Virtu Financial (VIRT) Q4 Earnings Miss on Higher Expenses
Virtu Financial, Inc. VIRT reported fourth-quarter 2023 adjusted earnings per share (EPS) of 27 cents, which missed the Zacks Consensus Estimate by 35.7%. The bottom line dropped 27% year over year.
VIRT’s adjusted net trading income of $260.9 million in the fourth quarter missed the consensus mark by 4.4%. The top line declined 4.8% year over year.
The company reported weak quarterly results caused by deterioration in net trading income and commissions, net and technology service revenues and higher expenses. However, the results were partially offset by improved interest and dividend income.
Virtu Financial, Inc. Price, Consensus and EPS Surprise
Virtu Financial, Inc. price-consensus-eps-surprise-chart | Virtu Financial, Inc. Quote
Q4 Performance Details
Revenues from commissions, net and technology services declined 3% year over year to $114.4 million. The metric missed our estimate of $115.5 million. Interest and dividends income increased 142.8% year over year in the fourth quarter to $154.7 million. The metric surpassed our estimate of $122.5 million.
Adjusted EBITDA amounted to $99 million, which fell 21.1% from the prior-year quarter and fell short of our estimate of $144.9 million. The adjusted EBITDA margin declined to 37.9% from 45.8% a year ago.
Total operating expenses of $519.2 million increased 13.3% from the year-ago figure and were 7.9% higher than our estimate. VIRT recorded increases in communication and data processing, interest and dividend expenses, employee compensation and payroll taxes. This was partially offset by lower net brokerage, exchange and clearance fees and payments for order flow expenses.
Segmental Update
Market Making: The segment reported an adjusted net trading income of $167.5 million, which declined 9.3% from the prior-year figure. Segmental total revenues jumped 9.4% to $422 million in the fourth quarter of 2023 but missed our estimate of $429.6 million.
Execution Services: The adjusted net trading income of the segment increased 4.5% to $93.4 million in the fourth quarter and remained well above our estimate of $89.9 million. Total revenues declined 4.8% in the quarter under review to $106.5 million and missed our estimate of $114 million.
Financial Update (as of Dec 31, 2023)
Virtu Financial exited the fourth quarter with cash and cash equivalents of $820.4 million, which declined from the 2022-end level of $981.6 million. Total assets of $14.5 billion increased from $10.6 billion at 2022-end.
Long-term borrowings, net, amounted to $1.73 billion, down from the 2022-end figure of $1.80 billion.
Total equity was $1.4 billion, down from $1.7 billion at 2022-end.
Share Repurchase and Dividend Update
In 2023, Virtu Financial (as part of its share repurchase program) bought back shares worth $210 million. It had $98.2 million remaining under its share buyback authorization for future purchases.
The company announced a cash dividend of 24 cents per share. The dividend will be paid out on Mar 15, 2024, to shareholders of record as of Mar 1, 2024.
Zacks Rank & Key Picks
Virtu Financial currently has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader Finance space are Alerus Financial Corporation ALRS, Navient Corporation NAVI and Finward Bancorp FNWD. Each stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus mark for Alerus Financial’s 2024 EPS is pegged at $1.37, which remained stable over the past week. ALRS beat earnings estimates in three of the past four quarters and missed once, with an average surprise of 14.4%.
The Zacks Consensus Estimate for Navient’s 2023 EPS is pegged at $3.49, indicating a 9.4% year-over-year increase. It has witnessed one upward estimate revision against none in the opposite direction during the past month. The consensus mark for NAVI’s revenues in 2023 is pegged at $964.7 million.
The Zacks Consensus Estimate for Finward’s 2023 EPS is pegged at $2.07, which has improved 63% in the past 60 days. FNWD has witnessed one upward estimate revision against none in the opposite direction during this time.
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