PR Newswire

NEW YORK, Feb. 16, 2012

NEW YORK, Feb. 16, 2012 /PRNewswire/ --

• Fourth Quarter
  • GAAP Total Revenues: $234.3 Million; Non-GAAP Total Revenues: $222.3 Million
  • GAAP Net Revenues: $204.6 Million; Non-GAAP Net Revenues: $192.6 Million
  • GAAP Net Loss: $22.1 Million, or a loss of $0.19 per Diluted Share, after a $19.7 Million Restructuring Charge
  • Non-GAAP Net Loss: $7.5 Million or a loss of $0.06 per Diluted Share
• Full Year
  • GAAP Total Revenues: $1.02 Billion; Non-GAAP Total Revenues: $1.01 Billion
  • GAAP Net Revenues: $880.8 Million; Non-GAAP Net Revenues: $874.5 Million
  • GAAP Net Loss: $3.2 Million or a loss of $0.03 per Diluted Share
  • Non-GAAP Net Income: $26.5 Million or $0.21 per Diluted Share
• Quarterly Cash Dividend Declared of $0.05 per Share

GFI Group Inc. (NYSE: GFIG), a leading provider of wholesale brokerage services, clearing services, electronic execution and trading support products for global financial markets, reported today its financial results for the fourth quarter and year ended December 31, 2011.  The Company also reported the completion of a cost savings initiative during the fourth quarter.

Highlights

• GAAP net revenues were $204.6 million for the fourth quarter of 2011, an increase of 4.2% from $196.4 million in the fourth quarter of 2010.  On a non-GAAP basis, net revenues increased 0.6% to $192.6 million from $191.5 million in the fourth quarter of 2010.
• GAAP brokerage revenues for the fourth quarter of 2011 were down 1.3% to $174.5 million compared with $176.8 million in the fourth quarter of 2010.  On a non-GAAP basis, brokerage revenues decreased 1.8% to $173.7 million from $176.8 million in the fourth quarter of 2010.  
• GFI completed a global restructuring in the fourth quarter that resulted in a $19.7 million pre-tax charge for severance and other restructuring costs.
• Compensation and employee benefits expense in the fourth quarter of 2011 was 78.7% of net revenues on a GAAP basis, but 71.6% on a non-GAAP basis. This compares with 70.9% of net revenues on a GAAP basis and 71.8% on a non-GAAP basis in the fourth quarter of 2010.  
• Non-compensation expenses were 34.5% of net revenues on a GAAP basis and 30.9% on a non-GAAP basis in the fourth quarter of 2011.  This compares with 28.7% of net revenues on a GAAP basis and 27.4% on a non-GAAP basis in the fourth quarter of 2010.
• Net loss for the fourth quarter of 2011 was $22.1 million on a GAAP basis, or a loss of $0.19 per diluted share, compared with net income of $4.3 million, or $0.03 per diluted share, in the fourth quarter of 2010.  On a non-GAAP basis, net loss for the fourth quarter of 2011 was $7.5 million, or a loss of $0.06 per diluted share, compared with non-GAAP net income of $3.6 million, or $0.03 per diluted share, in the fourth quarter of 2010.
• GAAP net loss for the year ended December 31, 2011 was $3.2 million, or a loss of $0.03 per diluted share, compared with net income of $25.6 million, or $0.20 per diluted share, for the year ended December 31, 2010.  On a non-GAAP basis, net income was $26.5 million, or $0.21 per diluted share, for the year ended December 31, 2011, compared with $33.6 million, or $0.27 per diluted share, for the year ended December 31, 2010.
• Cash earnings for the three month period ended December 31, 2011 were $12.5 million, or $0.11 per diluted share, compared with $22.5 million, or $0.18 per diluted share, for the same period in 2010.  Cash earnings were $107.4 million, or $0.85 per diluted share, for the year ended December 31, 2011, compared with $111.4 million, or $0.89 per diluted share, generated in the year ended December 31, 2010.

Michael Gooch, Chairman and Chief Executive Officer of GFI, commented:

"Total net revenues, on a non-GAAP basis, increased 10.1% year-over-year in 2011 due to growth in brokerage, Trayport and Fenics revenues, as well as the addition of a full year of Kyte revenues.  Despite this revenue growth, GFI's profitability was adversely impacted as a result of higher debt service costs, continued investment in both staff and technology, increased regulatory compliance costs and a higher effective tax rate for the period.

"The full-year results were also impacted by particularly slow trading activity in the fourth quarter, as many market participants reduced their risk appetite and stayed on the sidelines due to the continuing sovereign debt crisis and geo-political and market uncertainties.  Non-GAAP brokerage revenues were down 1.8% year-over-year in the fourth quarter of 2011, as continued growth in commodity and emerging market financial product revenues were offset by lower fixed income and equity product revenues.  Despite suppressed market conditions in the quarter, we expanded our geographic and product footprint with the opening of our new Swiss office focusing on emerging market financial and fixed income products.  

"We also continued to expand our electronic trade execution capabilities in the fourth quarter as approximately 60% of our brokerage revenues, excluding Kyte, were supported by our proprietary electronic trading systems.  Additionally, we now operate over 1,000 electronic matching sessions a week globally in fixed income, emerging market financial and commodity products.   This is over twice the number of sessions from a year ago and the number of sessions and users continues to grow.  We believe that the breadth of our hybrid electronic offerings and our market liquidity place us in a good position in the developing regulatory landscape.

"Our software, analytics and market data revenues grew 18.3% year-over-year in the fourth quarter and 21.4% for full year 2011 due to significant growth from our Trayport subsidiary.  We expect continued growth in our subscription-based Trayport and Fenics businesses as we develop new products and markets and look to expand our customer base.

"We completed a global restructuring initiative in the fourth quarter that included headcount reductions and resulted in a $19.7 million pre-tax charge.  We expect this restructuring initiative to reduce compensation and employee benefits expense in 2012 and anticipate pre-tax savings from the restructuring of approximately $19 million, or approximately $0.10 per diluted share on an after-tax basis.

"Our cash earnings per diluted share for full year 2011 were $0.85 per diluted share as compared with $0.89 per diluted share in 2010.

"Looking at our preliminary results through mid-February, total revenues are tracking up 5-6% compared to the same point in 2011.  January total revenues were up 2% compared to January 2011, while February total revenues are tracking up approximately 9%, indicating improving market conditions as we look toward March."

Mr. Gooch concluded: "We are pleased to declare a quarterly cash dividend of $0.05 per share to our shareholders."

Revenues

For the fourth quarter of 2011, total revenues were $234.3 million on a GAAP basis and $222.3 million on a non-GAAP basis.  This compares with total revenues of $222.2 million on a GAAP basis and $217.3 million on a non-GAAP basis in the fourth quarter of 2010.  Net revenues were $204.6 million on a GAAP basis and $192.6 million on a non-GAAP basis in the fourth quarter of 2011 compared with $196.4 million on a GAAP basis and $191.5 million on a non-GAAP basis in the fourth quarter of 2010. Brokerage revenues in the fourth quarter of 2011 were $174.5 million and $173.7 million on a GAAP and non-GAAP basis, respectively, compared with $176.8 million on a GAAP and non-GAAP basis in the fourth quarter of 2010.

GAAP revenues from commodity and financial products increased 14.5% and 5.2%, respectively, while equity and fixed income product revenues decreased 13.0% and 9.9%, respectively, in the fourth quarter of 2011 compared with the fourth quarter of 2010.  By geographic region, brokerage revenues increased 4.8% in the Americas, but decreased 10.0% in Asia-Pacific and 4.7% in EMEA, as compared to the fourth quarter of 2010.

Revenues from trading software, analytics and market data products for the fourth quarter of 2011 were $19.3 million, an increase of 18.3% from the same period of 2010.  

Expenses

For the fourth quarter of 2011, compensation and employee benefits expense was $161.1 million and $138.0 million on a GAAP and non-GAAP basis, respectively.  This compared with $139.1 million on a GAAP basis and $137.5 million on a non-GAAP basis in the fourth quarter of 2010.  Non-GAAP compensation expense in the fourth quarter of 2011 excluded $19.4 million of expenses related to the cost restructuring, as well as $3.7 million in compensation-related start-up costs of our new Swiss office.  Compensation and employee benefits expense was 78.7% of net revenues on a GAAP basis and 71.6% on a non-GAAP basis in the fourth quarter of 2011 compared with 70.9% of net revenues on a GAAP basis and 71.8% on a non-GAAP basis in the fourth quarter of 2010.

Non-compensation expenses for the fourth quarter of 2011 on a GAAP basis were $70.5 million, or 34.5% of net revenues, compared with $56.6 million, or 28.7% of net revenues, in the fourth quarter of 2010. On a non-GAAP basis, non-compensation expenses for the fourth quarter of 2011 were $59.5 million, or 30.9% of net revenues, compared with $52.5 million, or 27.4% of net revenues, in the fourth quarter of 2010. Non-GAAP non-compensation expenses for the quarter exclude a $4.1 million write-down of available for sale securities, a $2.5 million write-down of investments in unconsolidated affiliates, and $1.2 million in start-up costs for the Swiss office.  The increase in non-GAAP non-compensation expenses as compared to the fourth quarter of 2012 largely relate to increased interest expense resulting from our $250 million senior notes offering completed in July 2011, as well as incremental communications and market data expense associated with an expanded brokerage workforce and professional fees.  

The effective tax rate for 2011 was 39.0% on a non-GAAP basis, compared to 18.5% on a GAAP basis and 25.0% on a non-GAAP basis for 2010.

Earnings

On a GAAP basis, net loss for the fourth quarter of 2011 was $22.1 million, or a loss of $0.19 per diluted share, compared with net income of $4.3 million, or $0.03 per diluted share, in the fourth quarter of 2010.  On a non-GAAP basis, net loss for the fourth quarter of 2011 was $7.5 million, or a loss of $0.06 per diluted share, compared with $3.6 million, or $0.03 per diluted share, for the fourth quarter of 2010.

On a non-GAAP basis, cash earnings for the fourth quarter of 2011 were $12.5 million, or $0.11 per diluted share, compared with $22.5 million, or $0.18 per diluted share, for the same period in 2010.

Full Year Results

Net revenues for the year ended December 31, 2011 were $880.8 million, on a GAAP basis, compared to $795.0 million, for the year ended December 31, 2010.  Net loss was $3.2 million on a GAAP basis, or a loss of $0.03 per diluted share, for the year ended December 31, 2011 compared with net income of $25.6 million, or $0.20 per diluted share, for 2010.

On a non-GAAP basis, net revenues for the full year 2011 were $874.5 million, compared to $794.0 million, for the year ended December 31, 2010.  Non-GAAP net income was $26.5 million, or $0.21 per diluted share, for the year ended December 31, 2011 compared with net income of $33.6 million, or $0.27 per diluted share, for 2010.  

On a non-GAAP basis, cash earnings for the year-ended December 31, 2011 were $107.4 million, or $0.85 per diluted share, compared with $111.4 million, or $0.89 per diluted share, for 2010.

Dividend Declaration

The Board of Directors of GFI has declared a quarterly cash dividend of $0.05 per share payable on March 30, 2012 to shareholders of record on March 15, 2012.

Non-GAAP Financial Measures

To supplement GFI's unaudited financial statements presented in accordance with GAAP, the Company uses certain non-GAAP measures of financial performance. The presentation of these non-GAAP financial measures is not intended to be considered in isolation from, as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP, and may be different from non-GAAP financial measures used by other companies.  In addition, these non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the Company's results of operations as determined in accordance with GAAP. The non-GAAP financial measures used by GFI include non-GAAP total revenues, non-GAAP net revenues, non-GAAP net income, non-GAAP diluted earnings per share, cash earnings and cash earnings per share. These non-GAAP financial measures currently exclude from the Company's statement of income amortization of acquired intangibles and certain other items that management views as non-operating, non-recurring or non-cash as detailed in the reconciliation included in the financial tables attached to this release.

In addition, GFI may consider whether other significant non-operating, non-recurring or non-cash items that arise in the future should also be excluded in calculating the non-GAAP financial measures it uses.  The non-GAAP financial measures also take into account estimated adjustments to income tax expense with respect to the excluded items.

GFI believes that these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding the Company's performance by excluding certain items that may not be indicative of the Company's core business, operating results or future outlook. GFI's management uses, and believes that investors benefit from referring to, these non-GAAP financial measures in assessing the Company's operating results, as well as when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate comparisons of the Company's performance to prior periods.

In addition to the reasons stated above, which are generally applicable to each of the items GFI excludes from its non-GAAP financial measures, the Company believes it is appropriate to exclude amortization of acquired intangibles because when analyzing the operating performance of an acquired business, GFI's management focuses on the total return provided by the investment (i.e., operating profit generated from the acquired entity, as compared to the purchase price paid) without taking into consideration any charges for allocations made for accounting purposes. Further, because the purchase price for an acquisition necessarily reflects the accounting value assigned to intangible assets, when analyzing the operating performance of an acquisition in subsequent periods, the Company's management excludes the GAAP impact of acquired intangible assets on its financial results. GFI believes that such an approach is useful in understanding the long-term return provided by an acquisition and that investors benefit from a supplemental non-GAAP financial measure that excludes the accounting expense associated with acquired intangible assets.

A reconciliation of these non-GAAP financial measures to GAAP is included in the financial tables attached to this release.

Conference Call

GFI has scheduled an investor conference call to discuss its fourth quarter results at 8:30 a.m. (Eastern Time) on Friday, February 17, 2012. Those wishing to listen to the live conference call via telephone should dial 1-800-860-2442 in North America and +1-412-858-4600 in Europe, and ask for "GFI".

A live audio web cast of the conference call will be available on the Investor Relations section of GFI's Website. For web cast registration information, please visit: http://www.gfigroup.com. Following the conference call, an archived recording will be available on the same site.

Supplementary Financial Information

GFI has posted details of its historical monthly brokerage revenues on the Investor Relations page of its web site under the heading Supplementary Financial Information. The Company currently plans to post this information quarterly in conjunction with its announcement of earnings, but does not undertake a responsibility to continue to provide or update such information.

About GFI Group Inc.

GFI Group Inc. (NYSE: "GFIG") is a leading provider of wholesale brokerage services, clearing services, electronic execution and trading support products for global financial markets. GFI Group Inc. provides brokerage services, market data, trading platform and analytics software products to institutional clients in markets for a range of fixed income, financial, equity and commodity instruments.

Headquartered in New York, GFI was founded in 1987 and employs more than 2,100 people with additional offices in London, Paris, Nyon, Hong Kong, Seoul, Tokyo, Singapore, Sydney, Cape Town, Santiago, Bogota, Dubai, Dublin, Tel Aviv, Los Angeles and Sugar Land (TX). GFI Group Inc. provides services and products to over 2,600 institutional clients, including leading investment and commercial banks, corporations, insurance companies and hedge funds. Its brands include GFI(SM), GFInet®, CreditMatch®, GFI ForexMatch®, EnergyMatch®, FENICS®, Starsupply®, Amerex®, Trayport® and Kyte®.

Forward-looking statement

Certain matters discussed in this press release contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this press release, the words "anticipate," "believe," "estimate," "may," "might," "intend," "expect" and similar expressions identify such forward-looking statements. Actual results, performance or achievements could differ materially from those contemplated, expressed or implied by the forward-looking statements contained herein. These forward-looking statements are based largely on the expectations of GFI Group Inc. (the "Company") and are subject to a number of risks and uncertainties. These include, but are not limited to, risks and uncertainties associated with: economic, political and market factors affecting trading volumes; securities prices or demand for the Company's brokerage services; competition from current and new competitors; the Company's ability to attract and retain key personnel, including highly-qualified brokerage personnel; the Company's ability to identify and develop new products and markets; changes in laws and regulations governing the Company's business and operations or permissible activities; the Company's ability to manage its international operations; financial difficulties experienced by the Company's customers or key participants in the markets in which the Company focuses its brokerage services; the Company's ability to keep up with technological changes; uncertainties relating to litigation and the Company's ability to assess and integrate acquisition prospects. Further information about factors that could affect the Company's financial and other results is included in the Company's filings with the Securities and Exchange Commission. The Company does not undertake to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

- FINANCIAL TABLES FOLLOW -