BATS Global Markets Profit Drops in Q2 2016, Net Revenues Surge YoY

The global exchange operator makes the bulk of its revenue from transaction fees.

Bats Global Markets, Inc. (Bats: BATS), the Lenexa-based operator of the U.S second-largest stock exchange, reported a decrease in its earnings in the three months ending June 30, 2016 compared with a year ago.

Bats said on Thursday that it earned in the second quarter $17.9 million, or 19 cents a share. This represents an YoY loss of 12.3 percent and 9.5 percent respectively. It earned $20.4 million, or 21 cents a share, in the same months of 2015. The decrease was due primarily to a pretax $18 million debt refinancing charge in the latest period. However, the company says the refinancing process is expected to boost its credit profile and help lower interest expense by nearly $7 million in 2016 and $11 million in 2017.

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On the positive side, adjusted earnings reversed the narrative in Q2 2016, coming in at $33.9 million, or 35 cents a share, a jump of 38.0 percent and 35.0 percent YoY compared with $ 24.6 million and 26 cents a share in Q2 2015.

Additionally, net revenues, which represents revenue less cost of revenue, were also on the uptick in Q2 2016, with BATS orchestrating a figure of $109.9 million, compared to just $99.0 million in Q2 2015, good for a jump of 11.0% YoY. Revenue from transaction fees increased 9.7% to $332.1 million, while revenue from market data fees surged 18% to $72.6 million.

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Mixed results in Market shares

Furthermore, BATS Global Markets highlighted in its report that the firm continued increasing its market share in the U.S. Options market share (11.6% from 9.7% one year ago) and also remained strong in the Global FX market with its share reaching 11.6% versus 11.0% last year. However, a slight decrease was seen across its U.S. Equities market share which registered 20.4% from 20.8%, though its average daily volume grew to 7.3 billion shares from 6.4 billion a year earlier. Further, European Equities market share also dropped to 22.9% from 24.6% in 2015.

With new 26 ETF listings in the second quarter, Bats remained the #1 market for the trading of ETFs with a combined market share of 24.7%. In the twelve months ended June 30, 2016, Bats added 60 ETF listings.

Commenting on the results, the CEO of Bats Global Markets, Chris Concannon, said: “The second quarter marked another strong quarter for Bats as we continued to deliver strong organic net revenue† growth. This revenue growth was driven by a 14% increase in non-transaction revenue, record market share in our U.S. Options business, and increasing net capture rates. “

“In addition, we continued to see success in our U.S. ETF Listing business as we welcomed 23 new listings and three transfers over the quarter to the Bats ETF Marketplace,” he added.

The exchange operator went public in April, surging in its market debut after shares priced at the high end of expectations. As of Wednesday’s close at $25.60, the stock is up 35% from its IPO price of $19.

 

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