VIRT - Earnings call 3 2023 | Virtu Financial, Inc.

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Operator

Hello and welcome to Virtu Financial 2023 Third Quarter Results. My name is Kerry, and I'll be the conference operator for today. [Operator Instructions] I would now like to hand the call over to Andrew Smith from Investor Relations to begin. Please go ahead.

Andrew Smith

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

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

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

statements presently include are, indicated based forward-looking regarding forward-looking what in forward-looking a subject made statements, actual represent note may update to important First, available call from conditions becomes few and statements. belief this and Today's these that differ new financial to any Virtu's revise be call company's assumptions to company, statements future not on risks, undertake may is events may as outside therefore, do are reminders. information and to any current or our we which information is control. and It on materially the which forward-looking note that uncertainties, available. results the Please

to public you you our of report, release in and and factors in review the refer We description our to risk XX-K Form annual filings. contained disclaimers other press encourage

margin. GAAP During trading measures EBITDA including refer EBITDA income, adjusted measures, today's adjusted adjusted addition call, to in to adjusted and net may we certain non-GAAP net income,

uses equivalent of reconciliation material measures. referred financial the measures meaningful consult in deem to information a of information measures as to why not you'll website, and well to as as the portion with find reported well considered this of in supplemental non-GAAP superior be as These our management explanation additional to should with and how direct as earnings Investor non-GAAP GAAP. as measures as to accordance this on these the be we listeners We an term supplemental where as call GAAP to

turn Doug. the call over that, to with I'll And

Douglas Cifu

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

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

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

X% our business times as spread recently an per X global quarter. to to primarily see opportunity. an by environment Slide net million performance earned environment, in per at as trading the average typically our quarter. capture of that to scale our initiatives on X% Execution The have dissimilar overall quarter the well And compared Services we growth these million quarter. diversity. any rising thanks remain not day over prior like Periods day seen in reduced Making past reversion, in And highlights focused we that this our $X.X we most of income per underlies and enhancing and Virtu's what prior adjusted second was Market segment the rates are the quarter increase day, our characterized the of $X.X market in delivered while

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

to in which Making asset set. Market noncustomer quarter performed globally, relative opportunity business, the the Our classes liquidity across provides well

into organic including our Our initiatives, growth progress. Market continued make to Making options perform and meaningful expansion well

trading income XX% was the in day per $XXX,XXX of Our growth net quarter. from organic adjusted

had fixed our business. ATM did Virtu Capital our including an business, Block excellent Markets as ETF income Our business quarter

across all opportunities very the remain optimistic We growth about our initiatives.

trading net results averaged in adjusted the Services income the opportunity. the given On quarter, quarter, above market million general X% our per $X.X prior day third impressive per in day the decline about Execution side,

For the thanks much with our performed activity institutional rate of institutional these opportunity XXXX, in higher as its less remains VES markets, to as challenging Despite continued environment. investments become slow in year-to-date. well investors as have line quarter-over-quarter active

at strategy. a quarter back, our disciplined success and Taking long-term step I and results our look year-to-date third the of overall see

$X.XX in We realize continue us to a hire cost, which XX% business, report around in enabled EBITDA challenging remaining and environment. a to and respectable our make per investments share margin disciplined

significant any Our and tensions uncertainty. focus success and in businesses of growth us environment, global volatility enhancing including spikes in the continued volumes economic on macro for our our increasing positions well core initiatives and

briefly has performed In business XXXX, the opportunity record declining our Options initiatives. quarter. coming growth Options, well a our in on Touching a set against off

We across complex. venues including expand continue names index and addition geographies, to the in single to

quarter. Our third the ETF was Block business meaningfully in up

We and rates. our income in expand continue to in including both credit offering more cover more fixed to products regions,

Making seeing spot our in the in as the Market we the to We ETFs moves the be crypto States. in days approval business uptick inevitable XX are United of an crypto will SEC what also closer last think

to Capital Virtu activity business as primary had Markets excellent an began quarter to a capital. market of return use our the financing issuers our addition, number raise and service to In

years focused of reject SEC litigation, and customer Virtu's accessed ended ITG predating businesses. The the internal SEC's Suffice that SEC information to the information detailed assure we published. the in have is any that information by this a notice the to civil already X.X and the we with I add Virtu's to much the inappropriately allegations. that litigation not was any barriers. say, ever ago, not is do does completely have integration not Finally, likely historical and materials you'll related brought supplemental period

client engaged have We not our many and with observed news, clients about engagement. the have to of any impact we

different been general try And this relevant certainly a under circumstances. proportionate facts rule, could avoid litigation. and achieved As a the legal the we settlement case, in given to precedence, commercial have

whether structure and reform, commission disclosures litigation. as the seems increasingly consolidated market or other ETFs, actions of fee approach sad to are further equity and the matters their seems funding private be it trend it such equally or litigious However, issues the and trail inviting crypto that unfortunate serious audit the involves

Virtu alone not this trend. So is unfortunate in

turn now Joseph? over about to the quarter. who provide details and it additional Sean, will Joe some I'll

Joseph Molluso

you, Thank Doug.

expenses of and expenses, capital. the think is performance months Turning we of ended inflationary solid with to this year. On a year million, expenses environment. first in ahead X this We operating cash X.X% the of $XXX last

ratio the months end at compensation for XX% XXXX, which range. cash upper first of Our our historical the X is is of

year recruiting while to we and market in and were building history, X.X% compensation talent. manage data. expenses Consistent to for retaining and drive noncompensation expenses owing slightly world-class increases and with Other our processing new data discretionary out and with in expectations. versus headcount for price profitability line up Virtu's up investment businesses our will shareholders infrastructure were last Communications

annualized Other exchange due year. up bit, a favorable expenses primarily in basis an adjustments prior the on to are foreign

invested remained of from very Turning billion to a standpoint. debt capital management. billion $X.X to On trading this range that for year. $X Slide capital and long-term XX, capitalized well see capital has remain you a within our could We

annual could which when that see variable positioned steady capitalize has on they standpoint long well remain payout to $X.XX dividend, for have and volatile and the our X results remained be we steadily our able public also term. as paid more despite appear. markets over liquidity and from We you our now maintained we'll a We years,

In X.X the in for million approximately addition, $XX we shares third repurchased million quarter.

open company of count Our call shares million is our of And XX.X financial billion. repurchased to we have million your share with questions. it issuances, repurchases Sean our over period XX% for before total program. through review end now new our and repurchases the to over I'll brings years to including turn beginning X that, shares This $X in net to XXX.X since we details repurchase October, the share the

Sean Galvin

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

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

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

we X, summary a of expense Slide our provide On operating results.

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

third We operating continue our efficient management, and an expense maintain during expenses XXXX. Financing the of control interest structure to environment. quarter which cost $XX disciplined for us to million inflationary has expense was the helped

share repurchase long-term $X.XX benefit our commitment dividend to of prior year, our the this entered for contracts to our shareholders. interest With demonstrates quarter X% around We interest remain return swap debt the with was committed that into and combined in our aggregate. per we our blended the rate in our continued to program, rate capital

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

Operator

[Operator question from Instructions] the comes first Ken Worthington The of line on JPMorgan.

Kenneth Worthington

wanted in product particularly dig Block ETF Options to Making Market crypto. I expansion, into

I hopefully X So guess, to X parts question.

region Block, add added. year? products. What you new added been mentioned did ETF and products many this a how regions new for maybe you So new you And new have

profit to And Options, ETF you My it asset For expect is, new the possible crypto, lastly, you increases not then Bitcoin stand year potential where from right opportunities an add single to would be opportunity. exponentially, now? on names to And size this class, now? understanding the do as where is overlapping in linearly. a

walk could So as well? that through us you

Douglas Cifu

Yes. Great.

about So then marketplace. I'll disruption order mildly started which and them other talking had first in let bad it FTX better. about the years put ago. unfortunately, we actors with market maybe remember of a to handle And But let in some since to lot the me X crypto, of try the talk in reverse those had me

And significant the so interest is in There still class. declined, you as dramatically are asset volumes aware.

if the by that with happened corpus SEC You volume, going can I in would the to of a will, approval, of understand given amount ETFs influx the like fund the drop the bitcoin of be, its dead SEC, of XX, significant of that the is I up. that respect in there's sort scale so if does are to in sometime think, look January Court, assume the between District you which at interest you queued in amount what date kind loss the and closed-end and and rate today it

them. I of think there's to XX XX

because I of almost one, is, on it think et they that the trading of I out fluidity going if and kind Schwab of with of BlackRock, a these of once kind the know fee, within to there's the [ proposals amount AP names, a funds. on of that, a those people other say, whatever they'll price to will centrally XX. cetera, of just Whatever of national product or of be And ETFs the part an of natural that to offset. big an balloon look screen on traded each moved exchange Some But were is significant people I or be get a okay, is ]. listed an is of It's kind it's can the table, ETF, cleared. a and security product the effect price we that from will lower air have Ethereum move Bitcoin all letting another migrate, that. that's a it's closed-end fund will, in you portfolio are the think the And at or

we a know closing be significant retail that's and get institutional in a have going we proper then a real up price, environment, what people are there's setting for. see cetera, regulatory I going not shenanigans to we're you even can and et volumes, a increase to because think And

to [ we've Schwab create with clearing you In Citadel, would some custody and execution. know, which and a front called be EDX partnered others Fidelity a and platform back addition, as solution ] and through

which there by spot will great be owned CBOE, a is ErisX, So emerge that that to will addition in platform. now that, venues is

Wild a of So dealt will marketplace we bit there volumes, West and historically. the know have a [indiscernible] understand we real be of that little as said, that with and we'll will see kind unlike

investments the positioned well of that to this and why we're that's very did asset years class. market maker a in I'm couple a I think very significant we happy made So be we ago,

talking regard ETF about With been to again, something last for couple of Block, years. this the we've is

in in domestic significant Obviously, large both the of think flow really competitors, on pricing We a In work the and done better of terms there's Europe, terms others. We've all region. year and fixed international focused regions, traders there's we've and which opportunities. in income number of of hard products gotten we've this products, that at particular. products,

because have we relationships region importantly, are who marketplace on to U.K. know platforms, in connectivity of the the that right? but ITG-Virtu acquisition, end in both ITG in distribution have we We the because and both So users of continent. the more that the RFQ

distribution have well. there we So as

So we're very excited about that.

in a I talked Flow synergy focus in finally, also first us that to And room rates excellent -- about name be, big with to to of think and a index our we being between just have Citadel volumes information time do in what we've enables a the ], last to credit maker fixed dropped in being there's approach As there's really products. for And we in those have market some Jane, are off. a contributor options validated, day market our we've and significant about we index like significantly the the with doing the products Obviously, an been single ETF lot respect [ do think growth then incumbents somewhat job, X there, cetera, income regard explosion saw index of but been will, that's et I for options, think, if to volumes. or the big attack family. Virtu. maker you

trading to. will so. probably are what's in shift point, is we'll we brokers not with retail mind. at start -- taking flow directed given single XXXX, happened probably Whether we a we continue It's of in something question from to not not priority it's open Again, volumes, my name or significant do the this get but an still options,

Operator

Chris The next Allen Citi. line the comes from question of on

Christopher Allen

It's on be follow-ups going a Ken to question. only some got X-quarter. I've

Just on side days. noted quarter, it rate was on last very you build-out the particular, the early in

lot index clients a that right declining were of rev overall to And during you while set just doing on the strong. a XX% volumes Was quarter. environment specifically on the X% front? then how on You're X% function about focus for update pretty about volume realized a Options not of of Options, platform. the And opportunity great, talked were Any are thinking your where that volatility and volumes you now? declining

Douglas Cifu

question. great take in a We again That's Yes. them reverse order.

think in volatility, SPX we market were if I more of to options realized of be big kind nailed in outperformed family. has that and in you per did decline but quarter. terms will, grown like being up, volumes contract during we Index were opportunity and terms rate the share it. of expecting you in our said, the specific That what considerably and

X player now in are which that Options, ago. We have meaningful a been like statement single-digit would is a I years reluctant to make

I'm the So there. with very, very growth pleased

decent Virtu mention generating Japan, now not like both in in are individually would things material We years not which thought again, India X I in ago. and but P&L to have sense the Asia, in

pleased the very, there. with very progress I'm have we So made

index see that options macro family. kind greatest And it just I again, the Chris. But interest I'm not come. build We in the like single do we of and hope predictor, like day like and a will in it continued

continue I the between see macro to with interest central activity. Again, volatility world having will increased and to to conflict we'll options with events that So think continue I around banks increase think an and be and uncertainty global rates, focus. in deal our

and kind to You the over month week options shift see to products VIX themselves family, things like intraday day gone to can and traders the from enable if like that. that's expose that single and you like and of other will, volatilities

second it. was What had You forgot another the question? part? I

products. X SEC few an of, proposal have an that we strategies think It's right of right? see it's centralized We've SEC we Yes, a got, That to been actually a today clearing. distribution. that Obviously, build-out. we of of is supportive now. doesn't clearing We've treasury Virtu-style interesting one things the have centralized in There would the love connectivity. obviously, and going typical got rates is so about market, is the question market is really

great grown clients, reasonable the which we prices have then are come feel have methodically. out i.e., established share credible plan, build significant a we of of and up There's and can that is. it So market connectivity product, you good a that technology, year doing kind game a a we've lot significant figure with to we've top about, product what the distribution connectivity substantial to and go that's is -- with now the or amounts mechanism team, again, counterparties of competitive this

Obviously, large -- that's a we dealers, go a take go or ECM this [ through progress on we made to we've ] think of lot marketplace where will is feeds but also direct in that XXXX. and that clients

Operator

Fannon question next of Our from Jefferies. Dan comes

Daniel Fannon

on expenses. My question is

about should the subdued, then about reasonable and that both should revenue would help with think comp is think also next think associated the just any environment. we framework comp cash looking as the framework how be environment, allocation and other as which a fourth this inflation that somewhat at still could we expense and/or year, we quarter or in true-up noncomp So for just about with you great. us And

Joseph Molluso

I'll Look, take well. the order them think Joe. I it's Dan, mean that in reverse I expenses. non-comp as

I everything that everything low a environment all data. especially We pretty I market a year. We kind that our on much at if up And of think next all where equal. expect things right, this And been would same increases, the the there's good year, and in item, other dollars million of subscriptions. a that's at of I touch connectivity, grow think of line data few this price said everyone's look I think outcome. you work always kind single-digit a plan, market they're than down lot infrastructure Maybe monitor every our we higher to our rate. day, were do that to going we've and Bloombergs a

on had last XXXX. we some expenses, On adjustments. exchange keeping of type of were just favorable year expenses. where kind We it's foreign Again, the the lights other fortunate

it's the the the is increase constant again, comp, of multiyear monitor space look, a I So basis. acquisitions. I we professional are adjustments. more foreign in fees, those think from we than anticipate And or on couple year a to percents. of year this the of dollar on whether slightly large less integrations two have it a professional exchange year-over-year addition And again, And same, it's then closely, looks or past up in -- lot whether would very fees emerged

the the restocked have Our masks headcount has and is relatively steady over that what remained X really pool talent years. we past

really, terms we've always talent, base shop, in out We to payout ourselves the And held our not the in to of employee -- that's remain. think, terms that's it's and it's going capabilities. and upgraded of going I as a way way

the it's So in year need say what cash do think I our comp pay to people. adequately coming comfortable a from right? we're that, very to in, We mid-XXs would ratio this with standpoint, we

we a years. I hire the couple did lot of think quite in people of past

think it I in we way. disciplined did a

fortunate a our in we're with position think to it again, recruiting comp ratio continue I I So have issue where no and is.

right? a if If of at happy the it of then with times that's going that pendulum we're look -- the think you kind be look back less -- of think I I was as to more So markets, want very we're to you kind mid-teens, couple to that. years, in subdued from boom

Operator

Sachs. Blostein question comes next The Goldman from of Alex

Alexander Blostein

Quick financial question for you.

around is So Xx debt EBITDA. to back at leverage the ratio

to feeling of repurchases what at it's this But continue the up to share how here not kind be creeping that your the trading been. with around. you obviously, bounce so the So back about of kind this respect ability it's environment been if to pace continues business environment are will best for

Joseph Molluso

analysis different shares detailed of income. our provide at Look, I pretty we ability trading think repurchase levels to of a

everything, to other our at the time, use questions ask absent X shares, answer So repurchasing people right? is are looking of at any close to acquisitions? this to is level. shares but excess haven't across value I repurchase right, we for really separate we are think The our come cash all we there, us we that our look alternative at other represents them, there's going anything And the

pay And think to excess to going invest in extent cash, initiatives, as dollar expenses, we pay it's of So I be people, I our the deployed. said, growth that's our have our how after et after, we the cetera. that's

So one of I think kind of that's part question. the

at cheap about and when interest Xx, we debt. we a the had don't we We've I standpoint. mean, early did answer feel ourselves ratio, quantum X.XXx, our the it that fortunate keep we that were that question possible. debt. We very different with. want optimize like the cost cheap On it's I comfortable happy very total worried try is quantum rate -- debt possible. environment to we're always change pretty make really environment, is, as X.Xx. We got does and in We we And are And as look rate whether that we're this level. reset really. with comfortable a that the XXXX But But look that not our ask as swaps obviously. leverage from on the of to it to in always we're we'll as

Operator

from comes Morgan question Cyprys next The Michael of Stanley.

Michael Cyprys

drill to earlier your commentary. some index of options on down to Wanted

extent the see view options as future? evolution a E-mini like of sustainable replacement just you're you that curious to of these the the use do level what customer and how for, index marketplace types all emerging to on seeing evolve. different of you being cases? activity are that, the extent how this in options index you related of used also SPX that are to Just E-mini And futures, what seeing option then the say, here, as terms this curious Just evolution

Douglas Cifu

provisioning. to we Yes, are any because it liquidity products, It's of kind it's disparage don't the -- fascinating along we're the to -- you which with all and I people sort right of product of -- or whatnot sort a is And I'm not again, get nailed and great of question. think been Switzerland creating trying watch. exchanges of I

in be innovation and provides volatility, a way, that if you leverage, a of and it the So at market, you it's you people will, I to the said, manage volatility it's have affordable options it's whatnot. innate and look, want very think acceptable. looked speculative we and good encourage But really if good on product to way

you what you in a just equities So if complements well. I to et And see it [ think cetera. byproducts, them it world's is product, ] and complementary will, very futures

marketplace. it the has really So resonated with

investors. flexibility it stripes all of I think adds to traders,

At a So debate and between institutional to or involved Sachs investors now it's as on the big clearly, again, in all going that -- that of of out. it huge JPMorgan let service to Goldman product. not, there's we are because guys end day, going that, product. care we users fight as using get not spectrum don't a whether the of the of both retail I'm the sides and of the continuum traders

So want We the the it that hedge engage use market to express an expands to either interest provides we think and rest the lot. of like access in investors and the volatility product it portfolio. to a or

been So obviously, for healthy I a venue is it's a marketplace. think And really the perspective. from market development competitive the options incredibly

I missed wrong. I XXth. XX I have count, Maybe be could we exchanges. options last the At believe

to provide is there distribute and call the we for Virtu to that if between fantastic relate is then providing inter-connectivity, venues. circus work, that easiest understanding those venues an work off attractive a in Virtu. That's in you products, you technologies, the if will, and not because structure market kind of understanding DNA, the will, of XXX, can world for to So but these form the the a That's how in through of trick service which difference makers like pull technology that's understanding need various these within interact they all we price plan market making our of various venues. XXX products, related that how

that very about United evolved the how to States. continue we So be in excited has

index countries our mentioned Thank right I approach India you there for observation. now, value namely have can we we scale, attractive India But and global products and that question, as are that -- like to other Michael. Japan. as well scope found and earlier, namely the similar in And provide good with

Operator

questions. Thank currently you. have We no further

Thank So all this conference for today's concludes joining. you call.

lines. your disconnect now may You

Douglas Cifu

Thank you, everyone.

Virtu Financial (VIRT) 2 Nov 232023 Q3 Earnings call transcript