Knight/Trimark Group Reports 178% Growth in Quarterly Revenues and 331% Growth in Quarterly Earnings Over Second Quarter 1998
Growth of Online Trading Volume, Increased Market Share and Expanded Margins Drives EPS to $0.43
JERSEY CITY, N.J., July 21 /PRNewswire/ -- Knight/Trimark Group, Inc. (Nasdaq: NITE - news) today reported record results for the second quarter ended June 30, 1999. Knight/Trimark Group is the leading market maker in both Nasdaq securities and the over-the-counter market for New York Stock Exchange- and American Stock Exchange-listed securities.
Second Quarter 1999 vs. Second Quarter 1998
178% growth in revenues -- 138% growth in trades executed
331% growth in net income (1) -- 125% growth in shares traded
Second Quarter 1999 vs. First Quarter 1999
23% growth in revenues -- 15% growth in trades executed
34% growth in net income -- 34% growth in shares traded
First Half 1999 vs. First Half 1998
182% growth in revenues -- 142% growth in trades executed
336% growth in net income (1) -- 121% growth in shares traded
Second Quarter First Quarter Second Quarter
1999 1999 1998
Revenues ($) 224,047,186 182,664,136 80,612,588
Net income (1) ($) 50,194,764 37,406,875 11,660,413
Diluted EPS ($) 0.43 0.34 0.14
Trades executed 21,448,630 18,691,368 9,016,369
Average daily trades 340,454 306,416 143,117
Shares traded 21,319,768,752 15,943,152,289 9,477,317,566
First Half First Half
1999 1998
Revenues ($) 406,711,322 144,118,199
Net income (1) ($) 87,601,639 20,087,125
Diluted EPS ($) 0.77 0.23
Trades executed 40,139,998 16,588,034
Average daily trades 323,710 133,774
Shares traded 37,262,921,041 16,883,481,422
Revenues for the second quarter of 1999 rose 178% to $224.0 million, compared to $80.6 million for the second quarter of 1998. Net income(1) for the second quarter of 1999 totaled $50.2 million, or $0.43 per share on a diluted basis, a 331% increase from $11.7 million, or $0.14 per share on a diluted basis for the same period a year ago. Return on equity for the second
quarter and first half of 1999, stated on an annualized basis, was 58% and
60%, respectively.
In addition to the improvements in year-over-year results, the Company also achieved sequential quarterly gains as revenues and net income for the second quarter of 1999 rose 23% and 34%, respectively, over the first quarter of 1999. The Company also achieved pre-tax margins of 38% in the second quarter of 1999, up from 35% in the first quarter of 1999 and 25% in the prior year's second quarter. Second quarter revenues from the Company's institutional business grew 36% from the first quarter, and represented 19% of the Company's second quarter trading revenues.
''We have continued to show extraordinary growth this past quarter as more and more retail investors are embracing the opportunities of online investing. Knight/Trimark has demonstrated an ability to capture an expanded share of this growing market by executing over 340,000 trades per day on average during the second quarter of 1999, an 11% increase from the prior quarter,'' said Kenneth D. Pasternak, the Company's President and Chief Executive Officer. ''As a result of our focus on customer service; technology; innovative trading methodologies; and scale, we have delivered a 331% increase to the second quarter's bottom line compared with our net income in the prior year's quarter.''
''To maintain our rapid growth, we have deepened the management team and are setting our sights on new horizons,'' said Pasternak. ''This past quarter we have appointed John Hewitt as president of Knight Securities, hired a new head of business development, embarked on a corporate branding and advertising campaign and opened our London institutional sales office. These developments set the stage for our plans to become the leading global market maker.''
''Knight/Trimark also has taken significant steps this past quarter to enhance our broker-dealer and institutional client service,'' continued Pasternak. ''To help put an end to pre-opening pricing confusion for retail investors, we introduced true mid-point pricing that will, regardless of order imbalances, offer our broker-dealer customers a single price opening. With mid-point pricing and our recent roll-out of automatic price improvement for S&P 500 orders, we are enhancing our product capabilities to provide our customers with immediacy, enhanced liquidity and price improvement above and beyond the national best bid and offer (NBBO).''
The AutEx Group (''AutEx'')(2) ranked Knight Securities as the largest market maker in Nasdaq/OTC securities for June 1999 with 4.3 billion shares traded, which represented a 17.49% total market share. This represents a 69% increase in market share from June 1998 when Knight achieved a 10.33% total market share and a 16% increase in market share from March 1999, as reported by AutEx. Additionally, in June 1999, AutEx ranked Knight/Trimark number three in listed securities volume with 1.1 billion shares traded, representing a 6.41% total market share.
Knight/Trimark, headquartered in Jersey City, N.J., is the parent company of Knight Securities and Trimark Securities. Knight Securities makes markets in over 7,100 equity securities listed on Nasdaq and on the OTC Bulletin Board (OTCBB) of the National Association of Securities Dealers (NASD). Trimark trades NYSE- and Amex-listed equity securities over the counter -- the Third Market. As the number one destination for online trade executions, Knight/Trimark is the processing power behind the explosive growth in securities trading via the Internet. The four-year-old company employs more than 550 people worldwide with offices in Jersey City, N.J.; Jericho and Purchase, N.Y.; Chicago, Ill.; Boston, Mass.; and London, England. Copies of this earnings release and other information on the Company can be obtained via the Internet at knight-sec.com or toll-free on the Company's investor information line at 877-INFO-NITE.
The matters described herein contain forward-looking statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve a number of risks, uncertainties or other factors beyond the Company's control, which could cause actual results to differ materially from historical results, performance or other expectations and from any opinions or statements expressed with respect to future periods. These factors include, but are not
limited to, the Company's ability to implement its growth strategies,
economic, political and market conditions and fluctuations, government and
industry regulation, interest rate risk, intellectual property rights, and
other factors detailed in the Company's registration statement and periodic
reports filed with the Securities & Exchange Commission.
(1) Net Income for the periods ended June 30, 1998 was adjusted to
reflect pro forma income taxes related to the Company's
reorganization from a limited liability company to a C corporation in
connection with the Company's initial public offering on
July 8, 1998.
(2) The AutEx Group is a widely-recognized industry reporting service
that provides daily statistics on trading activity and broker-dealer
market-share, as reported by broker-dealers.
. KNIGHT/TRIMARK GROUP, INC.
Consolidated Statements of Income
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
1999 1998 1999 1998
Revenues Net trading
revenue $216,437,894 $80,225,541 $394,988,315 $143,193,040
Commissions
and fees 4,438,874 90,388 6,966,056 114,455
Interest, net 3,170,418 296,659 4,756,951 810,704
Total revenues 224,047,186 80,612,588 406,711,322 144,118,199
Expenses Employee compensation
and benefits 70,166,936 23,453,470 127,459,220 39,811,804
Payments for
order flow 35,354,189 19,489,651 67,782,016 35,746,170
Execution and
clearance fees 19,806,117 10,147,988 37,763,284 20,373,665
Communications and
data processing 4,009,431 2,516,119 7,948,485 4,684,365
Depreciation and
amortization 2,182,328 1,346,834 4,133,619 2,639,428
Occupancy and
equipment rentals 2,465,916 1,316,568 4,289,805 2,397,464
Professional fees 2,161,402 695,794 3,220,229 951,040
Business development 1,354,203 627,026 2,014,690 1,012,317
Interest on
Preferred Units -- 261,574 -- 678,060
Other 832,212 300,699 1,661,093 583,316
Total expenses 138,332,734 60,155,723 256,272,441 108,877,629
Net income
before taxes 85,714,452 20,456,865 150,438,881 35,240,570
Income tax expense 35,519,688 -- 62,837,242 --
Net income $50,194,764 $20,456,865 $87,601,639 $35,240,570
Basic earnings
per share $0.45 -- $0.80 --
Diluted earnings
per share $0.43 -- $0.77 --
Pro forma adjustment:* Net income
before taxes -- $20,456,865 -- $35,240,570
Pro forma income
tax expense -- 8,796,452 -- 15,153,445
Pro forma net income -- $11,660,413 -- $20,087,125
Pro forma basic and diluted earnings
per share -- $0.14 -- $0.23
Shares used in the computation of basic earnings
per share ** 110,916,677 -- 109,269,227 --
Shares used in the computation of diluted earnings
per share ** 116,167,843 -- 114,142,368 --
Pro forma shares outstanding for basic and diluted
earnings per share*** -- 85,603,272 -- 85,603,272
* Before its reorganization to a C Corporation on July 13, 1998, the
Company, as a limited liability company, was not subject to income
taxes. Pro forma income tax expense was computed based on an effective
tax rate of 43% for the periods ended June 30, 1998.
** The shares used to calculate basic earnings per share for the periods
ended June 30, 1999 reflect the weighted average shares outstanding
during the period. The shares used to calculate diluted earnings per
share include the effect of dilutive stock options.
*** Pro forma shares outstanding for the periods ended June 30, 1998 have
been determined as if the Company's reorganization to a C Corporation
occurred as of January 1, 1998, but do not include shares issued in
connection with the Company's initial public offering on
July 13, 1998.
KNIGHT/TRIMARK GROUP, INC.
Consolidated Statements of Financial Condition
(Unaudited)
June 30, December 31,
1999 1998
ASSETS
Cash and cash equivalents $265,729,845 $117,381,556
Securities owned, at market value 201,768,405 100,476,151
Receivable from clearing brokers 139,802,052 107,503,274
Fixed assets and leasehold
improvements at cost, less
accumulated depreciation 13,732,228 12,014,991
Goodwill, less accumulated amortization 18,406,900 16,036,859
Other assets 12,170,250 5,447,544
Total assets $651,609,680 $358,860,375
LIABILITIES & STOCKHOLDERS' EQUITY
Liabilities
Securities sold, not yet
purchased, at market value $219,267,126 $108,909,217
Short-term borrowings -- 10,000,000
Accrued compensation expense 36,583,038 16,529,004
Accrued execution and clearance fees 6,731,618 6,898,095
Accrued payments for order flow 8,575,989 8,672,668
Accounts payable, accrued
expenses and other liabilities 8,281,717 5,445,112
Income taxes payable 3,199,718 2,285,620
Total liabilities 282,639,206 158,739,716
Stockholders' equity
Class A Common Shares 1,057,338 981,244
Class B Common Shares 51,854 78,854
Additional paid-in capital 250,448,962 169,249,880
Retained earnings 117,412,320 29,810,681
Total stockholders' equity 368,970,474 200,120,659
Total liabilities and
stockholders' equity $651,609,680 $358,860,375
SOURCE: Knight/Trimark Group, Inc.
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