Itg investor presentation_01june16
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Transcript of Itg investor presentation_01june16
Subtitle
Q4 2013 Earnings 1/30/14
Subtitle
© 2016 Investment Technology Group, Inc. All rights reserved.Not to be reproduced or retransmitted without permission. #51016-28213
ITG Investor Overview June 2016
SubtitleSubtitleITG is an independent broker and financial technology firm that helps improve the efficiency and execution quality of institutional trading
International and Multi-Asset Growth
• ITG is expanding product offerings and market share in Europe, Canada and Asia Pacific
• Positive trends: unbundling of research from execution and growing electronification of trading
• Expansions to FX, Corporates, Futures & Options offer new revenue opportunities
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
• Unique liquidity, market-leading execution, platform 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
• Divestiture of investment research sharpens business focus
• Total cash and equivalents of $274 million and $100 million of excess cash as of March 31, 2016
• Only $11 million in long-term debt
• Active share buyback program: $241 million in repurchases since 1Q10 have reduced share count, net of issuances, by more than 24%
• $0.07 quarterly dividend paid since 2Q15.
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SubtitleGlobal Product Groups
2
18%
9%
51%
22%Platforms
Analytics
Electronic Brokerage
Research S&T
2015 Adjusted Revenues$527m*
*Excludes gain on energy research business sale in late Dec. 2015. Source: ITG
12%
9%
54%
25%Canada
Asia Pac
US
Europe
2015 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
PLATFORMS
Triton® broker-neutral execution management
ITG Order Management System and ITG Position Manager™ for Hedge Funds
ITG Net® FIX connectivity to 650+ destination
ITG RFQ-hub for OTC connectivity and trading
ELECTRONIC BROKERAGE
POSIT® dark crossing in 36 countries
ITG Algorithms® in 40 countries
ITG Smart Routing
POSIT® FI and POSIT® FX launched
ANALYTICS
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
HIGH-TOUCH SALES & TRADING
Global portfolio trading
Single-stock high-touch trading
Corporate Access
Energy research via RS Energy Group
ITG Investment Research unit sale closed in late May 2016
Subtitle
• 1,038 employees (as of 1Q16) • Offices in 9 countries including
9 trading desks
• 250 awards and honors over last 6 years across Electronic Brokerage, Analytics, and Platforms
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Global Presence, Local Expertise
SubtitleSubtitle
98% of clients who suspended trading with ITG post-SEC settlement in 3Q15 have resumed trading.
Trading activity and profitability improved sequentially in all operating regionsfrom 4Q15 to 1Q16.
4Q15 1Q16 4Q15 1Q16 4Q15 1Q16 4Q15 1Q160
100
200
300
400
500
600
700
800
Average Daily Trading Comms ($ thousands)
Canada EMEA Asia PacificUS
4
Client Recovery Underway
Source: ITG
SubtitleSubtitleSizing the Opportunity Upside Potential from Market Share Gains
North America (#15) Europe (#20) Asia Pacific (#21)0
50
100
150
200
250
300
350
400
450
500 Revenue Gap to #10 Broker
ITG Cash Commissions ($M)
ITG cash equity commissions and broker rankings in FY15. Source: McLagan. Excludes sell-side commissions and some buyside clients not in McLagan reporting universe.
5
SubtitleRising ElectronificationA Key Growth Opportunity
6
2014 2015 2018e46
47
48
49
50
51
52
53
Canadian Electronic Equity Trading
Electronic Trading (Algo, Portolio Trading, Crossing) as % of total trading. 2018 forecasts based on buyside trader surveys. Source: Greenwich Associates
US Electronic Equity Trading
2014 2015 2018e0
5
10
15
20
25
30
35
2014 2015 2018e46
48
50
52
54
56
58
EU Electronic Equity Trading
2014 2015 2018e32333435363738394041
Asia Pacific Electronic Equity Trading
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Dec '09 Dec '10 Dec '11 Dec '12 Dec '13 Dec '14 Mar '160
5000
10000
15000
20000
25000
30000
35000
40000
45000
50000
7
• Consistent capital return program has reduced outstanding shares by >24% since 1Q 2010. • Dividend payout since 2Q 2015 of approximately $2mm/quarter.
• Sale of Energy Research group increased available free cash - $100mm at March 31, 2016.
• Sale of ITG Investment Research added more than $5m in free cash at closing.
• ITG is well capitalized to take advantage of investment opportunities.
*Cash over and above the amount needed for regulatory capital, clearing margin, compensation accruals and other liabilities. Source: ITG
Basic Shares Outstanding (millions)
Dec '10 Dec '11 Dec '12 Dec '13 Dec '14 Mar '160
20
40
60
80
100
120
Available Excess Cash* ($millions)
Strong Capital Position
SubtitleSubtitleCore Business Strength
Europe
• Ranked #1 for Electronic Trading Quality and Best Portfolio Trading
• POSIT had over 14% share of European dark trading in 2015, a new record
• Full suite of ITG products now available in Europe; Algo trading and POSIT access in 21 EMEA markets
Canada
• Top 10 institutional broker by market share• Ranked #1 by Greenwich in electronic
trading, portfolio trading, algos and CSAs • Operates MATCH NowSM broker neutral
crossing system, Canada’s largest dark pool
US
• Ranked #1 US Equity Brokerage by Elkins McSherry and #1 among pension funds in Greenwich survey
• Named top CSA provider among large institutions by Greenwich and #1 for pre-and post-trade analytics
Asia• POSIT crossing available in Hong Kong,
Australia, Japan, India, Taiwan, Korea, Malaysia, Indonesia, Singapore and the Philippines
• Named Best Agency Broker by Asian Investor, ranked #1 in Electronic Trading Quality by Greenwich
• Move towards unbundling trading gaining traction with TCA research and CSAs
8
SubtitleSubtitle
*Offerings in red currently in development/planning
Equities ETFs Derivatives FX Fixed Income
Triton global broker
neutral portfolio trading execution
management system
Global ETF Trading from Triton
RFQ Hub integration
Expand to cover Global Futures & Options trading
from Triton
RFQ Hub integration
Global algorithms, smart routing and
trading desk services
POSIT Alert 20+ markets
POSIT crossing 30+ markets
US Futures algorithms, smart routing and DMA
High touch options trading
Index Futures Post Trade Analytics
FX TCA
Pre Trade Analytics
Real Time Analytics
Platforms
Execution & Liquidity
Analytics
Global algorithms, smart routing and
trading desk services
POSIT Alert 20+ markets
POSIT crossing 30+ markets
Triton for FX
FX Connect integration
FX algorithms
POSIT FX
POSIT Fixed Income
(global coverage)
Pre Trade Analytics
Real time Analytics
Post Trade Analytics
Pre Trade Analytics
Real time Analytics
Post Trade Analytics
Triton for Fixed Income
including RFQ Hub
Fixed Income TCA
Multi-Asset Opportunities
9
SubtitleSubtitleITG at a Glance
• Unique, market-leading assets for execution, liquidity, platforms and analytics
• Strong international business with favorable macro trends and ample room for market share gains
• Solid balance sheet to fund organic and inorganic growth initiatives
• Strong cash flow generation, active buyback program and quarterly dividend
• Disciplined expense management increases operating leverage: 50%+ incremental pre-tax margins
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SubtitleSubtitleElectronic Brokerage
Featuring: ITG Algorithms®
POSIT®
Large pool of accessible dark liquidity. Average US Daily Volume of 65m shares in 1Q16
ITG Algorithms®
Sophisticated strategies for equities and futures
ITG Smart RoutingOne-point high-speed connection to liquidity
Featuring: POSIT Alert®
• High-quality block crossing opportunities with average US trade size
(ex-algos) >30,000 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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SubtitleSubtitle
Featuring: Triton®
Platforms
Featuring: ITG Net®
• FIX connectivity and management to more than 650 global destinations
• Industry-leading tools for pre-, intra-day, 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 SystemsGlobal, broker-neutral and multi-asset EMSs
ITG Order Management SystemsITG OMS: Global, multi-asset enterprise OMSITG Position Manager: Dedicated Hedge Fund 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
13
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
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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SubtitleSubtitle
Featuring: ITG Portfolio TradingITG High Touch and Portfolio TradingHigh touch traders provide expert execution coupled with ITG Investment Research insights. Seasoned 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.
ITG Investment ResearchEnergy research provided to institutional clients through partnership with RS Energy Group. Sale of remaining ITG Investment Research group (Consumer & TMT Research) closed in late May 2016.
• Ranked #1 for US Portfolio Trading by Greenwich Associates
• Global coverage: 7500+ names in 40+ countries and 200 execution venues
• Insightful index research and analysis
High Touch Sales & Trading
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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.
Disclaimers 16