RECENT POSTS
Wednesday, February 13, 2019
Low Latency Calcbench

Monday, February 11, 2019
Now Streaming on Hulu: Red Ink

Thursday, February 7, 2019
Early Look at 2018 Tax Decline

Wednesday, February 6, 2019
You Revised WHAT, Netflix?

Thursday, January 31, 2019
Talking About Huawei Exposure

Wednesday, January 30, 2019
Another Discrepancy in Reported Numbers

Wednesday, January 30, 2019
Finding Revised Facts: Hertz Edition

Wednesday, January 23, 2019
GE Commercial Aviation Services: Bringing Numbers to Light

Monday, January 21, 2019
Differences in Earnings Releases and 10-Ks

Wednesday, January 16, 2019
The Importance of Textual Analysis

Tuesday, January 8, 2019
A Look at Climate Change Disclosures

Wednesday, January 2, 2019
Quants: Point-in-Time Data for Backtesting

Friday, December 28, 2018
Now Showing: Controls & Procedures

Thursday, December 27, 2018
A Reminder on Non-GAAP Reporting Rules

Monday, December 17, 2018
Researching PG&E’s Wildfire Risk

Wednesday, December 12, 2018
Tracking Brexit Disclosures

Thursday, December 6, 2018
Campbell Soup: Looking Behind the Label

Sunday, December 2, 2018
SEC Comment Letters: The Amazon Example

Wednesday, November 28, 2018
Measuring Big Pharma’s Chemical Dependency

Monday, November 26, 2018
Analysts, Can You Relate? A True Story

Archive  |  Search:
Another Discrepancy in Reported Numbers
Wednesday, January 30, 2019

The other week we noted an occasional quirk in financial reporting, where numbers a company announces in its earnings release don’t match what the company actually files in its 10-K or 10-Q several weeks later.

Today we have another example of that phenomenon — except this time that difference comprises almost all the company’s net income reported for the year, and clearly that detail sailed right off the radar screen of most investors.

The company in question: Virtu Financial ($VIRT), a financial services firm in New York with $1 billion in annual revenue. Here’s what happened.

On 8 Feb. 2018, Virtu filed its earnings release for 2017 full-year results. There on Page 10 of the release, Virtu reported that net income attributable to stockholders of $17.33 million. (Total net income was $33.29 million, but Virtu had to deduct the non-controlling interest portion of $15.96 million.) See Figure 1, below. The net income number is highlighted in yellow.



On 13 March 2018, however, Virtu filed its Form 10-K. There, we can see that net income attributable to shareholders was only $2.94 million. That’s $14.39 million of net income vaporized, a decline of 83 percent. See Figure 2, below, with the net income number highlighted in grey.



What happened?

Much of the answer lies in the line-item just above net income: provision for income taxes.

In the earnings release, Virtu reported its provision for income taxes at $78.13 million. By the time Virtu filed its 10-K five weeks later, its provision for income taxes stood at $94.26 million — a difference of $16.13 million.

Virtu also fiddled with a few other numbers here and there on the income statement. For example, interest and dividends income dropped by $3 million, while commissions on technology services rose by $5 million. The ever popular “other, net” also rose by $1.7 million.

Add up all those fluctuations, and Virtu’s net income pretty much evaporates for the year.

We aren’t entirely sure why Virtu’s tax bill changed so much. That was the first year companies were starting to report after the sweeping corporate tax cut from December 2017, so lots of revaluations were happening. You can investigate further on our Interactive Disclosure Viewer if you’re curious.

Equally interesting is what happened with Virtu’s stock price. We looked it up.

On Feb. 3, the day of the earnings release and reported net income of $17.33 million, Virtu’s stock jumped 22 percent, from $21.65 tyo $26.50.

And on March 13, when Virtu dropped the whole 10-K and net income dwindled down to $2.94? The stock opened at $32.80 and closed at $32.95. In other words, nobody cared. But small discrepancies like that add up over time, and people start to care sooner or later.

Here at Calcbench, we advocate for sooner.


FREE Calcbench Premium
Two Week Trial

Research Financial & Accounting Data Like Never Before. More features and try our Excel add-in. Sign up now to try the Premium Suite.