KCG’s Q1 2017 Financials Dive on Lower Volatility

KCG's Q1 2017 earnings were a shadow of previous quarters, undermined by low volatility.

KCG Holdings (NYSE: KCG), an independent securities firm agency and market-making execution services provider, has reported its financial metrics for Q1 2017. The figures represented a sizable decline in profitability, undermined by a lull in markets and lower than expected volatility.

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Looking at KCG’s total revenues in the first quarter of the calendar year, the group reported just $255.4 million, falling -56.0 percent quarter-over-quarter from $580.5 million in Q4 2016. On a year-over-year basis, the loss was slightly lower, albeit by a margin of -26.1 percent from $345.4 million in Q1 2016.

The latest figures follow on the heels of an announcement that KCG is being acquired by Virtu Financial, Inc. (NASDAQ: VIRT), which will see the group acquire all outstanding shares of KCG’s Class A Common Stock for $20.00 per share in cash.

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Trading Revenues Pointed Higher

In terms of its other financials in Q1 2017, KCG’s trading revenues did manage to orchestrate a climb on a quarterly basis, rising to $154.3 million, relative to $143.4 million in Q4 2016 or 7.6 percent higher, also posting a near identical figure in Q1 2016.

In addition, KCG also recorded a pre-tax loss of $404,000 for Q1 2017, compared with $309.9 million one year ago in Q4 2016. The group’s earnings per share (EPS) came in at just $0.05 in Q1 2017, down from $2.47 in Q4 2016, and $0.41 in Q1 2016. One of the main factors attributed to a decline in profitability during Q1 2017 was due to lower volatility.

Indeed, according to Daniel Coleman, Chief Executive Officer of KCG, in a recent statement on its financials, “During the fourth quarter, we monetized a longstanding investment in Bats through a swap of substantially all of our stake for all KCG shares and warrants owned by General Atlantic.”

“Our focus on creating value for stockholders enabled KCG to increase tangible book value per share to $18.71 as of the end of 2016. From an operating perspective, revenues in the fourth quarter fell below our expectations reflecting the continuation of a difficult trading environment. However, a rise in revenues on an operating basis from the prior quarter reflects the improved market conditions starting in November,” he explained.

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