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Virtu Financial (VIRT) Down 2.1% Despite Q1 Earnings Beat

Virtu Financial, Inc.’s VIRT shares fell 2.1% since it reported first-quarter results on Apr 20. Despite reporting better-than-expected results, investors were concerned regarding its significant year-over-year decline in major metrics. The company’s results were supported by a significant jump in interest and dividends income owing to the high-interest rate environment. The upside was partially offset by lower commissions, trading income and higher total operating expenses.

Virtu Financial reported first-quarter 2023 adjusted earnings per share (EPS) of 74 cents, which beat the Zacks Consensus Estimate of 60 cents and our estimate of 56 cents. However, the EPS fell from $1.27 a year ago.

VIRT’s adjusted net trading income of $373.1 million in the first quarter beat the consensus mark by 14.4% and our estimate by 16%. However, it fell from $505.1 million a year ago.

Virtu Financial, Inc. Price, Consensus and EPS Surprise

Virtu Financial, Inc. Price, Consensus and EPS Surprise
Virtu Financial, Inc. Price, Consensus and EPS Surprise

Virtu Financial, Inc. price-consensus-eps-surprise-chart | Virtu Financial, Inc. Quote

Q1 Performance

Revenues from commissions, net and technology services declined to $121 million from $155 million a year ago. Interest and dividends income rose to $73 million in the first quarter from $21 million a year ago.

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Adjusted EBITDA amounted to $207 million, which fell from $344 million in the prior-year quarter. The adjusted EBITDA margin declined to 56% from 68% a year ago.

Total operating expenses of $476 million increased from the year-ago level of $460 million. VIRT recorded increases in communication and data processing, interest and dividend and financing interest expense. This was partially offset by lower brokerage, exchange and clearance fees, payments for order flow, debt issues and costs related to debt refinancing and prepayment, operations and administrative, and depreciation and amortization expenses.

Segmental Update

Market Making: The segment reported an adjusted net trading income of $277.9 million, which declined from $381.8 million in the prior-year period. Segmental total revenues fell to $489 million from $546.6 million in the first quarter of 2022.

Execution Services: The adjusted net trading income of the segment decreased to $95 million from $123.2 million a year ago. Total revenues fell to $118.5 million in the quarter under review from $151.7 million in the prior-year quarter due to significantly lower revenues from trading income.

Financial Update (as of Mar 31, 2023)

Virtu Financial exited the first quarter with cash and cash equivalents of $809.2 million, which declined from the 2022-end level of $982 million. Total assets of $11,861 million increased from $10,583 million at 2022-end.

Long-term borrowings, net, amounted to $1,779 million, down from the 2022-end figure of $1,796 million. Short-term borrowings, net, at the first-quarter end were $121 million, up from the 2022-end level of $4 million.

Total equity remained flat at $1,635 million from 2022-end.

Share Repurchase and Dividend Update

In the quarter under review, Virtu Financial (as part of its share repurchase program) bought back shares worth $76 million. It had $232.8 million remaining under its share buyback authorization for future purchases of Class A Common Stock shares and Virtu Financial Units.

Zacks Rank & Stocks to Consider

Virtu Financial currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader finance space are Cboe Global Markets, Inc. CBOE, Euronet Worldwide, Inc. EEFT and Ares Capital Corporation ARCC. Each of these companies presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Chicago-based Cboe Global Markets is one of the largest stock exchange operators by volume in the United States. The Zacks Consensus Estimate for CBOE’s 2023 earnings indicates a 3.2% year-over-year increase.

Headquartered in Leawood, Euronet Worldwide is a leading electronic payments provider. The Zacks Consensus Estimate for EEFT’s 2023 earnings suggests 15.5% year-over-year growth.

Based in Los Angeles, Ares Capital specializes in rescue financing of middle-market companies. The Zacks Consensus Estimate for ARCC’s 2023 earnings suggests 17.8% year-over-year growth.

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Virtu Financial, Inc. (VIRT) : Free Stock Analysis Report

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