KCG posts $4.6M net loss in Q4 2015, as tough operating conditions hurt market making


KCG Holdings, Inc. Class A (NYSE:KCG) today reported its financial metrics for the final quarter of 2015, with revenues plunging and the company incurring a loss, as challenging operating environment hit the performance of the group’s market making segment.

KCG reported a net loss of $4.6 million in the three months to December 31, 2015 and a pre-tax loss of $7.1 million for the quarter.

Total revenues amounted to $262.7 million, down 30.3% from the third quarter of 2015 and down 24.1% from the fourth quarter of 2014.

Net trading revenues amounted to $145.96 million in the fourth quarter of 2015, down 47.4% from the preceding quarter and down 34% from the same quarter in 2014.

As of December 31, 2015, KCG had $581.3 million in cash and cash equivalents. Total outstanding debt was $495.6 million.

Daniel Coleman, Chief Executive Officer of KCG, said,

“KCG’s financial results for the fourth quarter of 2015 reflect a more difficult operating environment for market making due largely to macro market events as well as competitive pressures in U.S. equity wholesaling. In the fourth quarter, we made progress in growing KCG Electronic Trading among the largest U.S. asset managers. In addition, we continued to execute on our program of returning excess capital to our stockholders when conditions warrant.”

The Market Making segment generated total revenues of $168.2 million and a pre-tax loss of $6.4 million in the final quarter of 2015. Excluding charges related to asset writedowns of $15.5 million, the segment generated non-GAAP pre-tax income of $9.1 million.

KCG highlights for Q4 2015 include:

  • KCG Electronic Trading saw average daily U.S. equity share volume from the 25 largest U.S. asset managers rise 37% year over year;
  • KCG Acknowledge FI marked a new quarterly record for average daily U.S. Treasury notional volume with a 51% jump year over year;
  • KCG BondPoint marked a new quarterly record for average daily fixed income par value traded with a 15% rise year over year;
  • KCG completed the sales of investments including Aperture Group, the corporate parent of OptionsHouse;
  • KCG repurchased 2.3 million shares of KCG Class A Common Stock for $29.4 million and 2.6 million warrants for $4.4 million.

KCG mentions the sale of FX ECN business Hotspot amid the highlights for the full year 2015.

Mr. Coleman commented,

“As the year came to a close, KCG initiated a more fundamental reengineering of operations. Preparations are underway to achieve greater efficiencies from the front to the back office. In addition, we’re consolidating corporate headquarters in lower Manhattan to facilitate greater collaboration across teams. In the coming year, we’ll focus on that which we can control in terms of reducing costs, adding scale and continuing the capital return program as we work to achieve a double-digit return on equity in 2017.”

You can view the full announcement from KCG by clicking here.

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KCG posts $4.6M net loss in Q4 2015, as tough operating conditions hurt market making

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