ITG (NYSE: ITG) reported Q2 EPS of $0.27, $0.01 better than the analyst estimate of $0.26. Revenue for the quarter came in at $128.5 million versus the consensus estimate of $126.4 million.

• GAAP net loss of $3.0 million, or $0.09 per diluted share, and adjusted net income of $9.2 million, or $0.27 per diluted share. This compares to GAAP net income of $4.6 million, or $0.14 per diluted share for the second quarter of 2017.
• GAAP results for the second quarter of 2018 include a charge for the establishment of an accrual for the potential settlement of an SEC investigation into U.S. POSIT operational features and data access (see discussion below, “Potential Settlement with SEC”). The settlement charge of $12.0 million, together with related legal expenses of $0.2 million in the quarter, reduced after-tax earnings by $0.36 per share. There were no non-GAAP adjustments to results for the second quarter of 2017.
• Revenues of $128.5 million, compared to revenues of $121.6 million in the second quarter of 2017. Revenues for the second quarter of 2018 were reduced on a net basis by $0.7 million following an accounting rule change implemented in January 2018, which defers the recognition of certain commission revenues until later in the year and accelerates certain software license fee revenues (see discussion below, “Accounting Rule Change”).
• GAAP expenses of $128.7 million and adjusted expenses of $116.5 million, compared to GAAP expenses of $116.5 million in the second quarter of 2017. Adjusted expenses for the second quarter of 2018 exclude the charge for the settlement accrual and related fees listed above.
• GAAP pre-tax loss of $0.2 million and adjusted pre-tax income of $12.0 million, compared to GAAP pre-tax income of $5.1 million in the second quarter of 2017.
• Average daily trading volume in the U.S. was 133 million shares versus 148 million shares in the second quarter of 2017. POSIT® average daily U.S. volume was 47 million shares compared to 61 million shares in the second quarter of 2017.
• Total average daily U.S. volume traded through POSIT Alert® was 14 million shares in the second quarter of 2018 and 17 million shares in the second quarter of 2017.
• In Europe, average daily value traded in POSIT was $0.9 billion compared to $1.1 billion in the second quarter of 2017, including the effects of currency translation. Total average daily value traded through POSIT Alert in Europe rose 42% compared to the second quarter of 2017.
• Repurchases of approximately 103,000 shares of common stock at an average price of $21.09 per share, for approximately $2.2 million under ITG’s authorized share repurchase program. Repurchases since the first quarter of 2010 have totaled 17.8 million shares for $276 million, resulting in a decrease in shares outstanding, net of issuances, of approximately 25%.

ITG President and Chief Executive Officer, Frank Troise, said, “As we move into the final quarters of our Strategic Operating Plan, we are seeing clear results, with adjusted net income in the second quarter of 2018 nearly double that of the second quarter of 2017. Our goal is to deliver client value as the best operator in our core business areas of execution, liquidity, analytics and workflow technology.”

Commenting on the settlement charges, Mr. Troise said, “Across the firm, we are deeply committed to operating with the highest level of integrity. We are working towards a potential SEC settlement of these issues so we can focus on our agenda of technology-driven innovation and world-class client service.”

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