Shares of Flow Traders NV (AMS:FLOW) plummeted 17.53% on Thursday, April 24, 2025, following the release of its Q1 trading update, which revealed a significant decline in profitability despite increased trading volumes. The Amsterdam-based electronic trading firm saw its stock close at €24.94, a drop of €5.30 from the previous day’s close of €30.24.
The company reported a mixed bag of results for the quarter, with trading activity on its platforms rising but failing to translate into higher profits. This downturn comes amid a period of increased market volatility, with the VIX index up 35% year-over-year—a situation that typically favors market makers like Flow Traders.
In terms of trading performance, Flow Traders reported an impressive growth in trading volumes, with the value of Exchange Traded Products (ETPs) traded reaching €507 billion, marking a 24% increase from €409 billion in Q1 2024. Additionally, the total value traded across all products rose 11% to €1,724 billion. However, these gains were overshadowed by a significant decline in net profit, which fell by 21% to €36.3 million compared to €45.9 million in the same period last year.
Flow Traders' total income increased by 4% year-over-year to €135.1 million, but this was below the consensus estimate of €142.1 million, as noted by KBC Securities. The firm’s EBITDA saw a marginal improvement of 1% to €62.3 million, while earnings per share dropped from €1.05 in Q1 2024 to €0.84.
The decline in profitability can be largely attributed to rising costs. Fixed operating expenses surged by 15% year-over-year to €50.8 million, driven by higher employee and technology costs. This increase in costs caused the company's EBITDA margin to contract to 46% in Q1 2025 from 48% in Q1 2024.
Despite the drop in profits, Flow Traders managed to strengthen its balance sheet during the quarter. Trading capital increased by 32% since the end of Q1 2024 to €803 million, and shareholders’ equity grew by 25% to a record €787 million. Regionally, Europe remained the dominant contributor to revenue, generating €69 million, while the Americas experienced muted volumes due to market uncertainties.
Flow Traders continues to focus on optimizing its core operations and diversifying its business. The firm has identified four mega-trends driving its growth strategy: the continued growth of ETPs, increased electronification of markets, the expansion of digital assets, and a favorable regulatory environment. The company anticipates that fixed income ETF assets under management will triple from $2 trillion in Q1 2025 to $6 trillion by 2030.
However, the announcement of CEO Mike Kuehnel's impending departure in August 2025 added to investor concerns, with analysts like ING describing Kuehnel as a visionary leader. KBC Securities noted that his exit casts a negative shadow over the results, which already included €15 million in one-off costs, including a €10 million impairment on intangibles.
As a result of these developments, Flow Traders is on track for its worst trading day since July 2024. The significant drop in net profit and the rising cost base have raised questions about the company's ability to sustain its historical profit margins in an increasingly competitive market.
Looking ahead, investors will be closely monitoring Flow Traders to see if its ongoing investments in expanding trading capabilities and diversifying its business will yield improved profitability in upcoming quarters. The firm’s long-term performance shows potential for generating consistent trading income across varying market conditions, but the immediate outlook has raised concerns among stakeholders.
Overall, the mixed results and leadership changes at Flow Traders signal a critical juncture for the company as it navigates a complex market environment filled with both opportunities and challenges. As the trading landscape evolves, the firm’s ability to adapt and maintain profitability will be crucial for its continued success.
