Post on 07-Apr-2017
transcript
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Q4 2013 Earnings 1/30/14
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© 2016 Investment Technology Group, Inc. All rights reserved.Not to be reproduced or retransmitted without permission. #80216-28213
ITG Investor Overview September 2016
SubtitleSubtitleITG is an independent broker and financial technology firm that helps improve the efficiency and execution quality of institutional trading
Growth Opportunities
• ITG is seeking to expand product offerings and market share in Europe, Canada and Asia Pacific
• Positive trends: unbundling of research from execution and growing electronification of trading
• Multi-asset expansion strategy of cost-contained relevance in FX, Fixed Income
Robust Capital Position
Competitive Core Business
Strong Operating Leverage Potential
• Operating model and disciplined expense management provide attractive opportunities for increased profitability
• Pre-tax margins on incremental revenue exceed 50% across all regions
• Strategic operating plan launched in 3Q16 to drive revenue growth and improved margins
• Unique liquidity, market-leading execution, workflow technology and analytics assets. Technology is being deployed to boost scale and gain market share
• ITG consistently ranks at or near the top of industry analyst surveys (Greenwich, Tabb, Aite) for products and client service
• Sale of research business and closure of peripheral businesses has sharpened focus
• Total cash and equivalents of $237 million and $90 million of excess cash as of June 30, 2016, only $9 million long-term debt
• Active share buyback program: $246 million since 1Q10, has reduced share count, net of issuances, by ~25%
• $0.07 quarterly dividend paid since 2Q15
• $40m total capital return targets for FY16 & FY17
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SubtitleGlobal Product Groups
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20%
9%
71%
Workflow Technology
Analytics
Execution Svcs
1H16 Adjusted Revenues$243mm*
*Excludes business recovery insurance payment of $2.4 million. Source: ITG
13%
9%
52%
26%Canada
Asia Pac
US
Europe
1H16 Revenues by Region*
Data-driven research in Consumer, Macro and TMT sectors
Energy research under license from RS Energy
High Touch and Portfolio Trading
Corporate Access services
POSIT® dark crossing in 36 countries
ITG Algorithms® in 40 countries
ITG Smart Routing and Direct Market Access (DMA)
POSIT® FI and POSIT® FX in beta
Triton® broker-neutral execution management
ITG Order Management System and ITG Position Manager™ OMS for Hedge Funds
ITG Net® FIXconnectivity to 650+ destinations
ITG RFQ-hub for OTC connectivity and trading
ITG TCA® is the global market leader
Available for equities and foreign exchange, fixed income TCA in development
Pre-, real-, and post-time trade analytics
WORKFLOW TECHNOLOGY
Triton® broker-neutral execution management
ITG Net® FIX connectivity to 650+ destinations
ITG RFQ-hub for OTC connectivity and trading
ANALYTICS
ITG TCA® is the global market leader
Available for equities and foreign exchange, fixed income TCA in development
Pre-, intra-, and post-trade analytics
EXECUTION SERVICES
POSIT® dark crossing in 36 countries
ITG Algorithms® in 40 countries
ITG Smart Routing
Global portfolio trading
Single-stock high-touch trading
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• 963 employees (as of 2Q16) • Offices in 9 countries including
9 trading desks
• 250 awards and honors over last 6 years across Execution Services, Analytics, and Workflow Technology
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Global Presence, Local Expertise
SubtitlePositive Industry Trends: Unbundling and Electronification
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US EU CA Asia20
30
40
50
60
2014 2015 2018e
Continued growth in electronic equity execution
Source: Greenwich Associates
Electronic Equity Trading (% of total value traded)
• Importance of electronic execution continues to grow in the equity markets
• ITG today has the ability to compete for ~50% of the global wallet
• With MiFID II in EU and the global trend towards unbundling research and execution, ITG expects to compete for a larger share of the total wallet
Sizable and growing addressable market
$8bn
$2bn$3bn
$8bn
Execution only
Bundled
CSA - Research CSA - Execution
Current addressable
market
Increasingly accessible as
industry unbundles
2015 global equities commission pool: $21bn
Increasing importance of best-in-class, technology-enabled executionSignificant opportunity to capture value
SubtitleSizing the OpportunityUpside Potential from Market Share Gains
Americas (#15) EMEA (#20) Asia Pacific (#21)
Revenue Gap to #10 Broker
ITG Cash Commissions ($M)
ITG cash equity commissions and broker rankings in FY15. Source: ITG and third-party analysis. Excludes sell-side commissions and some buy-side clients not in third-party reporting universe.
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Global revenue gap to #10 broker: $500mm+ revenue opportunity
Universe of ~200 large prospect accounts available to pursue
.
$237m
$134m
$194m
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Liquidity
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Execution Analytics Workflow
Evolve Brand IdentityRefocus on core capabilities, clarity of
message and industry thought leadership
Optimize Cost StructureFocus on synergistic, scalable businesses, optimize processes,
technology/platform convergence
Strengthen the Leadership and CultureAspiration to be the best operator; shared understanding of mission and strategy
Differentiate Client ExperienceBest operator status to deliver best-in-class client
experience, product performance and execution advice
Provide Best-in-Class, Technology-Driven SolutionsProvide a complete set of solutions across the trade activity chain
through targeted investments and tenacious delivery
Client Delivery
Capture Scale and Foster a Leadership Culture
Strategic Operating Plan: 3Q16 through 4Q18
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Investments: Timing and Cost Savings Offsets
Investments
Cost reductions
Scoping /Initial
investments
Ongoing cost-cutting initiatives
20162H
20171H
20172H
20181H
20182H 2019+
Investment ramp-up period
Continuing investment Tail period
Ongoing development /maintenance
Initial cost-cutting
Ongoing benefits from technology
Illustrative timetable
• ~$40 million in incremental investment planned over next ten quarters - Anticipate ~½ operating, ~½ capitalized with 3-year amortization
• Cost reduction measures to be phased in starting 2H16 - Areas of focus: Compensation, connectivity, market data, and vendors- Expected to reduce costs by at least $5mm/yr- Reduced costs expected to provide funding for >$10mm of incremental
investment
• Technology investments, process improvements to cut expenses by additional $5mm/yr 2019 onwards
SubtitleFinancial Targets
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Run-rate revenue (exiting 2018)
Up 25% from 2015 pro forma¹
Revenue CAGR (2016-18)
Mid-to-high single digits
Pre-tax margin (exiting 2018) ~15%
Run-rate expense reductions
(2019 on)
Additional $5mm annually
1 FY15 Pro Forma Revenue of $478mm, excluding divested and closed businesses
• Revenue growth expected to take place over several years
- Growth expected to accelerate starting in mid-2017
• Forecasts assume flat global trading volumes
• Expense reductions from technology investments, process improvements (globalization, operations optimization)
Run-rate financial targets
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Dec '10 Dec '11 Dec '12 Dec '13 Dec '14 Dec '15 Jun '160
5000
10000
15000
20000
25000
30000
35000
40000
45000
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• Consistent capital return program has reduced outstanding shares by ~25% since 1Q 2010 • Dividend payout since 2Q 2015 of $0.07/share ($2mm+/quarter)
• Sale of Energy Research group increased available free cash: $90mm at June 30, 2016
• ITG is well capitalized to invest in organic growth opportunities
*Cash over and above the amount needed for regulatory capital, clearing margin, compensation accruals and other liabilities. Source: ITG
Basic Shares Outstanding (millions)
Dec '10 Dec '11 Dec '12 Dec '13 Dec '14 Dec '15 Jun '160
20
40
60
80
100
120
Available Excess Cash* ($millions)
Strong Capital Position
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$40mm
Share Repurchases$30mm
Capital Allocation Targets
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Capital return targets for FY16 and FY17
Cash dividend$10mm• Expect 2H16 share repurchases on
par with 1H16 (~$15mm) for total FY16 capital return of $40mm
• FY17 capital return expected to be similar: $40mm ($30mm buyback + $10mm dividend)
• Planned investments still leave >$50mm available free cash
SubtitleAppendicesProduct Offerings
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SubtitleSubtitleExecution Services
Featuring: ITG Algorithms®
POSIT®
Large pool of accessible dark liquidity. Average US Daily Volume of 57m shares in 1H16
ITG Algorithms®
Sophisticated strategies for equities and futures
ITG Smart RoutingOne-point high-speed connection to liquidity
ITG Portfolio TradingSeasoned portfolio traders provide high-touch and electronic list trading globally. Ranked #1 US electronic portfolio trading by Greenwich
ITG Single-Stock TradingSeasoned portfolio traders provide high-touch and electronic list trading globally.
ITG Corporate AccessExperienced team offers individual and group events with corporate decision makers at companies across a range of industries.
Featuring: POSIT Alert®
• High-quality block crossing opportunities with average US trade size
(ex-algos) of 35,000 shares.• POSIT Alert available in 36 countries• #1 for Dark Pool Access, The Trade
• Algo trading available in 40 countries. Offer algorithms for equities, futures and options
• ITG Dynamic Open named best algo by Wall Street Letter
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Featuring: Triton®
Workflow Technology
Featuring: ITG Net®
• FIX connectivity and management to more than 650 global destinations
• Industry-leading tools for pre-, intra-trade, and post-trade cost estimating
• Execution transparency to evaluate trading and broker performance against the market and your peers
• Sophisticated, broker-neutral EMS with global connectivity, aligned to clients’ interests and trading styles
• Alternative Trading System of the Year, Asian Banker,
ITG Execution Management SystemTriton: Global, broker-neutral and multi-asset EMS
ITG Order Management SystemITG OMS: Global, multi-asset enterprise OMS
ITG Net®
Providing EMS and OMS FIX connectivity with approximately 9,000 global connections
ITG RFQ-hubMulti-asset platform for global listed and OTC assets
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SubtitleSubtitleAnalytics
Featuring: ITG TCA®
• The leader in assessing trading performance to reduce costs and improve fund rankings. Includes competitive comparisons through ITG Peer Analysis™.
• Named Top TCA provider by Waters and The Trade• Available for both Equities and Foreign Exchange
ITG Trading AnalyticsAlpha preservation throughout the trading process
ITG Portfolio AnalyticsPortfolio modeling, optimization, and pricing
ITG Analytics ServicesInvestment process consulting to improve execution
• Dynamic, interactive tool set to view real-time market data, identify outliers, and forecast long-term costs to improve performance during a trade’s lifecycle
Featuring: ITG Smart Trading Analytics
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SubtitleSubtitleDisclaimers
These materials are for informational purposes only, and are not intended to be used for trading or investment purposes or as an offer to sell or the solicitation of an offer to buy any security or financial product. The information contained herein has been taken from trade and statistical services and other sources we deem reliable but we do not represent that such information is accurate or complete and it should not be relied upon as such. No guarantee or warranty is made as to the reasonableness of the assumptions or the accuracy of the models or market data used by ITG or the actual results that may be achieved. These materials do not provide any form of advice (investment, tax or legal). ITG Inc. is not a registered investment adviser and does not provide investment advice or recommendations to buy or sell securities, to hire any investment adviser or to pursue any investment or trading strategy. All functionality described herein is subject to change without notice.
Broker-dealer products and services are offered by: in the U.S., ITG Inc., member FINRA, SIPC; in Canada, ITG Canada Corp., member Canadian Investor Protection Fund (“CIPF”) and Investment Industry Regulatory Organization of Canada (“IIROC”); in Europe, Investment Technology Group Limited, registered in Ireland No. 283940 (“ITGL”) and/or Investment Technology Group Europe Limited, registered in Ireland No. 283939 (“ITGEL”) (the registered office of ITGL and ITGEL is First Floor, Block A, Georges Quay, Dublin 2, Ireland and ITGL is a member of the London Stock Exchange, Euronext and Deutsche Börse). ITGL and ITGEL are authorised and regulated by the Central Bank of Ireland; in Asia, ITG Hong Kong Limited (SFC License No. AHD810), ITG Singapore Pte Limited (CMS Licence No. 100138-1), and ITG Australia Limited (AFS License No. 219582). All of the above entities are subsidiaries of Investment Technology Group, Inc. MATCH NowSM is a product offering of TriAct Canada Marketplace LP (“TriAct”), member CIPF and IIROC. TriAct is a wholly owned subsidiary of ITG Canada Corp.
This document and the presenter’s comments relating hereto may contain forward-looking statements that reflect management’s expectations for the future. A variety of important factors could cause results to differ materially from such statements. These factors are noted throughout ITG’s Form 10-K and in its Form 10-Qs and include, but are not limited to, general economic, business, credit and financial market conditions, internationally and nationally, financial market volatility, fluctuations in market trading volumes, effects of inflation, adverse changes or volatility in interest rates, fluctuations in foreign exchange rates, evolving industry regulations, changes in tax policy or accounting rules, the actions of both current and potential new competitors, changes in commission pricing, potential impairment charges related to goodwill and other long-lived assets, rapid changes in technology, errors or malfunctions in our systems or technology, cash flows into or redemptions from equity mutual funds, ability to meet liquidity requirements related to the clearing of our customers’ trades, customer trading patterns, the success of our products and service offerings, our ability to continue to innovate and meet the demands of our customers for new or enhanced products, our ability to successfully integrate companies we have acquired, our ability to attract and retain talented employees and our ability to achieve cost savings from our cost reduction plans.
This presentation also contains certain non-GAAP financial measures, adjusted to include or exclude certain unique or non-operating items. Reconciliations of these non-GAAP financial measures to the most comparable GAAP measures are available on ITG’s website at investor.itg.com.
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