VIRT - Earnings call transcript Q2 2018

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Operator

Good morning. My name is Jack, and I will be your conference operator today. At this time, I would like to welcome everyone to Virtu Financial 2018 Second Quarter Results. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Instructions]. [Operator you. Thank of Head you begin may Andrew Investor conference. your Smith, Relations,

Andrew Smith

morning Good Jack. everyone. Thanks

our were As and quarter you second know, results on website. are our released available morning this

our disclosure which belief regarding today financial in risks, any It our that Speaking include filings Report and to your update future on to statements you Financial forward-looking events call then we Officer. outside with Joseph press review therefore are and are control, take Chief with to uncertainties, and undertake materially not begin note disclaimers information available. condition Chief our from this do becomes the to the and revise current Executive company will and you assumptions statements, remarks XX-K Mr. Molluso, what Commission. and in which our Officer, subject our refer questions may Douglas prepared release answering Annual to They any your available contained information Mr. and description and is Today's on is based forward-looking encourage as to of factors or forward-looking presently Cifu, important Virtu's statements. Securities maybe other differ results company's the and the in and are and indicated on Form represent actual forward-looking call these questions. risk and made new We Exchange statements may

materials included refer these earnings available measures you find of will we the addition non-GAAP our In website. and to terms GAAP a results, to on certain measures may non-GAAP GAAP to reconciliation in

call Chief Officer. Executive Mr. Cifu, I Douglas like to Now, over to the would turn Virtu’s

Douglas Cifu

thank morning today. Andrew, everyone joining you you, us Thank good for and and

integration on quarter this Our prepared the open and results before more an details the Molluso, call will and materials remarks providing be questions. on highlighting the to update released focused on to our brief CFO achievements date. provide your second supplemental our morning, quarter Joe the will we

the reflects XXXX KCG, last the quarter market second that and I results our of full continuing week the which operating the quarter the in I XXth, synergy of one just of combined as consolidated The on acquisition. targets, to July integration am of and discuss evidenced stock the all we of is Virtu the report anniversary year by of detail increase success closing repurchase our more third expense pleased indebtedness shortly. and an enhanced of plan, will repayment

VIX progressed. US quickly making net retail EPS. down and realized for report $X.XX second Americas Market Looking quarter, declining of business first volatility today realized at million but of we importantly compared were impact adjusted income XX.X first and as that Virtu favorably income our respectively that net retail of of on XXXX well trading million X, QX. XX% this experience the second within participation we quarter the during the and trading the volumes of quarter in and quarter’s slide $XXX result adjusted business starting The the $XXX the as it deteriorated of quarter equity the quarter realized started more declining occurred quarter to and and more market making in the the environment the as from continued, from the during reflects as adjusted volatility half severely volatility as quarter. XX.X XX%

XX% in June. March from to even declines over XX.X XX March and addition more of April, realized declined monthly of May as the In a to S&P to X.X decline in June, in XX striking in the volatility representing from are over

is in the retail of to principal Further pay to for our important retail are market our performance, spread compared compared notable participation the only are size service that transfer of market for bid offer of quarter when important large quarter also making have second previously, down quarter that to participants risk. relative this maker benchmark market the stated of segment XXXX, well. decline especially for to driver as business from quarter the example often an these XXXX mostly performance market we the willing in As QX metrics meaningfully decline quarter which fourth our Virtu, makers the was second to XXXX.This performance equities first US stemmed be but market a making of as not businesses participation retail expected, in like during to our wholesale the was and in to

our slide a you to quarter. market making X, X performance can Turning of and break in out

Our million our execution adjusted of million. services income net market and segment $XX.X making earned trading generated segment a $XXX.X

As Adjusted noted by Americas the in equities our first million. was per was reduced aforementioned importantly trading retail volatility participation. net by to the most depressed equities quarter day in compared performance America’s $X.XX impacted the and income

quarter equities market prior line world volumes with decline opportunities the was compared making by down the in reflected to of volatility benchmarks. as rest Our performance in the and the

in intra-day and volatility XX% compared to respectively Pan respectively, decline and and the prior volatility example, XX% decline Nikkei XX% For stocks XX% volume quarter. Euro EU realized an

largely quarter. options to performance in in Our complex global volatility were FICC first the the to down first segment the other quarter XXXX, the compared due and of outsize

global GX the FICC the outperformed performance despite a that within well second particular, bright in includes currencies the excluding XX% benchmarks spots decline volatility many index. of for volatility to However, continued business quarter Morgan very JP FX perform our complex, our global

business Our services contributor steady execution this quarter. a remained

competitive algos offer positioned technology execution only firm believe as Virtu the retail and and to provide to is institutional market to transparent continue and with street. We services scale the ability We develop agency liquidity the uniquely principal and our services. and leverage and to institutional agency routing, making wholesale infrastructure

the operating XX.X% us adjusted we discipline. earn margin. quarter quarter Our both while enabled exceptional highlights in first revenues an expense this XXXX, the profitability sequentially and attractive saw operating our our EBITDA of down scale the performance to were also from and of benefits Overall, environment scale

have witnessed any as first cost fixed of market quarter this As generate can volatility less results to and scales will and periods I our in before, said in than experienced result should the said operating enhanced as exceptionally returns as model business superior these in quarter results environments and Virtu profitable volumes ideal return well.

The from performed making our two important takeaways these financial improve first, our to quarters. are, non-customer market and facing prior overall results continued businesses from

during were by the Our market significant making negatively overall impacted results which impacted decline quarter, our retail adversely in however flows business. retail the

expense On continued we side, the overachieve. to

guidance. XX% the prior With the we for guidance first $XX against by XXXX second prior quarter beaten approximately have half million results, or

achieve well, layers synergies to XX% to and the be benefits or combined the technology the the million we realized expense to reap total the as integration $XXX progresses. integration all continued Revenue base of We in By of integration ultimately of Virtu our continue going and merger. around measures in synergies is will KCG prior labors.

a opportunities For these execution more that as with continue like to revenue we of we quantitative I’d and context, combine few to the discover Virtu’s non-linear discuss examples integration realize synergies and efficiencies strategies. KCG’s

integration deploying footprint. to also redundant common businesses by the firms principal opportunities enabled KCG of and integration this legacy clearing connectivity as been Not making all did The and KCG and of legacy integration Getgo infrastructures, activities, IT non-customer market the which Knight only legacy first synergies legacy legacy on the combine allowed independent principal by migrating of market prior decommissioning making combined technology. post-trading had first achieve cost. Virtu operations We trading market trading businesses, us a it it opportunities global on Virtu’s focused onto did the By integrating trading standalone expense this data have and to models real Virtu, across these three this knowhow Getgo platforms. we phase

clients came update facilitate July. we trading give to impact. call $XX These and percentage less annual three to have spoke were of interaction intra the begun November, then result last even large the we access opportunity. of and trading optimized, uniquely begun unique in principal a from reported capabilities we million was closing $XX which a run available to KCG’s our in we with in continued the market Virtu’s single institutions, market, though receive the our actions portion models on to profit the only client is tape to Canada services making of in provide algorithms one a you we segments about the third last of synergies of segment liquidity an quarter optimized conjunction to in from to by better execution introducing publishing liquidity for this inter us resulting liquidity and market overall of a Virtu addition as and Canada businesses. many Historically, only own call retail. and each benefit and in firm few our in Virtu’s making have from our opt have Since liquidity to volume, Europe ability introducing weeks within improve positioned mergers realizing institutional platform of allow clients agency across from Just fully clients large our million DEQ. Since something continued not to dealer those in fills last our to that coordinating other the liquidity in KCG’s price interaction our capabilities. are update execution we To principal provisioning and the time not algo with provide global to firm the also markets combined Asia, business market in benefits and rate fully the principal with horizons, often with

transparency days benefit control of as offering, of their choice have early makes we still clients which any as in because enhanced for they just sense. these as relationship accountability initiatives, acceptance a more over get seen bilateral is it execution. While and well lot great this and The

since as Under since repayment acquisition we last $XXX repurchase we $XX shares. our announced Finally our we the of $XX interest X.X an the repaid share quarter, make we annual million on million approximately by last to has million. progress call. the repurchased This front, million total program term loan brings to reduced have management continue earnings expense our capital have which additional significant

in we Additionally, additional revenue review leading will has remain retail technologies incremental continue agency superior I global authorized of execution Joe and going the continue improvements our to excited We $XX of now institutions from will overflow offer products execution market through believe Joe? of our a We and to realize turn making wholesale share an to of Directors quality remainder as about while very Board over to million forward. having the integrate we providers. leading businesses suite repurchases. materials.

Joseph Molluso

on I expenses. operating you core will thank our summarizes X operating slide Doug. Slide pick up trajectory. X, Okay, expense

guided XXXX expenses expenses processing, compensation on targets overhead total Our guidance. than the core depreciation we and report done amortization. We half employee outlined we year operating based to data two and pleased here or have quarters half benefits, of communications total. Previously, I’m first half the and first first and and better for our and

see, compare total adjusted these XXX you As the guidance were operating expenses. total provided expenses XX XXX you we total the first we figures can adjusted by operating million million to first have or guidance million in compared XXXX previously, When beaten in to quarter. our half XX%

core of expense operating this the categories outperformance. contributed to All

amounts headcount XXX reduction from larger a is in Our significant prior currently quarters. people, the

reduce expenditure global of to merger as and technological continued have We systems rationalize data. and market a the services telco our result redundant

year are the of As full expense guidance a revising second our result, the for and half XXXX. we for

run the continue You to of for XXXX. remainder expect the can see, and QX we rate XXXX in to

full XXX on to million to guidance expenses XXX XXX million. previous down is now adjusted of guidance million operating year from Our XXX XXXX million,

prior XX% we company compared merger these to As reduced expense the approximately goals, of combined the expense as will base base. to million achieve or by combined be our XXX total the

our Our was XX.X%. demonstrates in It operating adjusted EBITDA leverage margin the QX model.

environment, our QX ability margin expense performance environment. an margins quarter. EBITDA our any our would net superior of the have market of produced to EBITDA challenging operating XX%. our Our income and against margin this since This the adjusted merger discipline continued demonstrates QX Despite making XX.X% in trading was generate expense the base adjusted business

will X, our compensation key a slide and benefits. you see of to base is Turning expense employee driver

out point income While focus continue to manage how costs. wanted total net in adjusted we trading tend to on to operating compensation we demonstrate to to cash expenses, we ratio order our

and revenue You net will This half legacy total important in ratio tool our with see philosophy to is historically compensation XX.X%. is that managing costs. line comp an first Virtu is in

repaid repayment term our XXX our an debt individual time about long last announced repaid compensation us targets debt. expense call, have X earnings the well towards closing total well Since of of merger Since is and incentive putting firm-wide we we million ago additional Our biased for compensation in as debt long capital merger. the performance. as debt. ahead year have Slide the the of term one structure $XX reviews and we at that million

EBITDA we which end two Our of are ratio at the debt-to-adjusted times the comfortable quarter is with. second very

regard XX.X with share progress million. also repayment, of a of X.X the to Given total we’ve million total for a repurchased debt

As authorized targets in long an million debt-to-adjusted continue term EBITDA Board the repurchases. opportunistically of use as repurchase shares we quarters, anticipate remaining of excess our capital will within such we to Directors XX share additional has coming to and our

overtime. return policy public set net in would income variability set to dividend least excess the to of our our to term We capital have because appropriate of no in commitment inherent view quarter-to-quarter updated be the of at we returning a believe and because stakeholders. We term. we we shareholders fully and We went results. and our returns. over to returning capital sustainability the shareholders our demonstrate term policy shareholders of this confidence slide long a We policy X to long what to that over believe XX% long When

see of repurchases. share of that been form we’ve since and public returned earnings the XX% a in of we can You total dividends our

operator, our will back Our opportunistic we the begin that target long share X debt-to-adjusted payout in the call to reduce to times, the term. capital our ratio and EBITDA maintain can return to long question-and-answer load so remain the debt repurchases priorities portion. I to With turn X.X consider term

Operator

with Your first Richard Repetto Instructions] from [Operator O'Neil. comes Sandler question

line Your is open.

Richard Repetto

these up dwindling look price stock, as on But but compare retail a significant guess, the there’s on XQ, volumes, There’s seems of that to a and makes intuitively. was side, interactive we the in say. suspect first the as decline question it trading side, you sense you broker bulletin both at, to talk in low it upside the sort the OTC shares sort in shows job when participation Great volumes. you Board quarter expense participation anomaly the the be of lets’ well Bulletin decline significant I of revenue retail and board to about and Doug, XQ if

regulatory not thing and there here sensitive wholesale to And involved So the talked the price the stuff. that? on making low brokers market any about retail interactive also the stuff. bulletin anything operation feedback question in be the is, how to is Can us and other boards as stock is brokers pressure some this you give on

Douglas Cifu

Good question.

OTC of large part clearly but it’s a smaller a are We retail the an part segment. market Board maker, overall important it’s do, of we so Bulletin what

up is, the we retail like flavor But like is good marijuana mean involvement see and I of already think the lot a and those. you so in raised about the important barometer know a that takeaway, month a point is OTC stocks penny whatever the bulletin stocks, board my view of OTC to like on. as is of my tend look and And referred engagement engagement. prepared right really people I a retail those certainly the what but also I about is they what obviously that are dependent talk about IBKR to count remarks. to maker proxy rich count we for share really because almost in think a disclosures which at overall darts, market think I I they is and talk share you’re

And deal shares the declined down number dart with. at numbers the quarter share brokers XX% IBKR to it’s the quarter, similar average I actually so XX% imagine then to XXX we at look retail the significantly you from quarter IBKR. the if and would so And that or second fourth really quarter volumes other per second about the according comparing fourth were of

interacting market my So Interestingly as overall lower prepared saw our I less come the just reference terms the just in through up. our lot gone retail in for of a pipes. segment, remarks opportunity set significantly has because terms XXX in we share volume was

the better down XXX going overall on are retail retail making has said our in America important will large legacy lower results then from shares part our of retail rest do, an from of trading but clients very just decline is of quarter performing response was the saw you really the when making peeling decline been dart our net in and certainly second the where well we’re count and it’s earning we and the the what counter the followed is there’s you really very biggest we at our to from market So share parties back the prop per so businesses, our and looking positive, and as remarks KCG, segment our if of most less significant fourth the and this place prop And and segment. significantly quarter. market opportunity and prepared know from component I market making segment of the my income is having it adjusted

First till bit quarter a we little unfair of so had (inaudible) it’s place lot an volume more involved obviously a comparison.

Richard Repetto

My helpful job It’s done on it. a at. Got Doug. very the you’ve follow-up that expenses would fantastic one be

at you up the the in If it’s Joe ’XX. look excuse about midpoint synergies, guidance the of or X% fiscal expense

don’t on they just but just me slide ranges expected trying different KCGs’, I it understand, comp of now provided from where Like amazed have tell before where coming by line have are used So could reductions big items. X expenses, items think just given a you the line that you me, to I’m I the ratio. was given to see XX% and

these mostly synergies where from? or are comp in is coming So it incremental

Joseph Molluso

Thanks Rich.

at and we’ve where I’ll bucketed tell and that at line as You broken obviously previous occupancy, here a is much overhead is to in format comp result were was compensation page employee X, in the you pretty in is we the What technology XX.X full comp the guidance XXXX When out and right look zip year, then in if the same D&A. first you the quarter, second that the driver XXXX, out big the point code. look ratio, there. and XX.X XX.X% you it right were Virtu’s

do with So revenue know legacy and we’ve of ratio not a people, able a we’ve it’s frankly I that. magic, a gotten lot that’s there. XXs, to how base been KCG bigger it’s had the comp fewer in

well. that line there said in my communications, remarks data So also is but only is compensation, not – the I it’s processing

when it’s be when think I be, to merger the synergy combined look to item overhead as the individual going million prior and contribution in $XX $XX amount the will that total line to to the look the you at you at million well. companies

You have less have less people, less you data you have occupancy market you less expense. have spend, overhead,

So a on long tend that’s each when cash, global as previously write else, reduced got focus everything we off it’s periods and you’ve feeds capitalized off the was that kind And stuff footprint office of of lot meaningfully you of terms of depreciation written a and to in off of other. again well, but space of time. a

across it board the contribution. really So is

Operator

the Goldman Your comes Alex of from line with next Sachs. question Blostein

line is Your open.

Alex Blostein

you staying topic, model I doubled, that clearly retail a people sensitivity far the is same still vol feels participation so in greater than realized from think the back is and XQ daily average appreciate take I the step than Maybe on more think your it. to QX like to

abnormally historical us look the you So quarter daily abnormally kind firm size for was results retail can trading what revenue low, you XQ could just run help a the how from contributed or high be is from here. second perspective, us help have then back, revenue A, and when rate to revenues right of to understand much QX

Douglas Cifu

equity that’s part outcomes quarters of separately like world performed very, well performed rest overall exceptionally my our of this there I which the to the Alex, do why make portion the and a overall and segment, segment unique of particularly volatility we a business in your mean is of we to very is was segment quarter good sensitivity significant and significantly and would our the I of Each that a is tried business, still retail remarks prop the less there I disclosed say in in It’s significant is Asia since and we is American well. describe equities question. the it’s The quarter that good to I that. Japan our a it. reference volatility. on right particularly a what so way opportunities, range of guess second and one, to In in prepared and comment realized our fourth retail presents

business making a and I NTI. of just reported would if pattern Our legacy prop were think we nice, seen have Virtu, steady market as

Our the had making in of pointed out prop business making did up. currencies quarter. in actually a business business the the fourth parts quarter market was market quarter than in many And our we better I prop US and we in second

day-by-day where again, many depend down overall of studied is on, this dart way look We’ve And which this, really we you that brokers, But actually at right if share come. what you back look other some you a at because our the onion market if at some was looked that they and can maybe track obviously brokers. decline count different will at hour-by-hour the it do to darts size guy average However, can if we’ve retail declined that door We IBKR looked through count, significantly we significant okay, we share, the evidenced share this things. When that’s at retail mean say by at trying coming the here. an we’ve you as the is out. flows and darts put at look what to best and present trade actual in you peel participation. think

very well the opportunity against we quarter. So, in I fourth the think performed

better. not down. well to say, performed the because would retail I and liked pass entire to to I’m trying think went buck only it’s was we quarter the because second disappointing me have obviously have participations

quarter. in prop second did growth America in the in we saw the fourth ETF and Canada we Latin think our better business I quarter to as a opposed

firm ask like. I day. what of trying will in do quarter if the here like lot every think focusing of you a second clearly very the guys things terms going of so model we the nice to of and to take a trying bid quarter looks of onion I count in and guess the fourth there’s out share quarter And can peel are the little be we second quarters forward, that terms get retail to going to on that are the bit back look what should as we you the So

Alex Blostein

my follow-up along revenue I then And also guess the lines.

let’s you now. the opportunity from? guys organic for the environment So from combine is you is crazy What basis pretty as realized remains quarters XQish over as here, know you been have XX several growth that you the expect So guys see do an XX of of a company so growth is, kind assuming to come of the but not best months and for retail next a revenue where it kind it right? what is still kind so you at decent the level, valve to say on

Douglas Cifu

the in in market here we’re of mean retail US share the I on. It’s very a segments. couple focused

since about up So our is XXX market share X.X% January.

I pretty proud ETF our that, our domestically that. of lot. we’re So to and a we with every day customers continue in business Europe grow work and to like obviously

think had can in relationship been what I’d a etcetera. very active good I hybrid shift the we business passive. which automated we here so technologically is We’ve seen but RFQ the a compete about building can do to blocks, from call you’ve fully

of buzz firm institutional trust is because I another maybe is we’ve positioned a us This and rely not money making and Third, and ability I riding think also a – integrate different of street opportunities that job retail the with out that do types orders the us, and by that customers of the all uniquely is by really that. internalization. got great I talked rate flow. didn’t got we’ve interacting revenue got to business. hundreds the market not and hundreds fabulous Save thing There’s has word to prop call, first of in internalize clients we’ve firm provide to that about

pay increasing and retail and real price de-risking base, our that’s you provide to life’s institutional capital got So our commission approval exciting. if that’s you a commission going and an against a reducing good so customer we’re customer because

be that I quarter, business. continue parties. separately I’m in significantly improved our think the the very is We about to the excited area our FX about don’t second see it, growth and pretty [FIC] I of but business continues to fourth excited which report counter

think I’m the good, well there’s streaming volatilities rate quotes. the swaps, FX time quoting the exchange which and in Eris think business business the believer income We on I fixed as terms a return lot interest I in to the is of began but for first there. X% opportunities launched yet, SI talked haven’t The beginning I now. last I to is like say growth would thing is, And SI traction then in only Europe of the non-bank around but about Europe. to and our X% get offering market it’s really right overall

strength growth plays [BMR] and provide platform in unique a like bilateral we really there, relationships. large liquidity to size kind to of having So I have will, if a and Virtu the and of where there’s significant amount you that can think of customers

characteristics for are like those our one-on-one So kind of market Virtu place.

focus we organically. the or are four to that five those areas So on continue

Operator

from comes Jefferies. line Fannon of question the Dan with next Your

is line open. Your

Dan Fannon

segments to If XX metrics. we at part again, of about retail just guess think as XX Virtu other Is retail just to slides to through I outside follow-up the looking or participation? versus there standalone. it in business, market performed a point that the that terms would of well headwind you’d you have legacy any mentioned

Douglas Cifu

market two, to has change has been been has there, time volatility one, a the taken the and because declining soak in. Europe structure challenge,

a and the doing eliminated then mean part I that know were crossing that, at the method cap was on there’s what on networks big by So very you pools. two what dart broker you well, know we double

more You’ve seen options type increased their of a [spoke] market of and platforms periodic share. block

decline fourth the our a to quarter is an and what from second to of part seen which certainly equities important segment quarter do. So we quarter in first we’ve now European

medium there regulatorily and headwind I However, to And and in every can part of to be an to continue because new, to a money be major the we’re in longer comfortable area going would as been disappointment to response there, that’s in acceptance, Dan, it’s making business. the with is unfortunate been induced term grow. think regime But I mentioned segment growing I’m one it’s by in profitable the of it’s that’s I that it, in and a day. think the But little that so point there, a market Alex’s we bit we’re player that I a XXXX. structure over changing SI question, Europe

Dan Fannon

in And thus just it. the what’s Got quarter. third thinking about far happening been here

XQ the sequential change mid-quarter. I the think see there starting you I slow of from color any its the terms seems of be some kind like down in we July, on pretty quarter said guess would quiet, helpful. of it any mentioned can but kind volumes published color You really the of or throughout

Douglas Cifu

tell from And volumes has materially of of volumes – second going of again etcetera, of July, different indication that would It’s had the been a but published the be when and early. the changed I volumes from quarter. of sudden problems a the history. we’ve guy published in August etcetera. the the it in early seen all an be share you’ve in I its July it’s quarters the regular but second XXXX always best over, the to optimistic to I part the story. I was and count still had slow The But think the by months’ XX Xth quarter, going Virtu legacy had very quarter. August event and give obviously haven’t nature, since and we the am with it’s second quarter remember kind I not thought IBKR, would really say much nothing in

Operator

next from UBS. line question Your Alex of with comes Kramm the

Your line is open.

Alex Kramm

to Dan, a to Alex. that half you what XQ. is second Alex sounded me Alex’s - comment basically XQ expect the then is we’re point responded Just to answer tracking think in the in it your on just that ask you and XQ. said, follow-up we more but would to four, of the like that like really low earlier now sounds, wanted question Dan’s To from you XQ the other on When bid now like

you right we running X, look at the and actually bid way a to XQ me when me sounds it rate. So could at ask like the lower characterize be or to

what what want like the So just this is kind confidence point going think be really we see the that about sure should expecting we low correctly that level to forward? is of XQ of and make

Joseph Molluso

to the mean quarter and deteriorated said don’t we are some what pretty we began we But first was out good that then think the the from in with second one remarks quarter prepared tailwinds I the in rapidly. months. month third our I quarter, and break

of the here see published the precise few don’t get or quarter, you So to benchmarks. is the third but are again what where the too weeks can what the I high, volumes, want low first is around

performing we’re out against the that’s think opportunities I there.

So I in to I kind --. get thought want to

Douglas Cifu

particular, would I other you particularly Well in the will. of only May like part add color in the was May a if second trough

to getting getting retail Virtu in Virtu liquidity, making are and enabling in the introduced just customers so to I ability to to the and months said today day. Alex every strategies terms and I before. day integration these customers of we you quant institutional way the all comment ago will Every the why better is over lot firm stickier of day we’re line grow acceptance. and order SI to going to and I’m but if more point want sit will that expose without that’s quantic, was side you we’re terms the Every products its just in if better the happening. in say, KCG and right, having having I to than a here more long of some than other So that improving. institutional buy clients. don’t interact The liquidity, Virtu to it three sales and prop a side There’s getting made my with the with customers you know like so cycle is, rolling are interacting Europe we’re the organically, And on think two our out strategies

firm So volatility to will it always where that my even this as confidence and high continue better. grow kind continue level do to stayed is, of is

York Our what enable. improvements become it’s here ETF debt I’ve as it’s seen doing significant technologically in from New

firm integrate. to if argue the try continues it we’re But can have meaningful I would have the KCG revenues transaction know actually very at of fruit you of Virtu as the at peel that scaled in frustrating. So revenues. we’ve all proud think indicated bearing up. the all are Joe we firm impacted day, guys the ways. day challenge I gone every to will onion, I to end thesis get a footprint of better for know look And the it’s be I way as reduced that and you the the and back and

the really that’s model. So

throws very I’ve time built the the it we’ve a like this first if is but the cycle firm this last of for term, and long sustained is famine since part for sustainable financial We’ve and and for again, important which So and of is which leverage firm well second And gone cash years quarters through is the will before, feast continue three business has this I’ve term, up people a growth. the quarter. an will spoken positioned that over long a we’ve this that��s to look been ecosystem. significant public, to firm really very quarter said be every a you lot

Alex Kramm

just for I make think helpful I point, call that’s disappointment, that up yes wanted And setting you not a to sure XQ further you’re color, if low this right. yourself

terms side buybacks this think part of sheet, other So I remarks for the the forward look of or of in run of Joe’s question, the more prepared through, be balance Can your of in on in mentioned outlook think you just etcetera. terms number I you my business. may some the kind

to updated you’re debt should something going any thoughts with also said in you’re the buybacks, pay of off comfortable you assume range. current about So, leverage what’s pace terms like the we more and But here.

Joseph Molluso

Look of got we’ve now long term remaining. $X about billion debt

we the returned. we promised merger I million think of capital announced XXX when

million the well ahead XX And that target think I we you back I are months and target. out we’re XX that think proceeds, BondPoint away think from I if of that.

in a So print we’ll even still again of we million, terms printing we’re debt significant a XXXish EBITDA. at this, least when quarter repayment. And still we’re of achieve amounts a like that target printing

think in debt-to-EBITDA very metric win. will the I times be comfortably that So we two

we’re that. with comfortable think I very So

of as still we capital Doug then said, excess and So still that. excess we off capital have generate

I authorization repurchase about We’ll X.X million go shares. be out repurchase XX used to capital be of to going excess continue share. million think opportunistic to and opportunistic it the shares. about we’ve forward use initial and share repurchase $XX worth shares, We’ll million

the from the excess that extent creep generate and with So also grants we do beyond wasn’t that, it. share stock to sterilize what capital that decide will we’ll to

the I think share we but got Board capital that use and determine to towards evaluate what a we’ll repurchases, bias best with is. the

the that where accumulate I [quota] from was that capitalization standpoint, cover around excess kept a comfortable we business even the and determine are. this business excess the very a in dividend we we’re we are to like generating So enough think capital in and the run our promises cap. than We’ve more think and

Douglas Cifu

Just we up be very to is, KCG about to that going point acquired disciplined the think is we’re paying integration etcetera. to to important synergies and going an were which add and when get that, this adamant we levelling I make we’re to very back I that wanted

the of of now. and used And that comfortable sort the level almost indebtedness that, the so have of lion so done purchase we’re right debt equity we’ve we’ve with we we of all frankly repaid the share to that

But capacity it’s right I’ve think now, said bit more for industry this right something else. arrangements We’ve to that that gives many I consolidation. out an industry go is that as indicated. repay probably is little will it Alex an and We times and And consolidation. a there us that do for Joe but plans no right is

to more create technology and of synergies the leverage using the power seen to value. You’ve generate real and using importantly Virtu’s

that you have XX% phase, moving technology really class, the a unless happen flow. combined handle all that multi-asset can to this doesn’t of scalable We’re expense multi-currency

three, efficiency excited that and what explore lot the – in I be growth market this continue just a think So an we’re element over years important that’s next going to we’ve that’s just calling two, --. to very gets like services organic as to is this and place we to about those firm for opportunities, of the we’re and consolidate continue and providing. out scale five more It’s talked

Operator

question Morgan. next the from Worthington comes of with JP Your Ken line

Your line open. is

Ken Worthington

and Ameritrade of a the You sort half guys makes Is sort or about firms indication dozen of retail of like of gauge you it as interchangeable. highlighting six better are participation. is are of E-trade or one the IBKR there that they or something than IBKR activity other of

Douglas Cifu

very and only all I highlighted, just they are my to important again, say Well highlighted darts. Ameritrade would interchangeable very, you is reason very clear Ken, I’m are firm one The very, IBKR never we’ve most me all is clients is published because the so important firms. TD they our of

and can’t eat back shares mean okay, that how profit. and you well the the of view that you that through Like that’s actually is relative here to make come dart Our to darts, you peel say the you need like shares. does onion what

than of the provide of because we’re that certainly important and of Virtu, be so guys as like we we that out think out some number provides firms the a the more if they’re terms else So that’s shares two you looking me companies that in aware other IBKR count, the a could only are why how public retail firm that the we’re happy to would to really brokers, at that that actually prophecy. retail flowing through of because retail point quarter-to-quarter. interesting point very have universe, share that’s We show I’d someone performing count. indicator we share

Operator

from Ben comes the question line with Herbert of Citigroup. next Your

open. is line Your

Ben Herbert

on and the environment, the pilot] on based you specifically be Doug in what give you’re market on customers wondering hearing particularly update could maybe [street other just around regulatory just if us participants the excess thoughts US may Just or and an – from feedback?

Douglas Cifu

question. Good

comment letters sat chuckled lot read interesting. There’s various and of which exchanges kind a of we’ve was throwing which submitted including a different and XX kind comment that that XX stuff, from and So York a letter IEX noise obviously we’ve very back one I about. all there’s XX to between we’ve involved, been of the kind been grader been New spaghetti of

executing and obviously are people day, share integrate firm the thing why It end a of a of are in want they very comfortable the that manner efficiency with and support shift that institutional is but of exchange. very end it terms retail price that, expense and significant day on to important the in to. ecosystem the is across the opposed with, Virtu, that able with such more in we’re just at which are think execute in providing is Exchange in in lion can the very we are why all an you again I of the discovery in and manner. frustrated the bucket will and and flow people at letters the very the want exchanges frustrated exhibiting a exchanges is if service one be internalize like the to to which player the people think we to because all just of to are Virtu,

this, look the the commentators of fees charged think the and So at different. lion were try we that say, the of should we ultimately end share supportive are access day I being something of and the at

maker of are in have talk the do market do rebates story, and rebate, routing that is your about cost a and your with conflate different When The this letter because customer think order conflicting almost getting this it the issue. people broker center have your And they of that. I a brokerage an which part you issues. paid routing opposed real your important problem the I best that is talk with rebates they shouldn’t broker they fee being thing the about broker is a is paid issue, and in the for a to issue at think broker not the a think right. IEX the the routing it intentionally, market than said you to interest is is as people we’ve diametrically most I to rebate

between to market make a and very brokers a it are that’s liquidity. valid that’s we or tell doesn’t But and issues, would enhances you provider liquidity are maker incentivizing provide in AKS If argue liquidity a or and spreads exchange I separate market commercial XXX you’re perfectly and center fact disclosures, supportive two distort, and enhance they relationship an narrow routed. we’re a

do that we fact In voluntarily.

say send them at really has why that look resonated we send with XXX think we and buy side. you I our and where If the reports, orders we

it good and I’ll Ben really nonsense debate because for that really around has peeled It’s of conflicts HFT whole think issues. flash whole back separate been word Virtu [obligation], IEX rebates. this use from and some I has the this So boy- two complete

SEC the we’re very clearly think see it gets that we completely businesses, Now both and in that. I

Operator

Your next ISI. question with comes Evercore from the line Kai Chung

Your line is open.

Kai Chung

is Appreciate business part the volume puts how takes. and all on retail your the some of perspective color big shakeout and there needs

little step back want just term long think how big bit a to you Just do and about revenue picture, the outlook.

I the shares like going your back it think buy trend’s that companies last XX% public continue number to saw declined over markets. and to XX% looks private stat have almost continue that their and the growth companies of with publicly listed the of

do and So you those maybe opportunities the a your what view headwinds reminder main of offset sort in to like there? revenue just can

Douglas Cifu

been fall issue you that’s good has Sure, biggest a question. the price will if The stocks. large in frankly

exchanges story a stocks from there stock client a you’ll think the because goes market, stock back $X you same a than Amazon and high don’t was and do all the lot more volume other trading. XXXX and down. in to lot Priceline count hear when right, Citibank If was more And these when share splits the the

really think interest have XXX going just digit pretty extraordinary, don’t cases like in S&P bohemians to of three dial. right. because in that of many digit and move IPOs It’s stock four of a lack the and these it’s small pricing prices So a lack I really the cap is question which isn’t

less trading they’re a So just lot shares.

was, You $XXXX ago right. only years out and but of I’ll up an Hathaway there was stock Berkshire a XX the as $XX a had line kind outlier, stock, this now it’s that price make

has that in decline share count. really to led So a

to being a do the every it stocks exchange view stocks spread stock trade and more they’ll the the enable most important make the narrows all They trade thing actually due very large listed say and is company efficiently. split. So can this my fair, and more in

clunkier more risk high lot put have on the stocks because the priced a there’s trade you and I think bid a offer. lot to that

their on have companies price profitable the exchanges that always of to to we that’s with the So stock, pricing reduce encourage important. hand working notional think in the very and point we hand

long So view don’t that I a as term, headwind.

times, talked pop The other up. in thing obviously about that’s you United been every States ETS know the new as umpteen three day

count business a as volume share positive and which that is are So that in because well has we well. increased as generally

Operator

turn Q&A the the for portion the of our Cifu I Doug closing to call. concludes over remarks. would CEO, now back This call to like

Douglas Cifu

attention in body interest every your your you and Thank Virtu. for

we integrating We you many We and wish to continue talking the Thank very look to fall. opportunities. be a safe the excited of and to about everybody you. growth and forward healthy remainder the summer in Virtu

Operator

concludes This your you participation. thank today’s call. We for conference

may You disconnect. now

Virtu Financial (VIRT) 27 Jul 182018 Q2 Earnings call transcript