other expenses related to reduction in workforce


-


3,302


777


4,079

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


$              49,460


$              21,803


$            (16,507)


$              54,756



















Six months ended June 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


$              86,010


$              11,989


$          (101,314)


$              (3,315)

Accelerated stock-based compensation expense due to Mergers


-


-


22,497


22,497

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


-


-


31,423


31,423

Writedown of goodwill related to reverse mortgage business


-


17,787


-


17,787

Reserve for legal proceedings


-


-


10,000


10,000

Compensation and other expenses related to reduction in workforce


230


7,712


5,053


12,995

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


$              86,240


$              37,488


$            (32,341)


$              91,387










* Totals may not add due to rounding


















Knight Capital Group, Inc









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





(in thousands)


















Three months ended June 30, 2012


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


$                5,933


$                6,341


$              (4,665)


$                7,609

Facebook IPO trading losses


25,975


9,463


-


35,438

Investment gain


-


-


(9,992)


(9,992)

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


$              31,908


$              15,804


$            (14,657)


$              33,055



















Six months ended June 30, 2012


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


$              51,063


$              30,079


$            (22,543)


$              58,599

Facebook IPO trading losses


25,975


9,463


-


35,438

Investment gain


-


-


(9,992)


(9,992)

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


$              77,038


$              39,542


$            (32,535)


$              84,045










* Totals may not add due to rounding









 

 

 

 

SOURCE KCG Holdings, Inc.

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