J.T. Farley - Investor Relations
Bob Gasser - Chief Executive Officer
Steven Vigliotti - Chief Financial Officer
Niamh Alexander - KBW
Ken Worthington - JP Morgan
Rich Repetto - Sandler O’Neill
Chris Allen - Evercore
Michael Wong - Morningstar
Investment Technology Group, Inc. (ITG) Q3 2013 Results Earnings Call October 31, 2013 11:00 AM ET
Good morning and thank you for joining us to discuss ITG's Third Quarter Results for 2013. My name is Chad and I will facilitate the call today. After the speakers remarks, there will be a question and answer period. I will provide further instructions before we take questions. As a reminder, this session is being recorded.
I would now like to turn the call over to J.T. Farley of ITG. Please go ahead.
Thank you, Chad, and good morning. In accordance with safe harbor regulations I would like to advise you that the forward-looking statements we will be making this morning are subject to issues of risks and uncertainties that may cause the actual results to differ materially from those statements. These forward-looking statements speak as if today and you should not rely upon them as representing or views in the future. While we may elect to update these forward-looking statements in the future, we undertake no obligation to do so.
I advise you to read about the risk factors that may affect forward-looking statements in this morning's press release, as well as in our SEC filings. I would also like to point out that we will be referring to non-GAAP financial measure in today's presentation.
Reconciliations of these non-GAAP measures to the comparable GAAP measures can be found in this morning's press release, as well as the pres releases covering prior earnings periods. Press releases in the PowerPoint slides which accompany this presentation are available for download in the Investor Relations section of itg.com.
Speaking this morning are ITG's CEO Bob Gasser and CFO Steven Vigliotti.
To start, I would like to turn it over to Bob.
Thanks, JT. And thank you all for joining us to discuss ITG's Third Quarter 2013 Results. This quarter demonstrate that the measures we have taken to rule out our full product capabilities globally, that the contained costs are clearly paying off. Even as U.S. cash equity volumes dropped to their lowest level in more than six years, we remain profitable in the U.S., while our European operations reported strong revenues and profitability for the quarter.
Our overall revenue grew almost 7% to $127.6 million, driven by our international operations, while expenses were down about 2%, reflecting the expense discipline we have maintained across the firm. In the U.S. the average daily volume of combine New York Stock Exchange and NASDAQ list volume declined 6%, compared to the already low levels we saw in the third quarter of 2012.
Domestic equity mutual funds posted less than $3 billion in inflows during the quarter, despite outflows of almost $60 billion from bond funds.
International equity funds did benefit for some of this rotation. However, posting inflows of nearly $30 billion during the third quarter.
As you can see on Slide 6, our average revenue per share has continued to improve, offsetting the impact of lower U.S. volumes. This growth is -- and thanks to more client looking for research through bundle training, as well as increased use of higher value added products like POSIT Alert which is our buy-side only block crossing platform.
Our average U.S revenue per share rose to $49 million in the third quarter, the third straight quarter of improvement and the highest levels since the second quarter of 2011. This improvement came even as the percentage of sell-side volume rose from 49% in the second quarter of 2013 to 51% in the third quarter.
As a reminder, our average rate card is heavily depend on our product mix and will fluctuate from quarter-to-quarter based on this mix.
POSIT Alert volume rose approximately 20% as compared to the third quarter of 2012, while average trade size held steady at 33,000 shares. We also expanded our high (inaudible) sales training kit bringing on experience portfolio traders, as well as sector specialist in our consumer and technology, media and telecom sector. These sector specialists are helping us to expand the distribution of our differentiated research products by deepening our plan initiatives. Amplifying our research volume in the pipeline and collecting on research obligations.
Admission rate, there are multiples of the U.S average. As this business grows, it is allowing us to offset stained effect of low institutional turnover. During the quarter we made market moving output generating research calls or names such as Best Buy, Groupon, JC Penny and Magnum Hunter Resources. We also initiated coverage on (inaudible). While (inaudible) well in the U.S we significantly improved our reported U.S profitability in the third quarter over the prior year due to dramatic improvements in our cost base reflecting the impact of restructuring activities we (inaudible) December, 2012 and our new product approach. The product (inaudible) each of (inaudible) control their expenses. (inaudible) the demands for improved financial performance with the need to reinvest our capabilities.
Our international results improved significantly during the third quarter led by (inaudible) revenue growth of $28.7 million, a 53% drop over the third quarter of 2012. While market condition was more favorable to our business than a year ago, including institutional inflows in European equities and a greater demand for (inaudible) our outperformance reflecte the impact of the investments we had made in our infrastructure and products (inaudible) liquidity.
Average trading volumes in POSIT more than double, while European POSIT Alert volumes are up by 250%. As you can see on slide (inaudible) more than 30% total European (inaudible), up (inaudible) 5% in the first quarter 2011. During that same period (inaudible) in Europe grows from just over 2% of total value traded to over 5%.
In Asia Pacific, we posted revenues $10.5 million, an increase of 30%, while our total loss was cut by one-third over the prior year period. Our average (inaudible) in the region rose 14% versus the third quarter 2012, driven by (inaudible) activity across most markets and fuel (inaudible) electronic trading and liquidity solutions.
Lastly, we won awards for best (inaudible) possibility and best (inaudible) at the Trade Asia 2013 electronic boards.
In Canada, revenues were down 1%, against a backdrop of generally flat (inaudible) market. Given the difficult market conditions it is not surprising to see that a number of Canadian firms closed and several firms pull out of the Canadian market in recent month, which underscores the importance of our commitment to our Canadian operations over the past 13 years.
Given the recent decline in (inaudible) prices, we believe that Canada will continue to be a (inaudible) market in the near term. I (inaudible) difficult market conditions to present ITG with opportunities to deepen partnership within the Canadian brokerage community through technology and execution arrangements with this important client (inaudible). The latest (inaudible) survey of Canadian equity markets demonstrates our top competitive position with (inaudible) overall electronic trading commission sharing (inaudible) penetration and crossing (inaudible). ITG also received (inaudible) any other firm in the portfolio trading category. There are new (inaudible) from QT industry publications in London for our (inaudible).
And the trader (inaudible) 2013, POSIT was recognized as the best remarkable price improvement, while ITG algothirms won the (inaudible) consistently with pre-trade (inaudible). And financial (inaudible) reports for (inaudible) in trading and technology ITCA was named the best (inaudible) product for the second in a row.
These awards demonstrates the strength and breadth of ITG offering for institutional investors, as well as our long track record of innovation. And we continue to add to this (inaudible). Earlier this month we expanded our future (inaudible) Latin America equities, rolling out (inaudible) further training for Chillean (inaudible) training for Colombian and Peruvian equities. We now have a capability to trade in all the countries in the key MS guide Latin American (inaudible) allowing us to better serve international funds managers who use this as a benchmark.
Turning to our overall cost reduction, we continue to focus on expense (inaudible) in order to maintain our profitability in the current difficult market conditions. This (inaudible) also improves our operating leverage, so that would better (inaudible) capital for any (inaudible) trading equity.
Our third quarter results reflect full impact of the cost savings and restructure plan we announced in December, 2012. And as we mentioned previously, we expected our outgoing business unit now to yield some incremental cost savings over the long-term which we make to invest in select (inaudible) growth areas. As we indicated last quarter, we believe we turned the corner with the rationalization of our cost structure and the build out of our global execution capabilities.
ITG is now positioned to withstand the current business environment and maintain our profitability, while at the same time seeking to gain an increasing share of global institutional trading commissions.
We plan to continue to develop innovative solutions for our clients to fortify our strong position in electronic institution and research. This position is backed up by significant intellectual property. ITG has now more than 60 U.S. patents with many additional applications pending.
In closing, I like to take an opportunity to thank all one of employees for their hard work and their capability to focus on improving client outcomes. I would also like to thank ITC board member Bill Burdett who is retiring after more than 12 years of outstanding service to our firm and its shareholders.
With that, I would like to turnover to our Chief Financial Officer, Steven Vigliotti, to review third quarter financial developments.
Thanks, Bob, and good morning everyone. Our focus on growing POSIT Liquidity in Europe and on managing expenses enabled us to maintain profitability during the third quarter, despite declining market wide volumes on a sequential basis in all of our operating regions.
As noted on Slide 12, we generated consolidated revenues of a $127.6 million during the third quarter, 8% lower than the second quarter of 2013 but 7% higher than the third quarter of 2012.
We posted GAAP net income of $0.20 per share in the third quarter of 2013 compared to GAAP net income of $0.13 per share in the second quarter of 2013 and GAAP net income of $0.01 a share in the third quarter of 2012.
In Slide 13, we have details of non-operating items included in our GAAP results for the second quarter of 2013. There were no non-operating items in either the third quarter of 2013 or the third quarter of 2012. In the second quarter of 2013, we incurred duplicate rent and office moving charges related to our new headquarters in lower Manhattan. We incurred a restructuring charge and a one time tax charge related to the closure of our Israel development facility and we had offsetting reversals of accruals related to prior restructurings.
Excluding these items, we generated adjusted net income of $0.27 per share in the second quarter of 2013. For the rest of this discussion all references results and cost for the second quarter will be on our adjusted basis excluding these items.
Slide 14 presents our consolidated results along with separate breakdowns on the result from our U.S and international operations. On a year-over-year comparative basis consolidated expenses were down $2.6 million even as we incurred additional variable cost associated with an $8 million increase in revenues due, in part, to lower telecom and data cost and lower other general and administrative expenses. Our consolidated pretax margin was 8.4%, down from 11.4% in the second quarter of 2013 but up shortly from 0.2% in the third quarter of 2012.
Our cost saving initiatives helped in providing a boost to our pretax incomes throughout the year. On a (inaudible) basis our costs are down by more than $10 million compared to the first three quarters of 2012 not standing the additional variable cost associated with a $16 million increase in revenues.
During the third quarter of 2013, we posted net income of $0.07 per share in the U.S. on revenues of $76.9 million down from $0.12 per share in the second quarter of 2013 due to lower volumes but up significantly from $0.03 per share in the third quarter of 2012. Our third quarter pretax margin in the U.S. was 5.8%, down from the second quarter of 2013 and up from the third quarter of 2012.
As a reminder, U.S. segment bears nearly all of the firm's corporate costs which negatively impacts pretax margins reported for that segment. These costs include among others the cost of being a public company, intangible amortization, interest expense at a cost of maintaining our global transfer pricing structure.
Our combined international businesses posted solid net income in the third quarter of $0.13 per share, revenues of 50.7 million. Our international pretax margin rate was 12.2%.
On Slide 15 you can see that our U.S. expenses declined 4.6 million from 77 million in the third quarter of 2012 due chiefly to lower general administration costs which can fluctuate from time to time due to efforts to reduce these costs and our efforts to reduce market data and connectivity cost.
Our U.S. compensation expense ratio was 40.7%, up versus the first quarter of 2013 due to the impact of lower revenues and up versus the third quarter of 2012 due to improved profitability. Transaction processing costs as a percentage of revenue were down to 13.2% versus 13.5% in the second quarter of 2013 and 14% in the third quarter of 2012.
On Slide 16, we provide a summary of our international results. Revenues were down from $4 million from the second quarter of 2013 and up $8.9 million over the first quarter of 2012. Our strong European revenues continue to outdate the change in value traded market while reflecting our market share innings. While the growth in Asia-Pacific revenues compared to the third quarter of last year lagged broader regional trends due to the outside growth in Japanese trading which represent a lower portion of our activity relative to other markets in the region.
International expenses were higher in the third quarter of 2012 but were lower than the second quarter of 2013 largely due to the impact of transaction processing and variable competition costs on our changing revenue levels. The compensation ratio for our combined international operations was 36.2% higher than the second quarter of 2013 but down in the third quarter of 2012. Combined international transaction processing costs during the quarter as a percentage of revenue were 19.1% lower than both the second quarter of 2013 and the third quarter of 2012.
On the next slide we track performance of our foreign segments over the past five quarters. As compared to the second quarter of 2013, revenues were down in Canada and Asia-Pacific due to lower market-wide trading activity but Europe outperformed by growing revenues sequentially even as market-wide trading activity declined.
Revenues were up both Europe and Asia-pacific versus the third quarter of 2012 and down only slightly in Canada. All the international regions posted higher pretax results in the third quarter versus a year ago.
On Slide 18, we offer supplementary information on revenues broken out by our four product groups over the past five quarters. The table also includes a corporate group which primarily reflects investment income that is not directly attributable to any of the product groups. As you can see from this table, electronic brokerage revenues were down compared to the second quarter of 2013 a decline in market-wide trading (inaudible) produced revenues for this group in all regions except Europe.
Revenues for research sales trading declined sequentially primarily due to declines in Canada and Asia-Pacific as revenue levels for this group in the U.S. and Europe were stable.
We continued to generate steady levels of revenue from our Analytics product groups due in large part of the higher mix of recurring revenues. While the Platforms group products saw a modest drip in revenue sequentially due to a decline in commission revenues executed (inaudible) that the Platforms group shares with third party brokers and with ITG's Electronic Brokerage group.
We (inaudible) profitability metrics available for our product groups on a global basis once we have the full year under our belt of tracking the performance of these groups in each of our regions. On our fourth quarter 2013 earnings call, we plan to offer profitability metrics byproduct with globally for the full year 2013 and we intend to provide this additional information going forward for each quarter starting with the first quarter of 2014.
Please note that we are primarily organized by geographic regions for the purpose of allocating resources and measuring performance and thus expect to continue to use geographic segments as our reportable segments. We will, however, be providing supplementary product financial information to provide more transparency into the drivers of our business.
On Slide 19, we have presented our U.S. volume in a rate capture statistics. Our average nearly executed volume was down 10% versus the third quarter of 2012 while New York Stock Exchange and NASDAQ combined average volume decreased 6%.
Our average overall revenue capture rate per share rose from $48 million in the second quarter of 2013 to $49 million even as the percentage of buy-side volume declined, due in part to increased activity in POSIT Alert and clients paying for research through bundled research arrangements.
We ended the quarter with $261.6 million of cash and cash equivalents on our balance sheet, up from $259 million at the end of the second quarter of 2013. Our excess cash at September 30 over and above what we need for regulatory capital, debt payments and compensation liabilities was up with the first quarter at approximately $69 million.
During the third quarter, we repurchased 370,000 shares for $6.1 million or $16.38 per share. This amounted to 79% of our earnings during the quarter. As a reminder, our buyback program has reduced shares outstanding, net of issuances, by 17% over the past three years.
Looking forward, I would like to offer the following observations. As a reminder, we plan to repurchase shares on a regular basis in order to return capital to shareholders. However, our repurchases will depend on market conditions and the prevailing price of our stock and our activity level may not be directly tied to our level of earnings each quarter.
As of September 30, we had 3.7 million shares available for repurchase under our current buyback authorization.
Regarding current business conditions, our U.S. average daily volume for October was approximately 150 million shares at an average rate generally in line with our third quarter 2013 average. In our combined international businesses, our average daily commission levels in October were aproximately5% better than our third quarter average.
And with that, I would like to open the call to Q&A. Operator, please open up the lines for questions.
(Operator Instructions). Our first question comes from Chris Allen with Evercore. Please go ahead.
Chris Allen - Evercore
I guess we can just start a little bit on the cash rate obviously you see continued improvement there. Maybe you can give us an update in terms of the client's transition to bundled research kind of wondering are you and how many more clients potentially have room to transition there? Trying to think about where the cap rate could go moving forward and what’s maybe so much structural within your client base and then also cyclical just in terms of building the research revenue base in general.
Sure, sure. Well, I think where I'd say we're probably in the third or fourth inning. I think that as we think about the product and the sequential last three years we bought two independent research providers combined them into one under the ITG investment research monitor or flag, and over that time we've also invested in research sales and most recently we've invested in desk analyst and traders portfolio trading. All the component pieces now are in place in terms. I would think about it as a three-legged stool. You've got the research and the content which I think is very high quality and continues to rise in the voting list and all the metrics that you guys, I know, look at everyday.
You've got I think a very high quality sales force it's now spread throughout the U.S. and Canada and even has a point of presence in London at this stage of the game. And then that third leg of the stool is a very high quality cash register on the trading side. I think we now have in place. So we've got the three component pieces that are necessary I think to continue to grow the rate card, continue to penetrate the client base and continue to monetize the product suite we've invested in.
We're in a good place we continue to add names under coverage. We continue to acquire data sets. I think as we've said repeatedly in the past we don’t see the need to expand the consumer energy and TMT from here. We think those three major SMP sector groups give us plenty of runway to continue to grow the product and the business.
Chris Allen - Evercore
And then obviously you're seeing a great growth over in Europe, POSIT Alert continues to expand at very rapid pace. Maybe you can give us some answers how to think about that product moving forward like where you are in terms of penetration of custom base over there, future plans for growth?
Yeah, I think we've been saying we thought I was saying at the beginning of the year that this was the year of Europe. And the reason I think we felt so strongly about Europe as a region is that we had made significant investments over the past two or three years that we think are sustainable in terms of the return on that investment going forward. So there again I think we still a room for growth. We're out to, I think Steve alluded, we're off to a very good start in Q4 and we continue to take market share across the region. I think the product continues to do well. We continue to penetrate.
It's really blocking and tackling at this stage. I mean, the big sum costs of investing in infrastructure, data centers, market data, domain knowledge, intellectual capital that we've been doing for the last as I said three to four years are really starting to pay off at this stage of the game and I think we've got great momentum that will continue unto the New Year. I continue to be very, very optimistic about Europe and its ability to gain market share across all the business segments that we care about.
Chris Allen - Evercore
And then just a quick one on the build out of research sales and desk analytics and some other higher touch people, is that already embedded in the run rate or is there more to come on that? I mean, obviously you saw the comp to revenue ratios tick up a little bit in the U.S. this quarter. Obviously some of that's being driven by the market conditions and the top line production, so any color on that would be great.
Yes, it's embedded completely.
Our next question comes from Rich Repetto with Sandler O'Neill.
Rich Repetto - Sandler O'Neill
Just to highlight again, Europe growth has been significant, material. So I guess the question is on POSIT Alert. Can you give us a feel how much of, you talked about POSIT (inaudible) and you talked about POSIT Alert growth, but how much of POSIT is POSIT Alert, what is U.S. and Europe ballpark even?
Yes, I don't think we've disclosed that although I would just tell you that one of the things we talked about in the call last time in August was we talked about the global deployment of our next generation alert technology. And one of the most important things about that technology is it gives the client one point of entry to the four regional alert instances. So the ability to go in through one piece of software and hit the U.S., Canada, Europe and AsiaPac.
AsiaPac we're still at the very, very early stages. It's a big part of the plan in 2014. Europe, we are absolutely coming into our own. In the U.S., obviously we have an established presence. And in Canada, we have a presence that I think has potential to grow from where it is today certainly. So that deployment has been very, very important strategically and now we're starting to see the benefits of it in a very real way in the European region.
So as I alluded to on the call in August, we were in-flight making those changes, making those -- doing those integrations on site at the client and all the things that are necessary to bring those things live. And I think we're at a stage now where the reason I feel so confident in the European momentum is we're still I wouldn't say early stages but we're at the intermediate stages of rolling all that out.
Rich Repetto - Sandler O'Neill
Yes, because the way you describe it, Bob, that like these improvements to POSIT Alert might be more impactful to global players and but you also did say earlier to the earlier questions about the investments just in Europe and that's what probably a little bit both, is that so?
It is. It's certainly a little bit of both, and then the Holy Grail is when you can get both the global players and local players to interact with each other seamlessly. I think that's the stage we're at now.
Rich Repetto - Sandler O'Neill
I guess the next question is on Canada, and I know you said some things in the prepared remarks but we know there's been market structure changes on internalization as well as message traffic. And I guess the point is that's the only region you're down year-to-date year-over-year. And is it a pure thing of volumes and just more color on how these the structural regulatory changes up there (inaudible) --
Yes, I think it's more fundamental than that, Rich. I think it's not the structurals. At least we haven't seen the structural issues pass through in terms of negative effects on our business. In fact, MATCH Now's volumes are probably at a -- or close to their highs in terms of market share. That's our dart pool, multilateral dart pool. It's a little different than anything else we do in the rest of the world.
But I think it's more fundamental than that, and I've been saying since the beginning of the year I was concerned about Canada. I think that Canada in terms of its weighting from global investors has been in decline. And so for us that's obviously -- that's the more significant of that in that I think structurally we're fine. I think it's more the macros that are working against the Canadian business at this stage of the game.
The one thing I do want to highlight and say it again because its in the prepared remarks is that the persistence that we've had in Canada over 13 years has really, as you guys have seen maybe not this year but in other years, has really paid off. And we consider this to be a low point in the cycle. We'll create opportunities for ourselves though at the stage of the game as international firms pull out, as some of the Canadian players, domestic players probably fold. We do think there will be opportunities to be a sell-side provider, a subcontractor, if you will, to the firms that are no longer domiciled in Toronto but need the opportunity to basically fill out all the gaps in their global offering.
Rich Repetto - Sandler O'Neill
And just one quick follow up back on the POSIT again, I guess can you just comment on the POSIT Alert revenue capture relative to POSIT? I would assume that it's a positive mix impact?
It's multiples higher than the average, which is why we noted that that the growth in that activity has helped improve the overall part of it.
The next question is from Ken Worthington with JPMorgan.
Ken Worthington - JPMorgan
Maybe first on Page 14. Something kind of struck me and I know its just one quarter but the U.S. had about, I'm using rough math, 50% greater revenue than international but 50% less adjusted net income again rough math than the international. So the question is does this mean that there is still more room for efficiencies to be extracted in the U.S. or may be on the other side may you need to start to ramp up the investment internationally as that business continues to grow?
Hey, Ken this is Steve. So we -- I think I alluded to Myanmar. So when you look at the U.S. segment on a standalone basis, you need to keep it mind that it does carry all the other firms corporate cost, right which average around $5 million-ish a quarter and plus there are other sort of home office cost that are in the U.S. numbers as well, but don't necessarily to get pushed into each of the region. So that may be some of the comparative differences you're seeing from U.S. to international.
Ken Worthington - JP Morgan
Okay. And nothing obvious on the investment front globally?
No. I think where I -- to a large extent -- and now we're starting to -- as I said in the remarks we're starting to knock down places like Chile and Peru and Colombia. I think we're at a stage now where we cover Latin America. Obviously, we cover Canada very effectively. We cover the Asia-Pac region across the region. There are very few markets, relevant markets if any that ITG doesn't have a product capability and geographic reach. So at this stage of the game with the exception of may be a few tuck-ins like, Asia-Pac (inaudible) I think that it's -- there really is not a lot of investment required to broaden our international capability.
Ken Worthington - JP Morgan
And you touched on this, I think to Richard's question but I thought I was missing a point. So you have strong positive platform, U.S. and Europe you're building Asia and Latin. Outside of the technology development and kind of branding cost are there liquidity advantages from running the various pools? In other words, does U.S. customer benefit from increased participation by Latin, Asia, and European customers? You kind of mentioned that it's -- there is global -- local customer is trading with global customers, I would love to hear more about that because it seems like it could be a big deal longer-term?
Yes. Yes -- no I think that's in the press release. We talked about cross border flows right and that really is primarily about the U.S. to outbound to these various regions. And I think we're getting better and better, I think the technology that we're deploying is getting more and more efficient. We're getting better and better at seeding the regions from the U.S. than we've ever been. So I think that is very, very important to have one global seamless capability to create pools that are diverse in terms that they're domicile, they're client type, whether or not they're a transition player or portfolio player or single stock player all those things work for you when you're diverse. They work against you when you're not diverse. And so I think there is lot of benefit to that.
Ken Worthington - JP Morgan
And does the -- do the metric start to improve as well? So for example, you talk about trade size, you can also talk about percentage of orders that actually get executed. Does -- do those type of metrics start to improve as we see the local and the global interact more? And I assume at some point you get to a tipping point where liquidity really starts to get liquidity and the value proposition being starts to match out. Is that all kind of in theory?
You just, I mean you just hit the nail on the head in terms of what Europe is, right. So Europe, we got into that place where we are internalizing a very, very strong percentage of our diverse liquidity coming in from various regions from (inaudible) from UK, from the U.S., from Canada. So that is -- in a place like Europe where clearing cost are also extraordinary important to focus on, the transaction processing line has been a big point of operating leverage for the firm. So as we internalize, as volumes grow, as these diverse sources of liquidity come together, the European margin story is the perfect example of what you just articulated.
Our next question comes from Niamh Alexander with KBW.
Niamh Alexander - KBW
And on the expenses, just to -- kind of get back to because that's where kind of you certainly beat ours. And this is kind of still the benefit of the restructure and kind of given the different segment managements, kind of economy or there is expense as well as the revenue. Is there still a little bit more to come or kind of how we gotten there because we just primarily, non-compensation you saw the big drop there and is that something that we should think about as kind of sustainable, this is a good run rate going forward, to think about those non-comp?
Sure. I think we will go through it and just take of a few of them, Niamh. So the G&A, that's an expense that can vary from period to period. And based on the timing of when we engage if it is a recruiter or professional service for things like legal or tax advice or we rollout a marketing campaign et cetera. I might get -- might got on that as a run rate like we varies between the Q2 and the Q3 level but having said that, the savings we have from the prior year are absolutely sustainable due in large part to some of the reductions we've seen there and so for our amortization. Telecom and data processing, I think we've seen continued reductions in market data and connectivity cost that's probably, I think reached a good point there, I think that's fairly sustainable as well.
And then, with occupancy and equipment, we've seen kind of offsetting -- we see offsetting things with increases from our facilities cost from the headquarters move, potentially offset some flat, may be some future savings in next year on some other cost reduction which we have.
Niamh Alexander - KBW
And then, I guess some of the segment businesses, and if you look at your slide 18 there -- the revenue, you got kind of a good time series trend there and I know it's still only kind of six quarters. But the platform need analytics businesses, they're not really growing. And so help me think about where the growth comes from or how you drive growth or what you are doing to may be drive some growth in those businesses?
Yes. As I mentioned in my prepared remarks Niamh, in terms of quarter-over-quarter the platforms, product group was down primarily because of a reduction in the amount of commissions that group shares with third-party brokers and with the ITG Electronic Brokerage Group primarily, as a result of just market wide or buying decline quarter-over-quarter. If you look at a year-over-year --
Niamh Alexander - KBW
Yeah. I mean year-over-year and then just -- over the last several quarters, they haven't really moved those revenue lines that much. So I'm just wondering is there something outside of the environment or specifically is there something you're doing there to needed to improve the products or what not to get some growth?
Yeah, I think it's not so much -- I think that the seasonal equity market is what it is, right. And I think that as Steve alluded we've got a lot of -- in that business we have exposure to institutional volumes. And so, in the last quarter, I think that was -- that tells the story. But I think going forward in terms of growth for the platform business and really we were focusing on a number of things I think we will be allowed on them in the not too distant future in terms of client segments and asset classes though I think will help us -- I think more clearly articulate a gross strategy for the business. But we are certainly -- there is a lot of things on the drawing board.
And as we discussed in filings, we have seen a reduction in all match points. So that's a portion of the recurring revenue we seen in that business as well.
Niamh Alexander - KBW
And then, I guess if I get back in line just sorry if I missed it earlier, but the tax rate, did you -- that the U.S. tax rate just a bit is that kind of a good level to think about going forward or did you get some guidance on it?
Sure. The U.S rate is probably a little lower than I would expect going forward, there is about a couple $100,000 with adjustments. This is normal recurring type of things that happen from time to time that hit the quarter. So I would expect something in a low to mid 40s in the U.S. Niamh.
And then, on a global basis, the international came in pretty much consistent with where we were in the second quarter. And again, driven a lot by the strong European revenues where we have a favorable tax treatment and loss levels in APAC that are down from historical levels. As you know there we do not have a benefit that we are booking there, so that helps to be international rate as well.
Niamh Alexander - KBW
You guys are getting very close, does that -- I mean that could really kind of move the tax rate a few points lower once you start to kind of hit the black therein?
It certainly would, yeah.
This actually concludes the question-and-answer session. I would like to turn the conference back over to management for any closing remarks.
Well, thank you for joining us today to review the third quarter and we look forward to speaking with you in February. Thank you.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
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