5 - MF Q111 Presentation[1]

Embed Size (px)

Citation preview

  • 8/2/2019 5 - MF Q111 Presentation[1]

    1/25

    First Quarter 2011 Results

    August 5, 2010

  • 8/2/2019 5 - MF Q111 Presentation[1]

    2/25

    Safe Harbor

    Statements contained in this presentation that are not based on current or historical fact are forward-looking in

    nature. Such forward-looking statements are based on current plans, estimates and expectations and are made

    pursuant to the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on known

    and unknown risks, assumptions, uncertainties and other factors. The Company's actual results, performance, or

    achievements may differ materially from any future results, performance, or achievements expressed or implied

    b such forward-lookin statements. The Com an undertakes no obli ation to ublicl u date or revise an

    forward-looking statement. For a discussion of some of the important factors that could cause the issuers results

    to differ from those expressed in, and implied by, the following forward-looking statements, please refer to our

    SEC filings, in particular, the Risk Factors section thereof.

    1

  • 8/2/2019 5 - MF Q111 Presentation[1]

    3/25

    AgendaAgenda

    Jon Corzine, Chairman and CEO First Quarter 2011 financial results

    Early results of tactical review

    Strategic vision forward

    Randy MacDonald, CFO Income Statement

    Net revenue breakdown

    Revenue streams and macro drivers

    Key financial metrics

    Liquidity and capital structure

    2

  • 8/2/2019 5 - MF Q111 Presentation[1]

    4/25

    Improving Financial Performance

    $272$240

    $289 $67

    EBITDA (1) ($ millions)Net Revenues ($ millions)

    Y/Y change: 6%Q/Q change: 20% Y/Y change: 116%

    $31

    ($8)

    GAAP EPS

    1Q10 4Q10 1Q11 1Q10 4Q10 1Q11

    Fully Diluted EPS (1)

    June JuneMarch JuneJune March

    $0.05

    $0.16

    Y/Y change: 220%

    ($0.27)

    $0.01

    ($0.17)

    1Q10 4Q10 1Q11

    ($0.78)

    1Q10 4Q10 1Q11

    June JuneMarch June JuneMarch

    3

    (1) Presented on an adjusted basis. See schedules in appendix for reconciliation.

  • 8/2/2019 5 - MF Q111 Presentation[1]

    5/25

    Initial Actions Drive Early Results

    4

  • 8/2/2019 5 - MF Q111 Presentation[1]

    6/25

    Potential Benefits of Financial Reform

    MF GlobalCompetitors Market Impact

    Premium on clearing and post-trade

    services

    Levels competitive landscape

    - Commodities, equities and some fixed income

    Limits risk taking

    Creates push out of certain tradingactivities

    Increases capital costs

    Increased

    transparency

    Lower systemic risk

    Potential increase of exchange-tradedvolume

    Opportunity in underserved middle market

    Increases pricing transparency

    Fragments client base

    Key: Regulatorsimplementation ofreform

    Basel III- Likely to require banks to deleverage

    Drivers

    Volcker rule- Banks can invest only 3% Tier 1 capital- Limits bank capital committing opportunities

    Swaps push out- Commodities, equities, high yield/ABS/CDS in separately capitalized

    5

    Centralized clearing- Most OTC products to be moved to exchange and/or cleared

    - Non-cleared OTC products to be margined

  • 8/2/2019 5 - MF Q111 Presentation[1]

    7/25

    Net Revenue Increases Across All Revenue Streams

    4Q10 1Q11

    ($ millions)

    $120

    $160$132.7

    $142.4

    $87.4

    $40

    $80 $54.1

    $43.1$47.7

    $0

    Commissionsbased(1) PrincipalTransactions&Related

    Interest(2)

    NetIntfromClientFunds(2)

    Commodities

    FX

    Retail

    Equities

    Duration

    Avg. Client Balances

    666

    . Yield

    Securities Lending

    6

    (1) Net of sales commission expense(2) 4Q10 balances reflect reclassification of dividends from interest income andexpense to principal transactions.

  • 8/2/2019 5 - MF Q111 Presentation[1]

    8/25

    First Quarter 2011 Net Revenue Breakdown

    (4)

    For three months ended June 30, 2010

    Income

    Statement Total Commissions

    Principal

    Transactions &

    Related Interest

    Net Interest

    from Client

    Funds (1)

    ($ in millions) A B C D

    1. Interest Income 114.2$

    2. Interest Expense (45.4)

    3. Net Interest 68.8 18.0$ 50.8$

    4. Principal Transactions 66.3 69.4 (3.1)

    5. Commissions 376.6 376.6$

    6. xecut on an ear ng ees 175.2 175.2

    7. 201.4 201.4

    8. Sales Commission (59.0) (59.0)

    9. Other Income 11.9

    10. 289.4$ 142.4$ 87.4$ 47.7$

    11. Volumes 524.7 524.7

    12. Average Assets Client Funds and Corporate Cash ($bn) 13,319$

    13. Yield 0.27$ 1.42%

    14. Average Balances - Fixed Income and Stock Borrow Loan ($bn) 31,549$15. Yield from Fixed Income and Stock Borrow Loan 0.29%

    (1) Client funds yield includes customer payables and company capital

    7

  • 8/2/2019 5 - MF Q111 Presentation[1]

    9/25

    Key Financial Metrics Reflect Cost Rationalization Efforts

    62.5% 64.0%

    52.5%

    Estimated Annualized Savings - $60m to $75m Compensation as a Percentage of Net Revenue (1)

    Cost Savings 1Q11Actual

    1Q11Est.

    AnnualizedEst.

    Impairment of intangible $ 2m $1m to $2m $5m to $7massets and goodwill

    Write-down of up-frontcompensation payments $ 5m $3m to $4m $12m to $18m

    Headcount reduction andcompensation targets

    $ 10m $2m to $5m $43m to $50m

    1Q10 4Q10 1Q11

    Non-compensation Expenses(1) Pre-tax Margin and EBITDA Margin(1)

    Total $17m $6m to $11m $60m to $75mJune JuneMarch

    $93

    $114

    $9112.9 %11.5 %

    23.1 %PretaxMargin

    EBITDAMargin

    1Q10 4Q10 1Q11

    (0.8%)

    (15.4%)

    (3.3%)

    1Q10 4Q10 1Q11

    June JuneMarch March June

    8

    (1) Presented on an adjusted basis.

  • 8/2/2019 5 - MF Q111 Presentation[1]

    10/25

    Improved Capital Structure

    ($ and shares in millions)

    Proforma Jun

    30, 2010 (1)Jun 30, 2010 Mar 31, 2010

    1Q11

    Rate

    1Q11

    ExpenseMaturity

    Revolver 442.5$ 442.5$ 442.5$ 2.3% (4) 3.0 (2) June 2014 (3)

    Senior Convertible Notes, par 195.7 205.0 205.0 9.0% 4.6 June 2013

    Total Debt 638.2$ 647.5$ 647.5$

    Interest expense 7.6Amortization of debt issuance costs 1.5

    Accretion of debt discount 0.4

    Interest on borrowings 9.5$

    Preferred Stock

    Series A 96.2$ 96.2$ 96.2$ 10.7% 4.0$ Perpetual

    Series B 34.4 128.0 128.0 9.75% 3.7 Perpetual

    Equity 1,378.5 1,331.7 1,141.4

    , . , . , .

    Dividend expense 7.7$

    Total Capital 2,147.3$ 2,203.4$ 2,013.1$

    Debt/EBITDA 2.4 2.4 8.6

    (1) Proforma includes impact of tender offer to exchange convertible debt and preferred stock(2) Expense includes facility fees.(3) Revolving credit facility was amended in June 2010 extending $690m to June 15, 2014, while $511m retains the existing facility maturity of June 15, 2012.(4) LIBOR + 200. Changes to a weighted blended rate of LIBOR + 243 after amendment.

    9

  • 8/2/2019 5 - MF Q111 Presentation[1]

    11/25

    Tangible Book Value Remains at a Premium

    1,400

    1,600

    22 994

    (53)

    (2)

    ($ millions)

    TangibleBook value:

    $8.65

    ProformaTangible

    Book value:$8.00

    TangibleBook value:

    $8.46

    1,000

    1,200

    174

    Cash Flow Savings:

    Senior Notes Interest (after tax) 0.5$

    600

    800

    1,068

    1,242 1,264 1,2671,361

    1308 1,312

    .

    Savings to net income 11.2$

    P/E 10

    Value To Shareholder 111.7$

    Value Per Share 0.68$

    200

    400

    0Tangible

    Book Value3/31/10

    Net CashFrom Equity

    Raise

    Change inNet Equity

    TangibleBook Value

    6/30/10

    Exchangeof Senior

    Notes

    Exchangeof Series BPref Stock

    CashPremium

    Expenses IPO RSUVesting

    ProformaBook Value

    6/30/10

    123.5 25.9 149.4 0.9 10.5 3.3 164.1Basic Shares Outstanding

    10

    . _ . . _ _ .n m ons

  • 8/2/2019 5 - MF Q111 Presentation[1]

    12/25

    Strong Liquidity Position

    ($ in millions) Total

    Required

    Capital

    Excess

    Capital Free Cash Non-Cash

    Regulated entities 1,819$ 1,308$ 512$ N/A N/A

    Non-regulated entities 379 302 77Total Capital 2,198 1,308 512 302 77

    Uses and Sources (Proforma):

    as use n exc ange or conver e no es

    and preferred stock (including expenses) (55) (55)

    Preferred dividends (8) (8)

    Total Capital after Uses (Proforma) 2,135 1,308 512 239 77

    n rawn revo ver

    Non-segregated client payables and collateral 1,524

    Total Available Liquidity (Proforma) 512$ 2,521$

    ,

    March 31, 2010 Available Liquidity

    ,

    $3,025

    (1) Revolving credit facility w as amended in June 2010 extending $690m to June 15, 2014, while $511m retains the existing fac ility maturity of June 15, 2012.

    11

  • 8/2/2019 5 - MF Q111 Presentation[1]

    13/25

    Appendices

    This section of the page should be blank except when footnotes are present.

  • 8/2/2019 5 - MF Q111 Presentation[1]

    14/25

    Client-Driven Balance Sheet

    ($ in millions) 1Q11 4Q10

    Average(1)

    Client Balances 13,319$ 13,722$Fixed Income & SBL Balances 31,549 34,218

    Receivables 4,100 5,100

    Non-Interest Earning Assets 440 435

    Total Assets 49,408$ 53,475$

    Equity (2) 1,461$ 1,407$

    Free Cash (End of Period) 302$ 53$

    (1) Calculated as simple average quarter over quarter.

    2

    13

  • 8/2/2019 5 - MF Q111 Presentation[1]

    15/25

    Fixed Income and Securities Borrow/Loan Yield

    ($ in millions) 1Q11 4Q10 3Q10 2Q10 1Q10

    Average Balances

    Securities Borrowed 3,867$ 6,074$ 10,157$ 11,175$ 9,445$

    Securities Loaned (1,080) (835) (2,714) (4,551) (5,153)

    Securities Owned 6,925 6,027 6,188 7,590 6,762

    Securities Sold (4,349) (4,729) (5,099) (3,788) (2,659)

    Reverse Repo 18,814 20,575 20,311 19,959 15,612

    Repo (28,063) (30,197) (31,859) (30,456) (21,390)

    Average Net Balances (1) (3,886) (3,085) (3,016) (71) 2,617

    Average of Absolute Balances 31,549$ 34,218$ 38,164$ 38,759$ 30,511$

    Principal Transactions Revenue

    Fixed Income (4.5)$ (2.5)$ (10.8)$ 4.1$ 8.1$

    Securities Lending (3) 25.7 1.0 10.5 4.2 2.4

    Total 21.2 (1.5) (0.3) 8.3 10.5

    Net Interest Revenue

    Fixed Income 17.4 16.6 35.2 35.1 33.4

    Securities Lending (3) 0.6 5.9 (8.8) (2.3) 3.9

    Total 18.0 22.5 26.4 32.8 37.3

    Total Revenue

    Fixed Income 12.9 14.1 24.4 39.2 41.5Securities Lending 26.3 6.9 1.7 1.9 6.3

    Total 39.2$ 21.0$ 26.1$ 41.1$ 47.8$

    Yield (2) 0.29% 0.25% 0.27% 0.42% 0.63%

    14

    (1) Average absolute balances are calculated as adjus ted absolute balances divided by two.

    (2)

    Yield calculation for 1Q11 does not annualize certain one-time equity or stock borrow/loan transactions.(3) Balances reflect reclassification of dividends from interest income and expense to principal transactions.

  • 8/2/2019 5 - MF Q111 Presentation[1]

    16/25

    Net Revenue by Geography

    Net Revenue, net of Interest and Transaction-

    based expenses 1Q11 4Q10 3Q10 2Q10

    North America 50% 53% 54% 52%

    Europe 36% 30% 34% 35%

    Rest of World 14% 17% 12% 13%

    Total 100% 100% 100% 100%

    15

  • 8/2/2019 5 - MF Q111 Presentation[1]

    17/25

    Fourth Quarter 2010 Net Revenue Breakdown

    (4)

    For three months ended March 31, 2010

    Income

    Statement Total Commissions

    Principal

    Transactions &

    Related Interest

    Net Interest

    from Client

    Funds (1)

    ($ in millions) A B C D

    1. Interest Income (2) 113.2$

    2. Interest Expense (2) (42.8)

    3. Net Interest (2) 70.4 22.5$ 48.0$

    4. Principal Transactions (2) 26.8 31.6 (4.9)

    5. Commissions 347.6 347.6$

    6. Execution and Clearing Fees (156.4) (156.4)

    7. 191.2 191.2

    8. Sales Commission (58.5) (58.5)$

    9. Other Income 10.6

    . . . . .

    11 Volumes 426.0 426.0

    12. Average Assets Client Funds and Corporate Cash ($bn) 13,722$

    13. Yield (2) 0.31$ 1.26%

    14. Average Balances - Fixed Income and Stock Borrow Loan ($bn) 34,218$

    15. Yield from Fixed Income and Stock Borrow Loan 0.25%

    (1)Client funds yield includes customer payables and company capital

    16

    (2) Balances reflect reclassification of dividends from interest income and expense to principal transactions.

  • 8/2/2019 5 - MF Q111 Presentation[1]

    18/25

    Adjusted EBITDA

    (in millions) 1Q11 4Q10 1Q10

    Income / (Loss) Before Taxes 37.2$ (37.0)$ (2.1)$

    Depreciation & Amortization 10.5 13.8 13.6

    Stock Compensation (excluding IPO awards) 9.5 5.9 9.2

    n eres on orrow ngs . . .

    Adjusted EBITDA(1)(2)

    66.7$ (8.0)$ 31.2$

    (2)

    (1) Balances have been adjusted for exchange membership gains and losses, IPO-related costs, stock compensation expense

    related to IPO awards, impairment of intangible assets and goodwill, broker related loss costs, severance expense, foreign currency

    translation movements, accelerated amortization of debt issuance costs, restructuring, write-down of upfront compensation payments,

    and U.K. bonus tax.

    17

  • 8/2/2019 5 - MF Q111 Presentation[1]

    19/25

    EPS Roll Forward

    (in millions, except for per share data)

    Pre-tax Income/

    (Loss)

    Net Income/

    (Loss) Shares EPS Shares EPS

    1Q11

    Basic Fully Diluted

    Shares outstanding 179.5

    GAAP 16.6$ 0.8$ 130.2 0.01$ 130.2 0.01$Stock compensation expense related to IPO awards 8.6 6.4 0.05 3.3 0.04

    Anti-dilutive impact of fully diluted number of shares - 12.2 46.0 0.06

    Fully Diluted 25.2 19.4 130.2 0.06 179.5 0.11

    Restructuring charges 9.9 6.5 0.05 0.04

    Other adjustments (1) 2.1 2.5 0.02 0.01

    Adjusted 37.2$ 28.4$ 0.12$ 0.16$

    (1) Other adjustments include exchange membership gains, U.K. bonus tax, impairment of goodwill and severance expense.

    18

  • 8/2/2019 5 - MF Q111 Presentation[1]

    20/25

  • 8/2/2019 5 - MF Q111 Presentation[1]

    21/25

    Proforma Tangible Book Calculation

    ($ in millions)

    Equity 6/30/10 1,332$

    rem ums an expenses pa n exc ange o er

    Convertible Senior Notes exchanged 9

    Series B Preferred Stock exchanged 94

    1,380$

    Less: Intangible Assets (68)

    Proforma tangible book value 1,312$

    Proforma basic shares outstanding 164.1

    Proforma tangible book value per share 6/30/10 8.00$

    20

  • 8/2/2019 5 - MF Q111 Presentation[1]

    22/25

    EPS GAAP Calculation

    ($ and shares in thousands)

    1Q11

    Basic earnings per share:

    Numerator:

    Net income $8,821

    Less: Dividends declared for Series A Preferred Stock (4,022)

    Dividends declared on Series B Preferred Stock (3,656)

    Allocation to participating securities (360)Net income applicable to common shareholders $783

    Denominator:

    ,

    Diluted weighted average common stock outstanding 134,000

    Basic earnings per share $0.01

    Diluted earnings per share $0.01

    n cacu at ng ute or t e t ree mont s en e une 30, 2010, 3,803 o

    outstanding stock awards are dilutive, while the impact of certain other outstanding

    stock awards, Convertible Notes, and Series A and Series B Preferred Stock is anti-

    dilutive. The following table presents the potential shares excluded from the computation

    of diluted earnings per share because the effect would have been anti-dilutive.

    1Q11

    Restricted stock units and restricted stock 8,331

    Stock options 8,960

    9.0% Convertible Notes 19,617

    21

    ,

    Series B Non-cumulative Preferred Stock 14,354

    Total 63,262

  • 8/2/2019 5 - MF Q111 Presentation[1]

    23/25

    EPS Adjusted Calculation

    ($ and shares in thousands)

    1Q11

    Adjusted Diluted earnings per share:

    Adjusted net income 28,404$

    Denominator:

    Basic weighted average common stock outstanding 130,197Effect for dilutive stock awards 3,325

    9.0% Convertible Notes 19,617

    Series A Cumulative Preferred Stock 12,000

    er es on-cumu a ve re erre oc ,

    Total 179,493

    Adjusted Diluted earnings per share $0.16

    22

  • 8/2/2019 5 - MF Q111 Presentation[1]

    24/25

    Proforma Shares Outstanding June 30, 2010

    (in millions)

    Basic Common Shares Outstanding March 31, 2010 123.5

    Shares issued in equity offering 25.9

    Basic Common Shares Outstandin June 30, 2010 149.4

    Shares issued in exchange offer:

    Convertible Senior Notes 0.9Series B Preferred Stock 10.5

    Vesting of IPO RSUs 3.3

    Total Proforma Basic Shares Outstanding (after Exchange) June 30, 2010 164.1

    Series A Preferred Stock 12.0

    Series B Preferred Stock 3.9

    Convertible Senior Notes 18.7

    Total Proforma Fully Diluted Shares Outstanding June 30, 2010 198.7

    * For EPS calculation purposes, shares will be weighted based on issuance date.

    23

  • 8/2/2019 5 - MF Q111 Presentation[1]

    25/25

    Diversified and Balanced Revenue Model

    CommissionsFixed Income and

    Stock LendingPrincipal

    TransactionsInterest Income

    (Investment)

    MajorDriver

    VolumesInterest &Bid/Offer

    Spreads

    Bid/OfferSpreads

    InterestRates/Spreadsand Customer

    balances

    Products

    ExchangeListed

    OTC

    Cash

    Agencies

    Treasuries

    CorporatesE uities

    Metals/Energy

    ForeignExchange

    InvestmentGrade Agencies

    Treasuries

    Lon -Term

    Interest Rates

    Equities

    Commodities AssetManagers

    Broker

    Corporatehedgers

    AssetManagers

    Retail

    Institutional

    Clients

    Retail

    ProfessionalTraders

    Assetmanagers

    Dealers

    Corporations

    FinancialInstitutions

    nvestment

    banksProfessional

    Traders

    CompanyCapital

    24

    nanc aInstitutions

    Corporations

    24