VIRT - Earnings call 2 2023 | Virtu Financial, Inc.

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Operator

Hello, and welcome to the Virtu Financial 2023 Quarterly Results Conference Call. My name is Harry, and I'll be your operator today. [Operator Instructions] It's now my pleasure to hand you over to Andrew Smith, Head of Investor Relations, for Virtu Financial to begin. Andrew, please go ahead when you're ready.

Andrew Smith

Thank you, Harry, and good morning, everyone. us. joining for you Thank

Executive Our Financial Lee, second available this morning are and Galvin, Operating our released call, our Sean Joseph Co-President Mr. and Deputy results our website. Chief were Co-Chief Chief Cifu, on Douglas on Ms. have this and With Mr. we Molluso, Officer. Cindy and Officer; Mr. quarter Chief Officer; our us morning's Officer; our today Financial

then will begin with your We and take remarks questions. prepared

Today's or and as include other to control. and may important and you the these in forward-looking in forward-looking from reminders. and represent call results release not current encourage undertake this belief It report, events the available statements. risk which Please statements made our forward-looking description which factors review few annual future Virtu's our materially actual what any are and a First, is company's note to on may you filings. that be to and is update that outside of uncertainties, to any Form are risks, based in presently public available. We contained the financial we press refer included do information information statements, becomes our note revise on differ XX-K regarding conditions subject therefore, assumptions forward-looking company, disclaimers call to to new statements may

reported may with non-GAAP supplemental measures as in refer non-GAAP accordance adjusted During including and certain considered margin. and GAAP income, net we measures to be financial as to adjusted EBITDA today's call, should net trading EBITDA as superior not adjusted in addition measures, to GAAP. adjusted measures, to income, These

to well we to in of an supplemental equivalent a explanation why where terms the deem the GAAP of as information as consult find as reconciliation meaningful the these on to our how as management We with be earnings well additional website, this non-GAAP of to this portion uses call listeners measures direct information referred measures. you'll Investor materials

to call like I'd that, turn all to with Doug. over the And

Douglas Cifu

and you, performance joining Virtu's I good for strategic you XXXX and business will initiatives. this Andrew, In Thank remarks Thank morning. morning, today, focus financial on and second my everyone. quarter us

Cindy Following remarks, details additional and Joe performance. will on provide my our

Looking of results, on at per second our X and $X.X of material, and are adjusted the quarter $X.XX. trading summarized we year-to-date supplemental day Slide quarter which adjusted in million EPS income normalized net the of generated

the saw In overall delivered adjusted our retail participation businesses quarter, opportunity highlights the customer bid $X.X prior levels average trading income, earned Market per to outperforming metrics the Slide Services for quarter. the million market our offer and $X.X making spread decreased second quarter, net relative segment X day. public and an day the declined of per Making Execution market of that million our as

Although these performed factors our making opportunity with led customer decreased own we business, in performance to projections. for internal market our line

remains but within share that we've alone share in limited business market wholesale our previously, a performance, the market worth historic Making Market of gauge noting As said as making it's ranges. is

asset performed and volumes market the noncustomer environment. quarter, globally, opportunity liquidity well Our volatility its which the by muted also making across although business, impacted was provides classes in

abilities market growth especially that and excited making perform make our opportunities global about await, address remain Our into ETF optimistic options, fixed block and initiatives, expansion organic and to meaningful We options in including growing progress. continue well the income. to our

performed over XX%. in pan-European quarter line institutionally scale markets, VES for continue the with per the second XX% sized Execution opportunity well day clarity income averaged side, volumes the these Much as in $X.X volumes more last our large institutional macroeconomic quarters, net and from remained this million to On were as the environment. adjusted with muted in X quarter-over-quarter down like clients as quarter. second the Most trading activity look challenging pronounced Services year-to-year. our lighter Despite

Our business and multiyear has is focus on on efficiency global that multi-asset new clients. their focused laser scaled business yielded development a class

in the our classes. expansion about opportunities past, growth mentioned markets the automation new increased drive are we to particularly of especially seeing business. and I've in We're analytics, As continues excited asset which fixed uptake income our for to enhances new current

the we improving particular, very environment customer by April, slow are the our early softer, business. in While quarter very characterized by the a enhanced in we part In modest some were these of latter seeing making days start in opportunity, the third the performance was overall quarter, in especially in second quarter. encouraged of market

in While and It market how generally and environment. any recruiting in ways focus quarter we these how deploy with second improve we continue pleased we against we opportunities opportunities. is in performed to the on in environment to businesses, addressable new continue invest are seek to that to to talent new we any out note continue the important

strategic growth have areas have our hired developers money headcount and Virtu's integrations, business years fixed headcount investments relatively has and remained including of due and blocks, focus. to market up options, after that in Since and people steady in in full-time significant talent While with areas. asset employees made quants we of downs the income, masked total other almost January XXX ETF stable XXXX, we

grow right hired lead efforts to in product team have to client engagement VES of a our industry folks recently, Casuccio, invested Keith continue to veteran, within VES. hiring Most and client-facing the business. respected We we also

options performance well against remain quarter. our we XX% adjusted -- realized set record relentlessly on a our and EBITDA cost period. Coming opportunity in the the performed declining always, As has during XXXX, margin a business focused options off

continue across to venues geographies. expand We and

QX, index impacting market-wide volumes were down the However, results in customer XX% in options the U.S., in quarter.

players expanding including class products by we both our continue offering or regions, rates. block build more We to personnel allocate operating multi-tool cover technology allows credit and and income, on to focus enjoy opportunities. our out to we immediately more our to to ETF in the region desk from business scale growing competitive platform in fixed contribute edge as in improving asset global The biggest the our any standardized

ETF block quarter was over from as about from I quarter. our it Joe, additional turn this Joseph? announcements slower competitors However, the have recently. who may details other seen to will will you now in provide

Joseph Molluso

to were turning capital. annualized. expenses on X% of ended We Quickly We with focus year we half Okay. full million, and where first operating year XXXX cash the that OpEx. ahead about the of expenses the ended cash $XXX

expenses in We times. manage soft especially the in continue inflationary to aggressively, environment

year, is of end the at Our ratio at cash which XX% our the comp is first range. upper the half of for historical

the history, profitability drive compensation shareholders for world-class mentioned. and headcount and manage talent recruiting discretionary Doug while Virtu's So consistent with to our we retaining will as

expenses are So were expectations. out were other in Communications the environment due data year year-over-year adjustments essentially and annualized on professional expenses and fees. some a our flat prior basis up global prior up inflationary with the some in versus other owing to to in favorable FX X% increased an slightly and up businesses processing and new expenses bit some in building line investment the year

terms ability And can our remained steadily returning paid to Slide there payout can the maintained constant in annualized our despite relatively XXXX. long we've debt, to we remained to since we capital shareholders In of public of our public come to you been on term. first robust see year would our results X equal which you the results expenses material. cash operating expect dividend, capital for and We've have see On annual and for our our half throughout the basis that on $X.XX trading over steady an X XXXX, This to term. consistency now our the of capital variable over demonstrates the guidance years. has commitment long supplemental generate

repurchased approximately $XX million for quarter shares In this million. X.X addition, we

share years total Slide over shares, and of million have count our compensation-related XX% program. in is since beginning Since of share shares inception new the our repurchase little our period-end we Our XX.X a almost million repurchased for of repurchased now we the share X-plus $X repurchase a net of of company program, have an I to issuances, XXX.X turn over to the we various details call turn that million ahead to basis. And before the questions. Again, over please year-to-date guidance that, at levels to annualized $XXX repurchases see our will review share to on are X, it the financial of outcomes Lee refer Cindy on of with billion. performance the

Cindy Lee

On of supplemental X Good provided Slide of materials, our our you, Thank summary morning, performance. everyone. a we've Joe. quarterly

totaled XXXX, million Execution $XXX was million adjusted For million adjusted quarter gains, expenses, $X.X trading per $X.X net the of net our $X.X million represents trading or our trading $XX income net day. which or Market second Services' million income million trading trading net direct $XXX or day. Making per adjusted NT, day. per was of or income

EBITDA and Adjusted $X.XX. was quarter EPS adjusted million was margin normalized the XX%. XXXX, was XXXX quarter adjusted second of for second Our EBITDA $XXX the

Slide provided results. a On we've X, expense of operating summary our

of $XXX second quarter For XXXX, recorded operating expenses. the million we adjusted

We continue prior control in the expense $XX that was benefit maintain which for us during second and interest operating efficient to quarter, swap rate structure with to management, interest entered an our expense cost inflationary helped the has million year. the environment. Financing we the disciplined expenses contracts the of

for rate interest long-term aggregate. around blended X% debt was Our in

to to the combination capitalization The Our return program shareholders. demonstrate per share the We and remains our our to is. repurchase dividend committed $X.XX commitment payout continued remain as dividend. of quarter capital our

operator the the I turn to for call to Q&A. over Now like would the

Operator

Instructions] Jefferies. for question, will Daniel And go [Operator of our we to of the first Fannon line

Daniel Fannon

of both classes the have a maybe kind really below of the hoping appears been? you expand bit continuing seems like Can to and that of biggest or kind asset a bifurcate the saw of and bit. you in change I and or also have a improvement of April throughout bit what levels the where areas, I it environment. on maybe commentary improvement the was seen geographies then kind you Doug, July. It was more expand appreciate upon kind could be just

Douglas Cifu

Yes. Thank Dan. you,

replaced You're of you've lot Repetto because now a as the under questioner. Rich lead-off pressure

efforts Yes, institutional anyhow, months years. to I all decade. side, competitors, back So all talking that miss people over slowest Rich the was one But of April, anecdotally just question. his over to am on him getting we seen in a thank the for in the particularly and of have your

that catastrophes of had some of happening issues, a the better lot do do of United to I word with had macro think that were States. in bank lack to a the here regional for with

So performance well. Flow a most that a particularly certainly, And and is public in largest equities, we whatnot. particular, of making We've that XX, so market allowed reported the that our obviously, XX, Market second banks whatever, on called or it say and obviously slow. and trend comments, There's the metrics I well. big class, had difficult that July and second what and see it June which XX I seen can throughout trading side. slow through asset lot terms of drives of improvement. us an certainly progressed the then in quarter report performance very a seen XX to picked did including Traders the you somewhat highlight the in And almost as up Making improvement saw and Europe side. The saw are April that they've very and the only quarter. was just in in on my that an our very, kind in in quarter, And reporting. as Europe, very, June noted and as have we they continued. the company days of we in in was July, remarks of my quarter U.S. I were has It's and would

So particular, very we've say, and April, in an would was surprisingly in equities, I seen really, improvement. U.S. slow

Daniel Fannon

around income, commentary Great. your the That's I helpful. think mentioned fixed data the And some for you in quarter. of

about maybe -- you domestic side. in fixed your going of One your talk and making quarter active this an getting within income thinking that the announcement presence on about about peers forward? more that being market market had corporate opportunity more you're how Can

Douglas Cifu

Yes. No, and referring I firm, Securities. look, a I Citadel competitor news obviously, you're mean I mean, candid. great they're great a to to be think it was

terms Virtu and been on credit. other our MarketAxess -- active the TradeWeb partnering MarketAxess in counterparties, onboarding mostly all that We're year, I that you investment-grade as gives trading, validates and with a to all doing on Bloomberg going think it if will, and debt, developing disclosed thesis kind allow us a have of that market maker maker we've the things it our in expertise of full second market and distribution. venues and of and becoming like

a be good The or a like think will, credible of rates. that et is to liquidity can MarketAxess, improved credibility, either win as cetera. news counterparties distribution our TradeWeb, We've liquidity source we've provider if our and we improved buy-side that we through partners directly you

addition, rates on run. off the have both In and expanded our run capability in the we

primarily have XX credibility. TradeWeb. We're We firms those we and over and great scale to for rates, are enabled know and both that using distribution trading we as Bloomberg again, firms that us the mechanics agnostic give are

a And it's value. Again, these less we think our style. our well lot of maybe I'm engaged so and a of with platforms. it's than very and that on in days like marketplace lot seeing XX% personally where opportunity, and add part room market from competing because the think a early of X% can using done the of there's volume clients we've of of something always I the to I It's X%

just add rates that Citadel personnel of validates to our capital the area. reallocate made credit both can of So some X value decisions these that where that a we couple are and ago this will, years and if into from think we you frankly announcement marketplaces, we resources, and

Operator

for And JPMorgan. to Instructions] next Worthington question, [Operator Ken we line our from of will the go

Kenneth Worthington

the an market XXX making still far along equities terms the in maybe of road in options you participate that of option love the stock rollout the options? goal able how way Is effectively update type for where being single Virtu business for And terms you end business? is for client business in of are single do you in stock Would to in XXX, map.

Douglas Cifu

index SPI goal. I dramatic date was don't definitely X the were got relative it that dwarfed, making, noncustomer FTX if whatnot. single say can opportunity, and I I all both on options in is the It you I ask decision think not we've the validated they frankly in compete it, because you the question. mean -- these and for Good side of lot customer metrics frankly, and to I enormous But and because -- interest you from the a probably mean, market shift. people the venues terms end to been we've has the an shift customer what index distracted track -- customer mean the why smart to opportunity index that's institutional of what's seen not see on option a family as of happened. volumes and there what's some to our in options of guess and option of on can retail has a Yes. CBOE can the I that's frankly would side a because the first other know family. or been in has I that

Indian So it index because States. the in United in in point an primarily descended addressable the market huge in it here out and we so up that importance has and in family markets. the have would but road is is the in I business map, index do also certainly running the Japanese Asia,

we're we we and we'll such be going there's frankly, out opportunity it by in continue index time -- to such and market-making it suggest date, I in so a So our to family keep United a on be improve more there's continue because and come with opportunity that every pushing different to operational MEMX I date an options put the index to lot to capabilities on, don't the want because States. venues --

Operator

Chris of of Allen from line question next today is Our the Citi.

Christopher Allen

of historically, rates I you've centralized up impediments lot moving What's settlement getting right kind just just your of on And clearing, question to There's now, outlook rates. times. that in set there? on up this talked around is wanted the structure there? right bigger than improvement Dan's the to see then the to to talk build to just now, of follow business. market And speed about less you're a on longer-term X% in you of slowly What's getting because volume, business? level starting penetration terms the opportunity the

Douglas Cifu

treasuries. call on or of treasury and Yes. me clearing reporting something terms and an centralized reporting I'm say of relatively real-time chair the real-time earnings SEC TRACE of products or that do going you will hear for never in complement the to

marketplace. those positive, and SEC competition. I things of are that we think, undertaken, for and are very publicly supportive certainly, because I think All those this have those has of enhances it initiatives been the privately And

dominated I dealers. natural has little the even So XX in the were what is ago, I were efficiency think of changed bit a by big marketplace, marketplace and mean I that mean of ago that. the years largely X marketplaces years the these

smarter gotten the of terms alternative those. are seeking buy-side liquidity think of has I providers. in There dozens

the using ours. the great MarketAxess, with of And we are of bought have we i.e., so who Tradewebs the enable and credibility work always side. obviously, I should get to product, wheel, you business with buy Bloombergs world them those distributors of will, the credibility. -- our partners and now into a LiquidityEdge, the the I as distribution the well, partners it's us so give mean Chris, fight to to and if on

than -- in they no what cetera. our enable et in equities So do alert, can't providers. they XX different and liquidity and don't we It's business

for engaged we main it's So yesterday, and the in who key better, of to clients understand how the are, some I and distribution at terms counterparties on mean, world Tradewebs, who can the with the folks with then good markouts are, what channels MarketAxess' we getting pricing. were the response senior TradeWeb the get they're of this real-time looking the credibility just times. providing understanding Bloombergs,

very hundreds market dozens good counterparties. of of very and blocking it's and we're dozens the at, a very, competitors tackling making, hundreds with but It's of and of which marketplace competitive

market is the sifting and to what value the we're build that all out through offering doing. to provide So right

But the the ultimately now, XX to would in So on and in XX the realistic the be given nature not X, whether top like competitive TradeWeb top -- obviously, market. which we we're great. of that's right top or is but that in

scale we're fact think an gives I class. But multi-asset us our And the again, advantage. that

products the access being either expenses." these rates themselves ETF, competitive. prices the the so we as most can future obviously, to a our manifest And ourselves those we to always well. And in nice "that's of be in we manage extent, provider in saying, up So to have in we our tighten way are order marketplaces the that of X-sided pride efficient

the marketplace clearly This of offer. eminently different is build this but Virtu our again, is that think we it's to the a equities, So addressable kind XXX, by in just some than of is than U.S. how business. other product

Operator

[Operator Instructions] And of line Michael Stanley. question the next our of from is Cyprys Morgan

Michael Cyprys

We could over on types would on to customers hear you the or what I go you're to retail to the your maybe might able back driving next any a circle see quite think guys you're sounds other options? you activity? come provide is do on of hoping index lot that marketplace if -- you like elaborate I to if is, excited opportunity of the with of market activity that's characterize been set we to different how active. environments commentary strength sustainable the want And have color about color this the X? trading start index volumes was of And particularly But options there. where but across you're maybe what how you be or institutions into could seeing on sort think maybe do in what retail, It in? the you the sort year And side? it extent you

Douglas Cifu

better other question, they're, very that driving our exploration product, products. the guess, out trades is instruments folks use I like mean, to have think were cheaper instruments been these I the good Look, because the daily Yes. I'll hedging than That's sense give But and more exchanges credit, that at that it I Michael. there. a options the word I

volumes and drives interest So traders drive from this institutional both and traders. professional

and will these scale. that to the future and we we provides is I but folks and that hedgeable other don't a that's about. there near anytime ebbs how efficiency at mean be hats will that's So -- the I expect mean work, markets volumes, and creating flows change that in with done don't macro obviously, shift -- expect great off and what we're have instrument institutions a and the that all job CBOE that market

excited And that. so about we're

market of were couple give going ago, no, I run So over is this the validated we feel and right. they the be options lot me a a head folks is years our because going said, to where credit business to they and of beat and that the

products And very, so are very, the is fact those very our we business. to up and been has running that beneficial very and competitive -- in

of not it's I "customer" like is, terms there retail. are suitability what concerns. because, imagine obviously, mom-and-pop would flow In it's whether this

and probably that's the it's interest kind firm -- been you engagement. It's think based been that, smaller firms XX% customer big options and that's DASH folks that professional Tagging have focus has options really can It's smaller we noncustomer going focus not your customer continue but or we through in allocate that have we'll the like a that's terms more options I or and flow. of -- necessarily trading a And I the of accounts and of an our meaningful. that. come where aggregator aggregators. of flow like index firms firms, like focused end and them are the aggregator as front about energies. firms where for complex, from on FTX trading our with so retail And think that in as customer to that, act will

focused our energies. addressable So and that's that's significant. market, a we where It's attractive, very

Operator

is question Sandler. Moley today the next of from line of Patrick Our is Piper

Patrick Moley

maybe in the I those firm what question what if had opportunities. And saw going So forward? means the for contrast means just, maybe you relative that opportunities in, And wondering overall? earnings of opportunities first quarter second compare normalized environment Doug, then lower to the that you just the a volatility and given we're for power maybe quarter. the can was the I on internalization

Douglas Cifu

question, Good Yes. welcome and the to call.

shoes very, to As fill. Rich's successor, got large you very some

with we luck you. So and good forward look to to working you,

we various don't calls, disclose by what to advantage internalization on it mentioned and I it look are and historically -- but to rates competitive is, and to groups, continues your a our have firm. be it So answer key question, our this

we in were thought rates during opportunities with what Our quarter. the were line

And the desk, very down have the about et stock laying ETF our options single cetera, before with the cetera, line pace. we're were I've desk, I et so we hedging continues -- off examples, on what doing. very, pleased mean, given and at risk

I think the desk parcel equally culture that doing a so that. important, is of part technological a the widget we se, of the that in and widget is of a widget, and setup Virtu is sense and like capable have very per don't we're really

thing competitors -- is like our at least will Capital One that we we offering do with of -- double at-the-money I other flow. it's a point terms internal crossing what out our Virtu for in have can Virtu Markets, think business

obviously the Xx issuers other in point. desks offering, an lot have other institutions to for clients offer least believe being what What rate, internalization real we alacrity internalize and technological able in And future. with also key around our hopefully but a that's selling business our will is capital do, side, don't awful a has that more We of we competitors on on resonate of capabilities, research, our understanding and resonated business flow. the is both at So calendar. execution based do, on that example, are that and what with ATM our

excited continue in business be We about that particular, to very Patrick.

Operator

of Sachs. Blostein Goldman Our is line of question next today the Alex from

Alexander Blostein

X we income. hear on sort hand, in was could I you sheet on spend minute one the a of strategy guess, hoping fixed angles. from on I balance opportunities

we So balance sheet run And think the return to up coming do might impact? for picking the and sort down. of need capital if How the what capital you with then framework you that what that's leverage, business been down extent to at much road? that with secondly, obviously look means EBITDA

your So running all? reminder impact comfortable you debt to what of higher just And with? with does today, capital return level do EBITDA at again, maybe leverage framework a feel that

Joseph Molluso

of softer we more softer deploy expansive invested capital less X, a we planning those say, and from capital No. trailing reduced EBITDA in mean, there's right? Alex, amount fixed our a when returns look I for one, the And at environment, run our than capital profitability, of would so right, do that environment, and includes the within in a it of planned our in you intensive. little change unsurprisingly, are use -- going the income, That's that take kind deploy. return, to is right, we a on and There's Slide which capital business I in kind naturally, lower, that. I'll We but is use no basis. -- with Joe. -- more use we obligations, change. point don't the that prudent of trailing capital We are in the meaningful appropriately to in obviously, need of and for, of we there, look self-clear And brokers. our view. we no But environment we buffers amount prime of it's firm, kind numbers regulatory for terms the that's fixed terms one. or today. planned numbers And income

we of the of overall kind and of of higher I from leverage, impact terms the leverage management in the -- two, and Point a a of in the swaps terms think, from both were the yes standpoint very fortunate, timing a rates. muting look,

level we're keep debt. our allows So it updated with allows of slide us points back to flexibility dividend. in the very happy and to I've the overall shares quarter, at have to this here It us the the various buy

flow and the amortizations. punitive So got cash of refinanced required of 'XX. sweeps we early are more We of rid we kind in most --

comfortable on really focused is notional -- very, we're today. more we from Xx. the don't level It's We're it's with as at of of very So right X.Xx, it whether look -- a kind where and it debt, volatile business.

Operator

questions Thank queue you, further and in the we have today. no

this Virtu you all Financial Call. joining. will Quarter Conference So Thank Results the for Second XXXX conclude

a rest please day. You may have of your now and lines, lovely disconnect your

Virtu Financial (VIRT) 26 Jul 232023 Q2 Earnings call transcript