Flow Traders 2Q 2024 Results
Amsterdam, the Netherlands - Flow Traders Ltd. (Euronext: FLOW) announces its unaudited 2Q 2024 results.
Highlights
- Flow Traders recorded Net Trading Income of €79.5m and Total Income of €76.2m in 2Q24, compared to €49.5m and €51.4m, respectively, in 2Q23.
- Flow Traders’ ETP Value Traded increased 4% in 2Q24 when compared to the same period last year.
- Total Operating Expenses were €55.2m in 2Q24, compared to €48.2m in 2Q23, with Fixed Operating Expenses of €44.9m in the quarter, compared to €45.0m in 2Q23 (including one-off expenses).
- EBITDA was €21.1m in 2Q24, generating an EBITDA margin of 28%, compared to €3.2m and 6%, respectively, in 2Q23.
- Net Profit was €12.8m in 2Q24, yielding a basic EPS of €0.30, compared to a Net Loss of -€4.3m and EPS of -€0.10 in 2Q23.
- Trading capital stood at €624m at the end of 2Q24 and generated a 56% return on trading capital1, compared to €609m and 52% in 1Q24.
- Shareholders’ equity was €635m at the end of 2Q24, compared to €631m at the end of 1Q24.
- Flow Traders employed 635 FTEs at the end of 2Q24, compared to 633 at the end of 1Q24.
- Flow Traders has initiated a multi-layered trading capital expansion plan including a revision of its dividend policy.
Financial Overview
| €million | 2Q24 | 2Q23 | Change | 1H24 | 1H23 | Change |
| Net trading income | 79.5 | 49.5 | 61% | 206.6 | 160.0 | 29% |
| Other income | (3.3) | 1.9 | NM | (0.8) | 1.9 | NM |
| Total income | 76.2 | 51.4 | 48% | 205.8 | 161.9 | 27% |
| Revenue by region2 | ||||||
| Europe | 48.4 | 33.1 | 46% | 116.7 | 91.6 | 27% |
| Americas | 13.5 | 9.3 | 45% | 54.9 | 42.1 | 30% |
| Asia | 14.3 | 9.0 | 60% | 34.3 | 28.2 | 21% |
| Employee expenses | 31.7 | 22.4 | 42% | 76.2 | 67.3 | 13% |
| Fixed employee expenses | 21.5 | 19.2 | 12% | 41.1 | 39.2 | 5% |
| Variable employee expenses | 10.3 | 3.2 | 224% | 35.2 | 28.1 | 25% |
| Technology expenses | 16.8 | 16.7 | 1% | 32.6 | 33.3 | (2%) |
| Other expenses | 6.6 | 7.2 | 8% | 14.8 | 14.5 | 2% |
| One-off expenses3 | 0.0 | 1.9 | (100%) | 0.0 | 3.3 | (100%) |
| Total operating expenses | 55.2 | 48.2 | 15% | 123.6 | 118.5 | 4% |
| EBITDA | 21.1 | 3.2 | 552% | 82.2 | 43.4 | 89% |
| Depreciation / amortisation | 4.4 | 4.7 | (5%) | 8.7 | 9.7 | (10%) |
| Profit/(loss) on equity-accounted investments | (0.2) | (4.2) | (94%) | (0.6) | (4.6) | (87%) |
| Profit before tax | 16.4 | (5.6) | NM | 72.8 | 29.1 | 150% |
| Tax expense | 3.6 | (1.4) | NM | 14.1 | 5.6 | 150% |
| Net profit | 12.8 | (4.3) | NM | 58.7 | 23.5 | 150% |
| Basic EPS4 (€) | 0.30 | (0.10) | NM | 1.35 | 0.54 | 149% |
| Fully diluted EPS5 (€) | 0.29 | (0.09) | NM | 1.33 | 0.52 | 153% |
| EBITDA margin | 28% | 6% | 40% | 27% |
Revenue by Region
| €million | 1Q23 | 2Q23 | 3Q23 | 4Q23 | 1Q24 | 2Q24 |
| Europe | 58.5 | 33.1 | 33.6 | 42.6 | 68.3 | 48.4 |
| Americas | 32.8 | 9.3 | 22.0 | 18.1 | 41.3 | 13.5 |
| Asia | 19.2 | 9.0 | 12.1 | 13.6 | 19.9 | 14.3 |
Value Traded Overview
| €billion | 2Q24 | 2Q23 | Change | 1H24 | 1H23 | Change |
| Flow Traders ETP Value Traded | 347 | 333 | 4% | 755 | 755 | 0% |
| Europe | 147 | 144 | 2% | 300 | 340 | (12%) |
| Americas | 177 | 163 | 8% | 406 | 370 | 10% |
| Asia | 23 | 25 | (8%) | 50 | 45 | 10% |
| Flow Traders non-ETP Value Traded | 1,132 | 916 | 24% | 2,278 | 2,047 | 11% |
| Flow Traders Value Traded | 1,479 | 1,248 | 18% | 3,034 | 2,802 | 8% |
| Equity | 754 | 699 | 8% | 1,573 | 1,524 | 3% |
| Fixed income | 212 | 265 | (20%) | 482 | 612 | (21%) |
| Currency, Crypto, Commodity | 465 | 247 | 89% | 887 | 587 | 51% |
| Other | 48 | 39 | 23% | 92 | 79 | 17% |
| Market ETP Value Traded6 | 11,014 | 9,872 | 12% | 22,993 | 21,221 | 8% |
| Europe | 583 | 464 | 26% | 1,178 | 1,036 | 14% |
| Americas | 9,090 | 8,164 | 11% | 19,054 | 17,696 | 8% |
| Asia | 1,341 | 1,245 | 8% | 2,761 | 2,489 | 11% |
| Asia ex China | 444 | 373 | 19% | 883 | 738 | 20% |
Trading Capital
| 3Q22 | 4Q22 | 1Q23 | 2Q23 | 3Q23 | 4Q23 | 1Q24 | 2Q24 | |
| Trading Capital (€m) | 634 | 651 | 647 | 574 | 585 | 584 | 609 | 624 |
| Return on Trading Capital1 | 67% | 71% | 65% | 67% | 59% | 51% | 52% | 56% |
| Average VIX | 25.1 | 25.4 | 21.0 | 16.7 | 15.1 | 15.4 | 13.9 | 14.2 |
Market Environment
Europe
Equity trading volumes in the quarter increased both year-over-year and quarter-over-quarter but remain below the levels seen in 2021 and 2022. Market volatility improved slightly this quarter compared to the prior quarter but remains below the same period a year ago and well below the levels seen in 2021 and 2022.
Fixed Income trading volumes increased year-over-year but were flat-to-down on a quarter-on-quarter basis depending on the MTF platform.
Americas
Equity trading volumes in the U.S. were mixed as NYSE saw declines both on a year-over-year and quarter-on-quarter basis, while Nasdaq saw a slight increase both on a year-over-year and quarter-on-quarter basis. Market volatility in the U.S. was similar to Europe as the VIX saw a slight increase quarter-on-quarter but remains below the same period a year ago and well below the levels seen in 2021 and 2022.
Fixed Income trading volumes in the U.S. were similar to Europe, increasing year-over-year but declined on a quarter-on-quarter basis. Market volatility declined both year-over-year and quarter-on-quarter, and remains well below the levels seen in 2022.
Asia
Equity trading volumes in Asia were mixed across the region. Trading volumes declined on the Hong Kong and Tokyo Stock Exchanges both year-over-year and quarter-on-quarter while volumes increased significantly in China both year-over-year and quarter-on-quarter.
Digital Assets
Within Digital Assets, which trades across regions on a 24/7 basis, trading volumes in Bitcoin (the barometer of the industry) declined by double-digits quarter-on-quarter as the elevated initial fund flows into U.S. spot Bitcoin ETFs in the first quarter slowed significantly to flows more in-line with traditional ETFs in the second quarter. However, volumes were still elevated compared to the same period a year ago. Volatility in Digital Assets, as indicated by the BitVol index, was also down single-digits quarter-on-quarter but up by double-digits year-over-year.
Trading Capital Expansion Plan
In recent years, Flow Traders has successfully diversified its core trading model into diversified asset classes and geographies, which resulted in increased optionality for the business. The Board sees a significant range of emerging opportunities to accelerate growth for the firm, stemming from the investments it has made in these new markets and through diversifying its revenue streams. It believes now is the time to seize these opportunities and move the firm into a growth phase by meaningfully expanding its trading capital base, especially given the strong historical returns it has made on trading capital.
In recent months, the firm has been exploring various options to achieve this expansion in trading capital. It has concluded that the most cost-effective way to expand the firm’s trading capital base is to retain additional earnings on the Company’s balance sheet, as part of a multi-layered trading capital expansion plan.
Revised Dividend Policy
Accordingly, the firm is suspending regular dividend payments until further notice, a decision that will accelerate the expansion of the trading capital base and that the Board is confident will generate long-term value for shareholders.
External Debt Funding
Flow Traders is also currently working on other parts of the plan and has recently secured a €25 million bank term loan as a first step towards embracing debt financing to unlock the growth opportunities the firm sees. Management is also actively exploring other debt financing options that will enable the firm to take full advantage of the opportunities it sees.
Share Buyback
€5.3m worth of shares were repurchased in 2Q24 as part of the €15m share buyback program announced in October 2022, with €2.2m of the program remaining. A portion of the shares to be repurchased under this program could be allocated to employee incentive plans as needed.
Outlook
Fixed operating expenses guidance for the year remains unchanged and is expected to be in the same range as FY23 as headcount is expected to be flat to down for the year, offset by continued technology investments and inflationary pressures. The firm remains fully focused on operational and cost efficiencies across the business while implementing its growth and diversification strategies and bolstering trading capital.
CEO Statement
Mike Kuehnel, CEO
“Over the past 18 months, Flow Traders has made a concerted push into new markets, asset classes and geographies, with considerable success. Following the arrival of the newly constituted Board we have conducted a broad-ranging strategic review and concluded that we have a significant opportunity to capitalise on this period of development and move Flow Traders into a growth phase.
A critical element of this development will be the expansion of our trading capital base, especially given the significant returns we have generated on trading capital historically. Following a review of the various options to achieve this, we are implementing a wide-ranging trading capital expansion plan. As a first element of this we recently secured a €25 million bank term loan, and we are looking at several other ways to increase external financing.
We have also concluded that a central pillar of the plan, and the most cost-effective means of increasing our trading capital, is to increase the level of retained earnings in the business. Accordingly, we are suspending regular dividend payments until further notice, a move that will accelerate the expansion of the trading capital base and that the Board is confident will generate long-term value for the shareholders.
We believe that the firm’s new trading capital expansion plan and the continued expansion of our diversified set of existing and newly emerging trading strategies will deliver significant returns and further strengthen Flow Traders’ role as a leading global trading firm, providing liquidity and efficiency across a wide range of financial markets.
Coming to the quarter, market activity remained muted as volatility declined across most major asset classes compared to the same period a year ago. Nevertheless, we continue to expand our relationships across both the TradFi and DeFi ecosystems and actively sought out innovative partnerships to continue to support the adoption of Digital Assets. Internally, we continue to focus on our automation and efficiency initiatives, and we are pleased to have received shareholder and regulatory approval for Owain’s nomination as our Chief Technology Officer and as an Executive Director of the Board.”
Preliminary Financial Calendar
31 October 2024 Release of 3Q24 trading update
Analyst Conference Call and Webcast
The 2Q24 results analyst conference call will be held at 10:00 am CEST on Friday 26 July 2024. The presentation can be downloaded at https://www.flowtraders.com/investors/results-centre and the conference call can be followed via a listen-only audio webcast. A replay of the conference call will be available on the company website for at least 90 days.
Contact Details
Flow Traders Ltd.
Investors
Eric Pan
Phone: +31 20 7996799
Email: investor.relations@flowtraders.com
Media
Laura Peijs
Phone: +31 20 7996799
Email: press@flowtraders.com
About Flow Traders
Flow Traders is a leading trading firm providing liquidity in multiple asset classes, covering all major exchanges. Founded in 2004, Flow Traders is a leading global ETP market marker and has leveraged its expertise in trading ETPs to expand into fixed income, commodities, digital assets and FX. Flow Traders’ role in financial markets is to ensure the availability of liquidity and enabling investors to continue to buy or sell financial instruments under all market circumstances, thereby ensuring markets remain resilient and continue to function in an orderly manner. In addition to its trading activities, Flow Traders has established a strategic investment unit focused on fostering market innovation and aligned with our mission to bring greater transparency and efficiency to the financial ecosystem. With nearly two decades of experience, we have built a team of over 600 talented professionals, located globally, contributing to the firm's entrepreneurial culture and delivering the company's mission.
Notes
- Return on trading capital defined as LTM NTI divided by end of period trading capital.
- Revenue by region includes NTI, Other Income, and inter-company revenue.
- One-off expenses related to the completed corporate holding structure update and capital structure review work.
- Weighted average shares outstanding: 2Q24 - 43,270,311; 1Q24 - 43,515,359; 2Q23 - 43,289,018.
- Determined by adjusting the basic EPS for the effects of all dilutive share-based payments to employees.
- Source - Flow Traders analysis.
Important Legal Information
This press release is prepared by Flow Traders Ltd. and is for information purposes only. It is not a recommendation to engage in investment activities and you must not rely on the content of this document when making any investment decisions. The information in this document does not constitute legal, tax, or investment advice and is not to be regarded as investor marketing or marketing of any security or financial instrument, or as an offer to buy or sell, or as a solicitation of any offer to buy or sell, securities or financial instruments.
The information and materials contained in this press release are provided ‘as is’ and Flow Traders Ltd. or any of its affiliates (“Flow Traders”) do not warrant the accuracy, adequacy or completeness of the information and materials and expressly disclaim liability for any errors or omissions. This press release is not intended to be, and shall not constitute in any way a binding or legal agreement, or impose any legal obligation on Flow Traders. All intellectual property rights, including trademarks, are those of their respective owners. All rights reserved. All proprietary rights and interest in or connected with this publication shall vest in Flow Traders. No part of it may be redistributed or reproduced without the prior written permission of Flow Traders.
This press release may include forward-looking statements, which are based on Flow Traders’ current expectations and projections about future events, and are not guarantees of future performance. Forward looking statements are statements that are not historical facts, including statements about our beliefs and expectations. Words such as “may”, “will”, “would”, “should”, “expect”, “intend”, “estimate”, “anticipate”, “project”, “believe”, “could”, “hope”, “seek”, “plan”, “foresee”, “aim”, “objective”, “potential”, “goal” “strategy”, “target”, “continue” and similar expressions or their negatives are used to identify these forward-looking statements. By their nature, forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors because they relate to events and depend on circumstances that will occur in the future whether or not outside the control of Flow Traders. Such factors may cause actual results, performance or developments to differ materially from those expressed or implied by such forward-looking statements. Accordingly, no undue reliance should be placed on any forward-looking statements. Forward-looking statements speak only as at the date at which they are made. Flow Traders expressly disclaims any obligation or undertaking to update, review or revise any forward-looking statements contained in this press release to reflect any change in its expectations or any change in events, conditions or circumstances on which such statements are based unless required to do so by applicable law.
Financial objectives are internal objectives of Flow Traders to measure its operational performance and should not be read as indicating that Flow Traders is targeting such metrics for any particular fiscal year. Flow Traders’ ability to achieve these financial objectives is inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond Flow Traders’ control, and upon assumptions with respect to future business decisions that are subject to change. As a result, Flow Traders’ actual results may vary from these financial objectives, and those variations may be material.
Efficiencies are net, before tax and on a run-rate basis, i.e. taking into account the full-year impact of any measure to be undertaken before the end of the period mentioned. The expected operating efficiencies and cost savings were prepared on the basis of a number of assumptions, projections and estimates, many of which depend on factors that are beyond Flow Traders’ control. These assumptions, projections and estimates are inherently subject to significant uncertainties and actual results may differ, perhaps materially, from those projected. Flow Traders cannot provide any assurance that these assumptions are correct and that these projections and estimates will reflect Flow Traders’ actual results of operations.
By accepting this document you agree to the terms set out above. If you do not agree with the terms set out above please notify legal.amsterdam@nl.flowtraders.com immediately and delete or destroy this document.
All results published in this release are unaudited.
Market Abuse Regulation
This press release contains information within the meaning of Article 7(1) of the EU Market Abuse Regulation.
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