Virtu Financial, Inc. (NASDAQ: VIRT), a leading provider of
financial services and products that leverages cutting edge
technology to deliver innovative, transparent trading solutions to
its clients and liquidity to the global markets, today
reported results for the third quarter ended September 30, 2023.
Third Quarter 2023:
- Net income of $117.6 million;
Normalized Adjusted Net Income1 of $74.7 million
- Basic and diluted earnings per
share of $0.63; Normalized Adjusted EPS1 of $0.45
- Total revenues of $630.2 million;
Trading income, net, of $316.1 million; Net income Margin of 18.7%2
- Adjusted Net Trading Income1 of
$298.0 million
- Adjusted EBITDA1 of $139.5 million;
Adjusted EBITDA Margin1 of 46.8%
- Share buybacks of $48.8 million, or
2.7 million shares, under the Share Repurchase Program3
The Virtu Financial, Inc. Board of Directors
declared a quarterly cash dividend of $0.24 per share. This
dividend is payable on December 15, 2023 to shareholders of
record as of December 1, 2023.
Note 1: Non-GAAP financial measures. Please see
"Non-GAAP Financial Measures and Other Items" for more
information.Note 2: Calculated by dividing Net income by Total
revenueNote 3: Shares repurchased calculated on a settlement date
basis.
Financial Results
Third Quarter 2023:
Total revenues increased 12.3% to $630.2 million for this
quarter, compared to $561.0 million for the same period in 2022.
Trading income, net, decreased to $316.1 million for the quarter
compared to $397.4 million for the same period in 2022. Other, net
increased to $76.1 million for this quarter compared to ($1.0)
million for the same period in 2022. Net income totaled $117.6
million for this quarter, compared to net income of $79.9 million
in the prior year quarter.
Basic and diluted earnings per share for this
quarter were $0.63, compared to a basic earnings per share of $0.38
and diluted earnings per share of $0.37, for the same period in
2022.
Adjusted Net Trading Income decreased 10.0% to $298.0 million
for this quarter, compared to $331.1 million for the same period in
2022. Adjusted EBITDA decreased 22.7% to $139.5 million for this
quarter, compared to $180.6 million for the same period in 2022.
Each of these metrics excludes Other, net.
Normalized Adjusted Net Income, removing
one-time and non-cash items, decreased 30.0% to $74.7 million for
this quarter, compared to $106.8 million for the same period in
2022.
Assuming all non-controlling interests had been
exchanged for common stock, and the Company’s Normalized Adjusted
Net Income before income taxes was subject to corporation taxes,
Normalized Adjusted EPS was $0.45 for this quarter, compared to
$0.61 for the same period in 2022.
Operating Segment
Information
The Company has two operating segments: Market
Making and Execution Services; and one non-operating segment:
Corporate.
Market Making principally consists of market
making in the cash, futures and options markets across global
equities, fixed income, currencies and commodities. As a market
maker, the Company commits capital on a principal basis by offering
to buy securities from, or sell securities to, broker dealers,
banks and institutions.
Execution Services comprises agency-based
trading and trading venues, offering execution services in global
equities, options, futures and fixed income on behalf of
institutions, banks and broker dealers. The Company also provides
proprietary technology and infrastructure, workflow technology, and
trading analytics services to select third parties. The segment
also includes the results of the Company's capital markets
business, in which the Company acts as an agent for issuers in
connection with at-the-market offerings and buyback programs.
Corporate contains the Company's investments, principally in
strategic trading-related opportunities, and maintains corporate
overhead expenses.
The following tables show the trading income, net, total
revenues and Adjusted Net Trading Income by segment for the three
and nine months ended September 30, 2023 and 2022.
Total revenues by segment(in thousands,
unaudited)
|
Three Months Ended September 30, 2023 |
|
Three Months Ended September 30, 2022 |
|
MarketMaking |
|
ExecutionServices |
|
Corporate |
|
Total |
|
MarketMaking |
|
ExecutionServices |
|
Corporate |
|
Total |
Trading income, net |
$ |
310,523 |
|
$ |
5,562 |
|
$ |
— |
|
$ |
316,085 |
|
$ |
392,496 |
|
$ |
4,887 |
|
$ |
— |
|
|
$ |
397,383 |
|
Commissions, net and
technology services |
|
6,343 |
|
|
103,933 |
|
|
— |
|
|
110,276 |
|
|
10,687 |
|
|
110,299 |
|
|
— |
|
|
|
120,986 |
|
Interest and dividends
income |
|
124,803 |
|
|
2,890 |
|
|
— |
|
|
127,693 |
|
|
43,446 |
|
|
185 |
|
|
— |
|
|
|
43,631 |
|
Other, net |
|
75,682 |
|
|
68 |
|
|
360 |
|
|
76,110 |
|
|
1,257 |
|
|
4,228 |
|
|
(6,441 |
) |
|
|
(956 |
) |
Total
Revenues |
$ |
517,351 |
|
$ |
112,453 |
|
$ |
360 |
|
$ |
630,164 |
|
$ |
447,886 |
|
$ |
119,599 |
|
$ |
(6,441 |
) |
|
$ |
561,044 |
|
|
Nine Months Ended September 30, 2023 |
|
Nine Months Ended September 30, 2022 |
|
MarketMaking |
|
ExecutionServices |
|
Corporate |
|
Total |
|
MarketMaking |
|
ExecutionServices |
|
Corporate |
|
Total |
Trading income, net |
$ |
1,021,179 |
|
$ |
13,585 |
|
$ |
— |
|
|
$ |
1,034,764 |
|
$ |
1,299,117 |
|
$ |
16,501 |
|
$ |
— |
|
$ |
1,315,618 |
Commissions, net and
technology services |
|
22,677 |
|
|
318,546 |
|
|
— |
|
|
|
341,223 |
|
|
30,881 |
|
|
381,100 |
|
|
— |
|
|
411,981 |
Interest and dividends
income |
|
300,086 |
|
|
7,830 |
|
|
— |
|
|
|
307,916 |
|
|
95,221 |
|
|
214 |
|
|
— |
|
|
95,435 |
Other, net |
|
77,580 |
|
|
84 |
|
|
(4,171 |
) |
|
|
73,493 |
|
|
1,825 |
|
|
4,525 |
|
|
37,660 |
|
|
44,010 |
Total
Revenues |
$ |
1,421,522 |
|
$ |
340,045 |
|
$ |
(4,171 |
) |
|
$ |
1,757,396 |
|
$ |
1,427,044 |
|
$ |
402,340 |
|
$ |
37,660 |
|
$ |
1,867,044 |
Reconciliation of trading income, net to
Adjusted Net Trading Income by operating segment(in thousands,
unaudited)
|
Three Months Ended September 30, 2023 |
|
Three Months Ended September 30, 2022 |
|
Market Making |
|
Execution Services |
|
Corporate |
|
Total |
|
Market Making |
|
Execution Services |
|
Corporate |
|
Total |
Trading income, net |
$ |
310,523 |
|
|
$ |
5,562 |
|
|
$ |
— |
|
$ |
316,085 |
|
|
$ |
392,496 |
|
|
$ |
4,887 |
|
|
$ |
— |
|
$ |
397,383 |
|
Commissions, net and
technology services |
|
6,343 |
|
|
|
103,933 |
|
|
|
— |
|
|
110,276 |
|
|
|
10,687 |
|
|
|
110,299 |
|
|
|
— |
|
|
120,986 |
|
Interest and dividends
income |
|
124,803 |
|
|
|
2,890 |
|
|
|
— |
|
|
127,693 |
|
|
|
43,446 |
|
|
|
185 |
|
|
|
— |
|
|
43,631 |
|
Brokerage, exchange, clearance
fees and payments for order flow, net |
|
(101,077 |
) |
|
|
(22,168 |
) |
|
|
— |
|
|
(123,245 |
) |
|
|
(147,346 |
) |
|
|
(21,523 |
) |
|
|
— |
|
|
(168,869 |
) |
Interest and dividends
expense |
|
(132,523 |
) |
|
|
(279 |
) |
|
|
— |
|
|
(132,802 |
) |
|
|
(61,019 |
) |
|
|
(970 |
) |
|
|
— |
|
|
(61,989 |
) |
Adjusted Net Trading
Income |
$ |
208,069 |
|
|
$ |
89,938 |
|
|
$ |
— |
|
$ |
298,007 |
|
|
$ |
238,264 |
|
|
$ |
92,878 |
|
|
$ |
— |
|
$ |
331,142 |
|
|
Nine Months Ended September 30, 2023 |
|
Nine Months Ended September 30, 2022 |
|
Market Making |
|
Execution Services |
|
Corporate |
|
Total |
|
Market Making |
|
Execution Services |
|
Corporate |
|
Total |
Trading income, net |
$ |
1,021,179 |
|
|
$ |
13,585 |
|
|
$ |
— |
|
$ |
1,034,764 |
|
|
$ |
1,299,117 |
|
|
$ |
16,501 |
|
|
$ |
— |
|
$ |
1,315,618 |
|
Commissions, net and
technology services |
|
22,677 |
|
|
|
318,546 |
|
|
|
— |
|
|
341,223 |
|
|
|
30,881 |
|
|
|
381,100 |
|
|
|
— |
|
|
411,981 |
|
Interest and dividends
income |
|
300,086 |
|
|
|
7,830 |
|
|
|
— |
|
|
307,916 |
|
|
|
95,221 |
|
|
|
214 |
|
|
|
— |
|
|
95,435 |
|
Brokerage, exchange, clearance
fees and payments for order flow, net |
|
(323,868 |
) |
|
|
(67,370 |
) |
|
|
— |
|
|
(391,238 |
) |
|
|
(401,982 |
) |
|
|
(74,253 |
) |
|
|
— |
|
|
(476,235 |
) |
Interest and dividends
expense |
|
(340,954 |
) |
|
|
(1,942 |
) |
|
|
— |
|
|
(342,896 |
) |
|
|
(149,401 |
) |
|
|
(3,842 |
) |
|
|
— |
|
|
(153,243 |
) |
Adjusted Net Trading
Income |
$ |
679,120 |
|
|
$ |
270,649 |
|
|
$ |
— |
|
$ |
949,769 |
|
|
$ |
873,836 |
|
|
$ |
319,720 |
|
|
$ |
— |
|
$ |
1,193,556 |
|
Financial Condition
As of September 30, 2023, Virtu had $726.4
million in cash, cash equivalents and restricted cash, and total
long-term debt outstanding in an aggregate principal amount of
$1,805.4 million.
Share Repurchase Program
Since inception of the program in November 2020 through
settlement date October 31, 2023, the Company repurchased
approximately 42.2 million shares of Class A Common Stock and
Virtu Financial Units for approximately $1,083.7 million. The
Company has approximately $136.3 million remaining capacity for
future purchases of shares of Class A Common Stock and Virtu
Financial Units under the program.
Earnings Conference Call Information
Virtu Financial will host a conference call to
review its third quarter 2023 financial performance today,
November 2nd, at 8:00 a.m. ET. Members of the public may
listen to the conference call through an audio webcast through the
Investor Relations section of the firm’s website
ir.virtu.com/investor-relations.
Website Information
We routinely post important information for
investors on the Investor Relations section of our website,
ir.virtu.com/investor-relations and also from time to time may use
social media channels, including our Twitter account
(twitter.com/virtufinancial) and our LinkedIn account
(linkedin.com/company/virtu-financial), as an additional means of
disclosing public information to investors, the media and others
interested in us. It is possible that certain information we post
on our website and on social media could be deemed to be material
information, and we encourage investors, the media and others
interested in us to review the business and financial information
we post on our website and on the social media channels identified
above, in addition to following our press
releases, SEC filings, public conference calls,
presentations and webcasts. The information contained on, or that
may be accessed through, our website and our social media channels
is not incorporated by reference into, and is not a part of, this
document.
Non-GAAP Financial Measures and Other Items
To supplement our unaudited condensed consolidated financial
statements presented in accordance with generally accepted
accounting principles ("GAAP"), we use the following non-GAAP
measures of financial performance:
- "Adjusted Net Trading Income", which is the amount of revenue
we generate from our market making activities, or trading income,
net, plus commissions, net and technology services, plus interest
and dividends income and expense, net, less direct costs associated
with those revenues, including brokerage, exchange, clearance fees
and payments for order flow, net. Management believes that this
measurement is useful for comparing general operating performance
from period to period. Although we use Adjusted Net Trading Income
as a financial measure to assess the performance of our business,
the use of Adjusted Net Trading Income is limited because it does
not include certain material costs that are necessary to operate
our business. Our presentation of Adjusted Net Trading Income
should not be construed as an indication that our future results
will be unaffected by revenues or expenses that are not directly
associated with our core business activities.
- "EBITDA", which measures our operating performance by adjusting
Net Income to exclude financing interest expense on our long-term
borrowings, debt issue cost related to debt refinancing,
prepayment, and commitment fees, depreciation and amortization,
amortization of purchased intangibles and acquired capitalized
software, and income tax expense, and "Adjusted EBITDA", which
measures our operating performance by further adjusting EBITDA to
exclude severance, transaction advisory fees and expenses,
termination of office leases, charges related to share based
compensation and other expenses, which includes reserves for legal
matters, and Other net, and “Adjusted EBITDA Margin”, which
compares Adjusted EBITDA to Adjusted Net Trading Income.
- “Normalized Adjusted Net Income”, “Normalized Adjusted Net
Income before income taxes”, “Normalized provision for income
taxes”, and “Normalized Adjusted EPS”, which we calculate by
adjusting Net Income to exclude certain items including gains and
losses from strategic investments and the sales of businesses, and
other non-cash items, assuming that all vested and unvested
non-voting common interest units in Virtu Financial LLC have been
exchanged for shares of our Class A common stock, and applying an
effective tax rate, which was approximately 24%.
- “Adjusted Operating Expenses”, which we calculate by adjusting
total operating expenses to exclude severance, share based
compensation, reserves for legal matters, termination of office
leases, connectivity early termination and write-down of
assets.
Adjusted Net Trading Income, EBITDA, Adjusted
EBITDA, Adjusted EBITDA Margin, Normalized Adjusted Net Income,
Normalized Adjusted Net Income before income taxes, Normalized
provision for income taxes, and Normalized Adjusted EPS and
Adjusted Operating Expenses are non-GAAP financial measures used by
management in evaluating operating performance and in making
strategic decisions. Additional information provided regarding the
breakdown of Total Adjusted Net Trading Income by category is also
a non-GAAP financial measure but is not used by the Company in
evaluating operating performance and in making strategic decisions.
In addition, these non-GAAP financial measures or similar non-GAAP
measures are used by research analysts, investment bankers and
lenders to assess our operating performance. Management believes
that the presentation of Adjusted Net Trading Income, EBITDA,
Adjusted EBITDA, Adjusted EBITDA Margin, Normalized Adjusted Net
Income, Normalized Adjusted Net Income before income taxes,
Normalized provision for income taxes and Normalized Adjusted EPS
provide useful information to investors regarding our results of
operations because they assist both investors and management in
analyzing and benchmarking the performance and value of our
business. Adjusted Net Trading Income, EBITDA, Adjusted EBITDA,
Adjusted EBITDA Margin, Normalized Adjusted Net Income, Normalized
Adjusted Net Income before income taxes, Normalized provision for
income taxes and Normalized Adjusted EPS provide indicators of
general economic performance that are not affected by fluctuations
in certain costs or other items. Accordingly, management believes
that these measurements are useful for comparing general operating
performance from period to period. Furthermore, our credit
agreement contains tests based on metrics similar to Adjusted
EBITDA. Other companies may define Adjusted Net Trading Income,
Adjusted EBITDA, Adjusted EBITDA Margin, Normalized Adjusted Net
Income, Normalized Adjusted Net Income before income taxes,
Normalized provision for income taxes and Normalized Adjusted EPS
differently, and as a result our measures of Adjusted Net Trading
Income, Adjusted EBITDA, Adjusted EBITDA Margin, Normalized
Adjusted Net Income, Normalized Adjusted Net Income before income
taxes, Normalized provision for income taxes and Normalized
Adjusted EPS may not be directly comparable to those of other
companies. Although we use these non-GAAP financial measures as
financial measures to assess the performance of our business, such
use is limited because they do not include certain material costs
necessary to operate our business.
Adjusted Net Trading Income, EBITDA, Adjusted EBITDA, Normalized
Adjusted Net Income before income taxes, Normalized provision for
income taxes, Normalized Adjusted Net Income and Normalized
Adjusted EPS should be considered in addition to, and not as a
substitute for, Net Income in accordance with U.S. GAAP as a
measure of performance. Our presentation of Adjusted Net Trading
Income, EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Normalized
Adjusted Net Income, Normalized Adjusted Net Income before income
taxes, Normalized provision for income taxes and Normalized
Adjusted EPS should not be construed as an indication that our
future results will be unaffected by unusual or nonrecurring items.
Adjusted Net Trading Income, Normalized Adjusted Net Income,
Normalized Adjusted Net Income before income taxes, Normalized
provision for income taxes, Normalized Adjusted EPS and our
EBITDA-based measures have limitations as analytical tools, and you
should not consider them in isolation or as substitutes for
analysis of our results as reported under U.S. GAAP. Some of these
limitations are:
- they do not reflect every cash expenditure, future requirements
for capital expenditures or contractual commitments;
- our EBITDA-based measures do not reflect the significant
interest expense or the cash requirements necessary to service
interest or principal payment on our debt;
- although depreciation and amortization are non-cash charges,
the assets being depreciated and amortized will often have to be
replaced or require improvements in the future, and our
EBITDA-based measures do not reflect any cash requirement for such
replacements or improvements;
- they are not adjusted for all non-cash income or expense items
that are reflected in our statements of cash flows;
- they do not reflect the impact of earnings or charges resulting
from matters we consider not to be indicative of our ongoing
operations; and
- they do not reflect limitations on our costs related to
transferring earnings from our subsidiaries to us.
Because of these limitations, Adjusted Net Trading Income,
EBITDA, Adjusted EBITDA, Normalized Adjusted Net Income before
income taxes, Normalized provision for income taxes, Normalized
Adjusted Net Income and Normalized Adjusted EPS are not intended as
alternatives to Net Income as indicators of our operating
performance and should not be considered as measures of
discretionary cash available to us to invest in the growth of our
business or as measures of cash that will be available to us to
meet our obligations. We compensate for these limitations by using
Adjusted Net Trading Income, EBITDA, Adjusted EBITDA, Normalized
Adjusted Net Income before income taxes, Normalized provision for
income taxes, Normalized Adjusted Net Income and Normalized
Adjusted EPS along with other comparative tools, together with U.S.
GAAP measurements, to assist in the evaluation of operating
performance. These U.S. GAAP measurements include Net Income, cash
flows from operations and cash flow data. See below a
reconciliation of each non-GAAP measure to the most directly
comparable GAAP measure.
Virtu Financial, Inc. and Subsidiaries |
Condensed Consolidated Statements of Comprehensive Income
(Unaudited) |
|
|
Three Months Ended September
30, |
|
Nine Months Ended September
30, |
(in thousands, except
share and per share data) |
2023 |
|
2022 |
|
2023 |
|
2022 |
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
Trading income, net |
$ |
316,085 |
|
|
$ |
397,383 |
|
|
$ |
1,034,764 |
|
|
$ |
1,315,618 |
|
Interest and dividends income |
|
127,693 |
|
|
|
43,631 |
|
|
|
307,916 |
|
|
|
95,435 |
|
Commissions, net and technology services |
|
110,276 |
|
|
|
120,986 |
|
|
|
341,223 |
|
|
|
411,981 |
|
Other, net |
|
76,110 |
|
|
|
(956 |
) |
|
|
73,493 |
|
|
|
44,010 |
|
Total revenues |
|
630,164 |
|
|
|
561,044 |
|
|
|
1,757,396 |
|
|
|
1,867,044 |
|
|
|
|
|
|
|
|
|
Operating
Expenses: |
|
|
|
|
|
|
|
Brokerage, exchange, clearance fees and payments for order flow,
net |
|
123,245 |
|
|
|
168,869 |
|
|
|
391,238 |
|
|
|
476,235 |
|
Communication and data processing |
|
57,066 |
|
|
|
52,907 |
|
|
|
170,837 |
|
|
|
164,441 |
|
Employee compensation and payroll taxes |
|
97,221 |
|
|
|
103,254 |
|
|
|
296,214 |
|
|
|
305,338 |
|
Interest and dividends expense |
|
132,802 |
|
|
|
61,989 |
|
|
|
342,896 |
|
|
|
153,243 |
|
Operations and administrative |
|
22,416 |
|
|
|
14,319 |
|
|
|
72,204 |
|
|
|
53,110 |
|
Depreciation and amortization |
|
15,815 |
|
|
|
16,658 |
|
|
|
47,076 |
|
|
|
50,470 |
|
Amortization of purchased intangibles and acquired capitalized
software |
|
15,967 |
|
|
|
16,060 |
|
|
|
48,007 |
|
|
|
48,817 |
|
Termination of office leases |
|
364 |
|
|
|
361 |
|
|
|
314 |
|
|
|
1,744 |
|
Debt issue cost related to debt refinancing, prepayment and
commitment fees |
|
1,796 |
|
|
|
1,404 |
|
|
|
5,744 |
|
|
|
28,525 |
|
Transaction advisory fees and expenses |
|
6 |
|
|
|
134 |
|
|
|
30 |
|
|
|
1,113 |
|
Financing interest expense on long-term borrowings |
|
25,361 |
|
|
|
23,483 |
|
|
|
74,499 |
|
|
|
66,905 |
|
Total operating expenses |
|
492,059 |
|
|
|
459,438 |
|
|
|
1,449,059 |
|
|
|
1,349,941 |
|
|
|
|
|
|
|
|
|
Income before income taxes and noncontrolling interest |
|
138,105 |
|
|
|
101,606 |
|
|
|
308,337 |
|
|
|
517,103 |
|
Provision for income taxes |
|
20,512 |
|
|
|
21,732 |
|
|
|
51,117 |
|
|
|
88,405 |
|
Net income |
$ |
117,593 |
|
|
$ |
79,874 |
|
|
$ |
257,220 |
|
|
$ |
428,698 |
|
|
|
|
|
|
|
|
|
Noncontrolling interest |
|
(55,678 |
) |
|
|
(39,867 |
) |
|
|
(120,722 |
) |
|
|
(191,264 |
) |
|
|
|
|
|
|
|
|
Net income available for
common stockholders |
$ |
61,915 |
|
|
$ |
40,007 |
|
|
$ |
136,498 |
|
|
$ |
237,434 |
|
|
|
|
|
|
|
|
|
Earnings per
share: |
|
|
|
|
|
|
|
Basic |
$ |
0.63 |
|
|
$ |
0.38 |
|
|
$ |
1.36 |
|
|
$ |
2.17 |
|
Diluted |
$ |
0.63 |
|
|
$ |
0.37 |
|
|
$ |
1.36 |
|
|
$ |
2.16 |
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding |
|
|
|
|
|
|
|
Basic |
|
93,408,537 |
|
|
|
102,289,172 |
|
|
|
95,376,590 |
|
|
|
105,500,700 |
|
Diluted |
|
93,408,537 |
|
|
|
102,550,852 |
|
|
|
95,376,590 |
|
|
|
106,004,393 |
|
|
|
|
|
|
|
|
|
Comprehensive income: |
|
|
|
|
|
|
|
Net income |
$ |
117,593 |
|
|
$ |
79,874 |
|
|
$ |
257,220 |
|
|
$ |
428,698 |
|
Other comprehensive income |
|
|
|
|
|
|
|
Foreign exchange translation adjustment, net of taxes |
|
(4,005 |
) |
|
|
(18,527 |
) |
|
|
170 |
|
|
|
(43,505 |
) |
Net change in unrealized cash flow hedges gains, net of taxes |
|
(7,646 |
) |
|
|
30,731 |
|
|
|
(12,612 |
) |
|
|
92,666 |
|
Comprehensive income |
$ |
105,942 |
|
|
$ |
92,078 |
|
|
$ |
244,778 |
|
|
$ |
477,859 |
|
Less: Comprehensive income attributable to noncontrolling
interest |
|
(50,832 |
) |
|
|
(44,719 |
) |
|
|
(115,557 |
) |
|
|
(209,051 |
) |
Comprehensive income available
for common stockholders |
$ |
55,110 |
|
|
$ |
47,359 |
|
|
$ |
129,221 |
|
|
$ |
268,808 |
|
Virtu Financial, Inc. and Subsidiaries |
Reconciliation to Non-GAAP Operating Data
(Unaudited) |
|
The following
tables reconcile Condensed Consolidated Statements of Comprehensive
Income to arrive at Adjusted Net Trading Income, EBITDA, Adjusted
EBITDA, and selected Operating Margins. |
|
|
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
(in thousands, except
percentages) |
2023 |
|
2022 |
|
2023 |
|
2022 |
|
|
|
|
|
|
|
|
Reconciliation of
Trading income, net to Adjusted Net Trading Income |
|
|
|
|
|
|
|
Trading income, net |
$ |
316,085 |
|
|
$ |
397,383 |
|
|
$ |
1,034,764 |
|
|
$ |
1,315,618 |
|
Commissions, net and technology services |
|
110,276 |
|
|
|
120,986 |
|
|
|
341,223 |
|
|
|
411,981 |
|
Interest and dividends income |
|
127,693 |
|
|
|
43,631 |
|
|
|
307,916 |
|
|
|
95,435 |
|
Brokerage, exchange, clearance fees and payments for order flow,
net |
|
(123,245 |
) |
|
|
(168,869 |
) |
|
|
(391,238 |
) |
|
|
(476,235 |
) |
Interest and dividends expense |
|
(132,802 |
) |
|
|
(61,989 |
) |
|
|
(342,896 |
) |
|
|
(153,243 |
) |
Adjusted Net Trading
Income |
$ |
298,007 |
|
|
$ |
331,142 |
|
|
$ |
949,769 |
|
|
$ |
1,193,556 |
|
|
|
|
|
|
|
|
|
Reconciliation of Net
Income to EBITDA and Adjusted EBITDA |
|
|
|
|
|
|
|
Net income |
|
117,593 |
|
|
|
79,874 |
|
|
|
257,220 |
|
|
|
428,698 |
|
Financing interest expense on long-term borrowings |
|
25,361 |
|
|
|
23,483 |
|
|
|
74,499 |
|
|
|
66,905 |
|
Debt issue cost related to debt refinancing, prepayment and
commitment fees |
|
1,796 |
|
|
|
1,404 |
|
|
|
5,744 |
|
|
|
28,525 |
|
Depreciation and amortization |
|
15,815 |
|
|
|
16,658 |
|
|
|
47,076 |
|
|
|
50,470 |
|
Amortization of purchased intangibles and acquired capitalized
software |
|
15,967 |
|
|
|
16,060 |
|
|
|
48,007 |
|
|
|
48,817 |
|
Provision for income taxes |
|
20,512 |
|
|
|
21,732 |
|
|
|
51,117 |
|
|
|
88,405 |
|
EBITDA |
$ |
197,044 |
|
|
$ |
159,211 |
|
|
$ |
483,663 |
|
|
$ |
711,820 |
|
Severance |
|
1,346 |
|
|
|
1,250 |
|
|
|
5,256 |
|
|
|
4,009 |
|
Transaction advisory fees and expenses |
|
6 |
|
|
|
134 |
|
|
|
30 |
|
|
|
1,113 |
|
Termination of office leases |
|
364 |
|
|
|
361 |
|
|
|
314 |
|
|
|
1,744 |
|
Other |
|
(74,599 |
) |
|
|
1,556 |
|
|
|
(67,396 |
) |
|
|
(35,813 |
) |
Share based compensation |
|
15,353 |
|
|
|
18,133 |
|
|
|
47,108 |
|
|
|
50,841 |
|
Adjusted
EBITDA |
$ |
139,514 |
|
|
$ |
180,645 |
|
|
$ |
468,975 |
|
|
$ |
733,714 |
|
|
|
|
|
|
|
|
|
Selected Operating
Margins |
|
|
|
|
|
|
|
GAAP Net income Margin (1) |
|
18.7 |
% |
|
|
14.2 |
% |
|
|
14.6 |
% |
|
|
23.0 |
% |
Non-GAAP Net income Margin (2) |
|
39.5 |
% |
|
|
24.1 |
% |
|
|
27.1 |
% |
|
|
35.9 |
% |
EBITDA Margin (3) |
|
66.1 |
% |
|
|
48.1 |
% |
|
|
50.9 |
% |
|
|
59.6 |
% |
Adjusted EBITDA Margin (4) |
|
46.8 |
% |
|
|
54.6 |
% |
|
|
49.4 |
% |
|
|
61.5 |
% |
|
|
|
|
|
|
|
|
1 Calculated by dividing Net
income by Total revenue. |
|
|
|
|
|
|
|
2 Calculated by dividing Net
income by Adjusted Net Trading Income. |
|
|
|
|
|
|
|
3 Calculated by dividing
EBITDA by Adjusted Net Trading Income. |
|
|
|
|
|
|
|
4 Calculated by dividing
Adjusted EBITDA by Adjusted Net Trading Income. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Virtu Financial, Inc. and Subsidiaries |
Reconciliation to Non-GAAP Operating Data
(Unaudited) |
(Continued) |
|
The following tables reconcile Condensed Consolidated Statements of
Comprehensive Income to arrive at Normalized Adjusted Net Income
before income taxes, Normalized provision for income taxes,
Normalized Adjusted Net Income and Normalized Adjusted EPS. |
|
|
Three Months Ended September
30, |
|
Nine Months Ended September
30, |
(in thousands, except
share and per share data) |
2023 |
|
2022 |
|
2023 |
|
2022 |
|
|
|
|
|
|
|
|
Reconciliation of Net
Income to Normalized Adjusted Net Income |
|
|
|
|
|
|
|
Net income |
$ |
117,593 |
|
|
$ |
79,874 |
|
$ |
257,220 |
|
|
$ |
428,698 |
|
Provision for income taxes |
|
20,512 |
|
|
|
21,732 |
|
|
51,117 |
|
|
|
88,405 |
|
Income before income taxes and noncontrolling interest |
$ |
138,105 |
|
|
$ |
101,606 |
|
$ |
308,337 |
|
|
$ |
517,103 |
|
Amortization of purchased intangibles and acquired capitalized
software |
|
15,967 |
|
|
|
16,060 |
|
|
48,007 |
|
|
|
48,817 |
|
Debt issue cost related to debt refinancing, prepayment and
commitment fees |
|
1,796 |
|
|
|
1,404 |
|
|
5,744 |
|
|
|
28,525 |
|
Severance |
|
1,346 |
|
|
|
1,250 |
|
|
5,256 |
|
|
|
4,009 |
|
Transaction advisory fees and expenses |
|
6 |
|
|
|
134 |
|
|
30 |
|
|
|
1,113 |
|
Termination of office leases |
|
364 |
|
|
|
361 |
|
|
314 |
|
|
|
1,744 |
|
Other |
|
(74,599 |
) |
|
|
1,556 |
|
|
(67,396 |
) |
|
|
(35,813 |
) |
Share based compensation |
|
15,353 |
|
|
|
18,133 |
|
|
47,108 |
|
|
|
50,841 |
|
Normalized Adjusted Net Income before income taxes |
$ |
98,338 |
|
|
$ |
140,504 |
|
$ |
347,400 |
|
|
$ |
616,339 |
|
Normalized provision for income taxes (1) |
|
23,601 |
|
|
|
33,702 |
|
|
83,374 |
|
|
|
147,922 |
|
Normalized Adjusted
Net Income |
$ |
74,737 |
|
|
$ |
106,802 |
|
$ |
264,026 |
|
|
$ |
468,417 |
|
|
|
|
|
|
|
|
|
Weighted Average Adjusted
shares outstanding (2) |
|
167,164,049 |
|
|
|
175,893,027 |
|
|
169,101,067 |
|
|
|
179,290,742 |
|
|
|
|
|
|
|
|
|
Normalized Adjusted
EPS |
$ |
0.45 |
|
|
$ |
0.61 |
|
$ |
1.56 |
|
|
$ |
2.61 |
|
|
|
|
|
|
|
|
|
(1) Reflects U.S.
federal, state, and local income tax rate applicable to
corporations of approximately 24% for all periods presented. |
(2) Assumes that
(1) holders of all vested and unvested non-vesting Virtu Financial
Units (together with corresponding shares of the Company's Class C
common stock, par value $0.00001 per share (the “Class C Common
Stock”)) have exercised their right to exchange such Virtu
Financial Units for shares of Class A Common Stock on a one-for-one
basis, (2) holders of all Virtu Financial Units (together with
corresponding shares of the Company's Class D common stock, par
value $0.00001 per share (the “Class D Common Stock”)) have
exercised their right to exchange such Virtu Financial Units for
shares of the Company's Class B common stock, par value $0.00001
per share (the “Class B Common Stock”) on a one-for-one basis, and
subsequently exercised their right to convert the shares of Class B
Common Stock into shares of Class A Common Stock on a one-for-one
basis. Includes additional shares from dilutive impact of options,
restricted stock units and restricted stock awards outstanding
under the Amended and Restated 2015 Management Incentive Plan
during the three and nine months ended September 30, 2023 and 2022
and the Amended and Restated ITG 2007 Equity Plan during the three
and nine months ended September 30, 2022. |
Virtu Financial, Inc. and Subsidiaries |
Condensed Consolidated Statements of Financial Condition
(Unaudited) |
|
(in thousands, except
share data) |
September 30,2023 |
|
December 31,2022 |
|
|
|
|
Assets |
|
|
|
Cash and cash equivalents |
$ |
688,790 |
|
$ |
981,580 |
Cash and securities segregated under regulations and other |
|
37,565 |
|
|
56,662 |
Securities borrowed |
|
1,524,177 |
|
|
1,187,674 |
Securities purchased under agreements to resell |
|
3,127,072 |
|
|
336,999 |
Receivables from broker-dealers and
clearing organizations |
|
1,696,495 |
|
|
1,115,185 |
Receivables from customers |
|
148,445 |
|
|
80,830 |
Trading assets, at fair value |
|
8,287,525 |
|
|
4,630,552 |
Property, equipment and capitalized software, net |
|
92,124 |
|
|
85,194 |
Operating lease right-of-use assets |
|
161,811 |
|
|
187,442 |
Goodwill |
|
1,148,926 |
|
|
1,148,926 |
Intangibles (net of accumulated amortization) |
|
273,473 |
|
|
321,480 |
Deferred taxes |
|
132,361 |
|
|
146,801 |
Other assets |
|
299,664 |
|
|
303,916 |
Total assets |
|
17,618,428 |
|
|
10,583,241 |
|
|
|
|
Liabilities and
equity |
|
|
|
Liabilities |
|
|
|
Short-term borrowings, net |
|
97,217 |
|
|
3,944 |
Securities loaned |
|
1,459,980 |
|
|
1,060,432 |
Securities sold under agreements to repurchase |
|
3,376,948 |
|
|
627,549 |
Payables to broker-dealers and clearing organizations |
|
540,464 |
|
|
273,843 |
Payables to customers |
|
74,374 |
|
|
46,525 |
Trading liabilities, at fair value |
|
7,941,472 |
|
|
4,196,974 |
Tax receivable agreement obligations |
|
215,483 |
|
|
238,758 |
Accounts payable and accrued expenses and other liabilities |
|
411,848 |
|
|
448,635 |
Operating lease liabilities |
|
211,249 |
|
|
239,202 |
Long-term borrowings, net |
|
1,778,743 |
|
|
1,795,952 |
Total liabilities |
|
16,107,778 |
|
|
8,931,814 |
|
|
|
|
Total equity |
|
1,510,650 |
|
|
1,651,427 |
|
|
|
|
Total liabilities and equity |
$ |
17,618,428 |
|
$ |
10,583,241 |
|
|
|
|
|
As of September 30, 2023 |
Ownership of Virtu
Financial LLC Interests: |
Interests |
|
% |
Virtu Financial, Inc. - Class A Common Stock and Restricted Stock
Units |
|
96,468,282 |
|
|
58.4% |
Non-controlling Interests (Virtu Financial LLC) |
|
68,699,738 |
|
|
41.6% |
Total Virtu Financial LLC Interests |
|
165,168,020 |
|
|
100.0% |
About Virtu Financial, Inc.
Virtu is a leading financial services firm that
leverages cutting-edge technology to provide execution services and
data, analytics and connectivity products to its clients and
deliver liquidity to the global markets. Leveraging its global
market making expertise and infrastructure, Virtu provides a robust
product suite including offerings in execution, liquidity sourcing,
analytics and broker-neutral, multi-dealer platforms in workflow
technology. Virtu’s product offerings allow clients to trade
on hundreds of venues across 50+ countries and in multiple asset
classes, including global equities, ETFs, foreign exchange,
futures, fixed income and myriad other commodities. In
addition, Virtu’s integrated, multi-asset analytics platform
provides a range of pre and post-trade services, data products and
compliance tools that clients rely upon to invest, trade and manage
risk across global markets.
Cautionary Note Regarding
Forward-Looking Statements
This press release may contain “forward-looking
statements” made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Statements
regarding Virtu Financial, Inc.’s (“Virtu’s”, the “Company’s” or
“our”) business that are not historical facts are forward-looking
statements. Forward-looking statements should not be read as a
guarantee of future performance or results, and will not
necessarily be accurate indications of the times at, or by which,
such performance or results will be achieved. The Company assumes
no obligation to update forward-looking statements to reflect
actual results, changes in assumptions or changes in other factors
affecting forward-looking information, and if the Company does
update one or more forward-looking statements, no inference should
be drawn that the Company will make additional updates with respect
thereto or with respect to other forward-looking statements.
Forward-looking statements are based on information available at
the time and/or management’s good faith belief with respect to
future events, and is subject to risks and uncertainties, some or
all of which are not predictable or within Virtu’s control, that
could cause actual performance or results to differ materially from
those expressed in the statements. Those risks and uncertainties
include, without limitation: risks relating to the COVID-19
pandemic, including the possible effects of the economic conditions
worldwide resulting from the COVID-19 pandemic and governmental and
other responses thereto; fluctuations in trading volume and
volatilities in the markets in which we operate; the ability of our
trading counterparties and various clearing houses to perform their
obligations to us; the performance and reliability of our
customized trading platform; the risk of material trading losses
from our market making activities; swings in valuations in
securities or other instruments in which we hold positions;
increasing competition and consolidation in our industry; the risk
that cash flow from our operations and other available sources of
liquidity will not be sufficient to fund our various ongoing
obligations, including operating expenses, short-term funding
requirements, margin requirements, capital expenditures, debt
service and dividend payments; regulatory and legal uncertainties
and potential changes associated with our industry, particularly in
light of increased attention from media, regulators and lawmakers
to market structure and related issues including but not limited to
the retail trading environment, wholesale market making and off
exchange trading more generally and payment for order flow
arrangements; potential adverse results from legal or regulatory
proceedings; our ability to remain technologically competitive and
to ensure that the technology we utilize is not vulnerable to
security risks, hacking and cyber-attacks; risks associated with
third party software and technology infrastructure. For a
discussion of the risks and uncertainties which could cause actual
results to differ from those contained in forward-looking
statements, see Virtu’s Securities and Exchange Commission filings,
including but not limited to Virtu’s Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K
filed with the SEC.
CONTACT
Investor & Media RelationsAndrew
Smithinvestor_relations@virtu.commedia@virtu.com
Virtu Financial (NASDAQ:VIRT)
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Virtu Financial (NASDAQ:VIRT)
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