Virtu Financial (VIRT) 24 Oct 242024 Q3 Earnings call transcript

Good day, and thank you for standing by. Welcome to the Virtu Financial 2024 Third Quarter Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Andrew Smith, Head of Investor Relations. Please go ahead.

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

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

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

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

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

be measures the of with as these materials this to well how the in measures. uses These GAAP. reconciliation as During additional of equivalent supplemental to and consult as in GAAP reported We measures to income, to including margin. financial we as meaningful adjusted and should with in why this you'll adjusted EBITDA and supplemental referred to net be to to as to where not net may today's term non-GAAP non-GAAP direct well call, as certain measures portion GAAP find EBITDA accordance measures, information adjusted trading addition deem explanation the Investor of call considered management refer non-GAAP we measures, an on our superior website, income listeners as adjusted earnings information

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

our thank third and morning, reported morning, results. we quarter Good you, Andrew. This

the $X.X of ended XX% net market EBITDA generated earned quarter XX, and noncustomer of delivered For per strong day adjusted We trading We EPS a on basis. income. both in $X.XX of our million an on $XXX September adjusted Virtu EBITDA customer performance making quarter adjusted both this businesses. margin million and

with continue initiatives strong options performance crypto ETF We block. and progress our to in growth

Our businesses and headline against performed well metrics volatility across globe. volume the

solid Services we given Execution Our business as a institutional the volumes. which count Virtu quarter-over-quarter, was performance environment for flat muted

talk about a will VES minute. more We in

again, up Pacific of Virtu trading are was our Beginning Asia low. were from global Execution volume and impressive were results that X% X%, in notional X% down remain turnover the especially about and XX% in million volumes were or versus second essentially these $XXX Europe volumes while quarter, day. this Adjusted Volumes versus quite second net considering performed million Overall, share Services, business in the and U.S. respectively, with quarter. the down equity notional income quarter, per quarter, $X.X X%. delivering second very ANTI flat well.

multi-asset last needs. spoke second continually to the XX% when XXXX afford and combined quarter performance, clients' in were meet platform ability quarter daily represents trading in Virtu's invest higher highest This volatility was volumes net similar higher. us class operations unique XX% I of second of since global with the adjusted a the how the scaled income result quarter to about levels our

a Virtu data broker-dealers. and/or through results positive and is multiyear regional as We and have what trading client A evidence yielding investments for infrastructure calling Technology major midsized we growing are demonstrated successes. validation recent offering this a our major contributor third-party analytics that Solutions, to are

with efficiently better products and leading and to a enabled suite VTS our serve class clients us cost-effective multi-asset to VES manner. solutions, empowering their technology expect long global with them scale technology of Along to to our brokers, we allows distribute continue term. strategically business in our other growing

offering, fueled solutions, expect including to by algos. workflow and to growth we products our of datalytics, platform, to class and and management flagship be systems our our In industry analytics world data VTS our or execution Triton, addition global standard trading

income, implementation further Our and techniques multi-asset next-generation align Triton decisions equities, integrate FX our algos their platform, covers EMS clients' machine to results. class derivatives our learning fixed investment and with

new on existing to by into Additionally, few such and In offer reach in markets efficiently in we've well and months, client solutions. previously segments Japan as relations. our seen increase as Virtu, as VES several as increasing we focused to Middle in India expand technology wins markets the our regions and we underpenetrated the opportunities client expanding past are client East address

The increasing been are excited most about made now include the in wins with XXXX and increase of fixed clients. have algo help ever. rankings place important early adoption this us earlier. are leading in of our is I future offerings. to of is as Virtu as allows on senior our offering I its trade it And These learning to mentioned broaden as and adoption before, this hires new distribution new seen across efforts global business switcher of RFQ for VTS, production developed still and growing. days, the while key address were we opportunity agency our to have machine mentioned income, broker We've position

driven long-term and and are on scalable demand always, anchored class business has offerings VES As partnerships, revolving our global multi-asset in our built by client our technology.

Making. Turning to Market

noncustomer a with quarter. delivering our the both in solid Our market business performed very customer and quarter well businesses making third

enhancements opportunities improve internalization and explore costs to the risk to team's our cross reduce the market. in continue trading help and desk ways to more to see us address of We our manage we

equity particularly quarter. showed Our segments Asia performance strong U.S. and this

second compared Making Market opportunities, August, about the the quarter. an customer measured of as July to and suggests XXX our market opportunity through For business, reports, elevated X%

to spread to percentage. quarter-over-quarter quoted in single-digit for preliminary low reducing on a XXX decline opportunity based the in However, September, increase the September, reports significantly

As volatility we we capitalize remain the markets positioned we products on to and very expand opportunities. and trade, well future

no in success areas where a new deliver ago. to few continue years presence short we had We only

day quarter Our organic contributing this growth our generated of ANTI. $XXX,XXX per about XX% net in adjusted trading initiatives income

will Building capabilities this our standout global highlight performance a I from to quarter. priority. options results be continues the top

Our the growing options business delivered a performance quarter. strong in

growing the In center our local cash local our and opportunities optimizing technical our equity our we're U.S. footprint leveraging global increasing within we addition to options, data are streamlining to by and using, target integrations options brokers markets. capabilities

and onboarding We continue ETF clients new broadening distribution. to grow by block our in

for symbol and fund issuers regular opened enabling with door rebalance our In ETF needs. execution addition, us growing broader have relationships and coverage underlier service managers, their to capabilities and the trading

up making shares ETFs. these market the spot and about Spot abilities getting compared market extension And as crypto as on ETFs Bitcoin the new volumes X% XX% ETF pace. crypto products. to exciting crypto to ETFs Our were spot to Ethereum XX% are are many trading and is U.S. Bitcoin QX. it business continue to to options natural a at closer options making support launching of about our

and new We exchanges market-making products by thoughtfully supporting token efforts ]. new continue expand crypto [ to adding our and listed

more which capabilities competitive, grow, reduce fees. we and cross-product keep of trading we to us the internalization continue As be to spread allow our out build more

With that, will it turn to I over Jeff.

very lows Compared on about was S&P mixed the market Thank environment this volatility up realized to the of quarter, was the second the just to similar which up XXX you, and prior Doug. I'll the quarter. quarter, of XX%. pick

week volumes the exclude U.S. However, first down almost if significant option X%. much it's to note, you about up only the volatility were up important equity U.S. it's of and in volumes were half as August. X%,

Retail opportunity be up down activity change mixed full Slide noted, But X% at high-yield versus XXX% report quarter. volumes versus volumes through XX, with single FIC September capital, XX%; digits. billion. up Global equity total August suggests the EURO mixed. was quarter-over-quarter September our markets, low supplement stood also while on U.S. XX second mixed. and which X%. that volatility in in as up volume the Index share were Doug At realized X%, then volume spread is $X.X also FX X% credit quarter the volumes preliminary the the indicators the second up The XXX and the in equity was the will were were XXX of IBKR for Energy trading were down Nikkei and XXXX, STOXX was

can excellent a Our remain service-oriented incremental over use you as to see, capital basis. demonstrating our capital, and through. our on returns long-term our ability

the portion million shares To fully that range Since an date, shares price our million repurchased Virtu share. average we The our end, we cash program, of price repurchased XX.XX to after issuances. XXX ] per at our was count in we buybacks target we share. set third on to within repurchase X.X bringing diluted per forth shares free we end repurchase average an net at shares outstanding share $XX.XX and of used quarter, fit is new flow XX.X% have [ To million XX initiated the of the quarter a share have of have publicly. of as

and and the earnings Results program positive Slides and X repurchase sustained the enjoy the impact management the operating repurchases. year-to-date power initiatives share volumes guidelines Our like X share vary the our will prudent we from well illustrate market-related ours of cumulative as but is capital our and within growth volatility, from as business of published. we've businesses always leverage with the

expenses operating $XXX million On the the adjusted side, cash quarter. in were expense our third

is Our cash prior with about X% consistent guidance. OpEx run rate up year-over-year, the

the and ratio was to XX% for respectively, the cash XXXX. quarter was full and total our XX%, compensation XX%, year of ratio compared compensation for Our XX%

recent expect cash within to operating to the remain compensation We ratio historical historical expect we also expenses cash range, within remain and the marks.

expense. cash increases we assume operating expenses forward, in non-compensation to low single-digit our total continue overall going Regarding

remarks, that, Lee. with it our Financial to And Cindy Cindy? the conclude to will over Officer, prepared Chief turn I

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

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

summary normalized was EBITDA margin XXXX, third was for On results. adjusted XX, a our third of and provided we operating XXXX quarter EBITDA expense adjusted Our our $X.XX. quarter $XXX the Adjusted Slide of XX.X%. million

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

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

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

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

Sandler. Patrick [Operator Instructions] from Piper question first Moley Our comes from

We'll our question. move next to

JPMorgan. question from Ken Our Worthington comes from

we're the developing are futures a first, profitability futures. basis? in options proliferation same brokers directly that to retail a say, This seeing the payment of into model attractiveness trading the for Virtu versus, Maybe now investors is just offering business play order to of seems and and see Virtu of how options And access on equities? process equities for we futures based products

business existing of keen And an Yes. connectivity very I as cash what mean opportunity that the complementary exciting following that to all you broker with wholesale we it's that I Thanks, It's our it's observation. retail think relationships a us. Obviously, and equities I been Ken. dealers. we for have think aforementioned do we've suggest in in closely.

in confident and for, needs. firms years, liquidity these some they're business been the provide cases, in to XX have clients' very these efficient We've in doing prior Virtu now and our to been ability with very, night XX, X-sided

leverage I would particular, traders retail very and in products there's products in retail active say, We that future more are offerings intraday a looking Japan, particular, attractive. you are certainly, for see if CFD that and clients have in I derivative our active think, the more market. our day where with Asia, perhaps in

as about excited a different a if probably a going We opposed the investor business We're casual more to description. don't it's to think active an we it's cash that's of for equities it. better more of lack will, of So retail complementary. think trader it's cannibalize day trader retail you sleeve,

that, us for opportunity to we've retail I with relationships is long-term exciting a And great in it's that firms that business service an continue think great it's part. with. appreciated had under really to So these partner customer

things. price of all those Obviously, a and But scored matters brokers lot. all and on retail of get customer service by we uptime our

and us, Knight provide that folks goes XX to customers. is so business glove inherited that from the white folks the to And we these much that it inherited wonderful Capital that very service years, that for back a continue the XX, we

So Virtu. for as they great expand offerings, that's

Okay. Great.

the We've Just brokerage with since highest brokerage bigger modeling then question, since some COVID. were level quarters at costs definitely costs. activity low seen

So, the mix how And business the quarter? was this through think there anything of about higher go forward? costs about do that brokerage we

call Yes. of a they a them -- statute, the great great know observation. supposed probably They theory work. No, are XX a Actually, tax. in FCC. fees, measured arrears to transaction transaction they're Section Section fund sort you as question. by the they're they one and XX it's measured how very It's and of the are they unfortunately, It's lumpy is shouldn't tax the of they're fees,

the then changes But that year. market to tries So yes, do a things goes twice the in we agency bad rate ironically. to that are funding

it's would so as it not as smooth be. And otherwise

kind -- trading ups fee you the suppose in P&L. normalized perfect like be, a and it see downs can more you world, of if adjusted if and one, I our and history out and within go normalized see would net a they back wouldn't Section you had So in that what smooth XX a

I fees, the in top kind some of in earnest think was to but cash significant quarter, of we that, in that September. started not were as which well. on pay up started hugely unfortunately

X those So items. the are

Craig Our Bank next America. of question comes from from Siegenthaler

is doing everyone Hope well.

is businesses. your question growth on Our organic

drivers. record monitored option ETF launches, So activity. in X the index ETF strong also positive [indiscernible] and we volumes big quarter, The

So a wondering about a drove decline was little so see to were in if I what you sequential could we surprised talk ANTI, this?

Yes. a Thank question. good It's Craig. you,

pretty saw the ETF, off in driver drop a Andrew we telling is think was quarter-over-quarter. biggest XX% I it Bitcoin within about was down where probably crypto, me significant ADV.

as obviously the within measure is we And think family, and that. of Obviously, was quarter-over-quarter those well. I there's options spread important, spread volume internally So index but products down

market maker, know. opportunity the that's a set So for as you

not just this and it's [indiscernible] decrease. FX in times the wide So wide instance,

nothing perspective. the those X Again, it. alarming are So from of big drivers our

made and those trading we're Asian now continue We as investments where a adjusted that in grow. net optimistic particularly continue that continue certainly, particularly we the those to continue have business, we future will off to optimistic in And areas meaningful perform to options daily now -- in income. as we're And grow expand business, guardedly businesses, is Japan, and we've contributing to options we India in in pay quarters. which

And risk? market follow-up, just have much for now us your market and so rebates. my you we you the roughly on big will at the if NMS And on-exchange updated Virtu? from is a your see proposal, of wanted for structure can size up on-exchange us then a making you're market equity how receiving give impact to help sense Specifically, business give view how we're looking Reg income to final how I amendments it large us could the SEC on

Yes. followed the rule, view think filed there's which we letters. final don't Yes. comment overall Great. you file. but is It's a litigation one that I closely will, great And our if been question. -- Obviously,

going know final, if So We'll how the final. I out be see [indiscernible] it works in don't courts. to

But it's not result a a many the I rebate think for firm. have we trading times, are we market. bad said

exchange holding are We of payer fees. net a

maker. because is lot out a spread reduced as to to a income trading kind trading of "Hey, the obviously, There's perspective, won't wrong names. way and suggesting, in nothing scratch So a the collect just adjusted firm head suggestion impact be just We of not going at rebate my people a a an with significant become I market figured rebate from the net that. net never the quoted reduction rebates, us of always we

think i.e., rebates value, marketplace. that I to will, if paired liquidity will widen [ will think spreads with but -- down narrow, some incentives, reduced provide you of rebates $XX a but those underestimate the the to the million people the lot actually being we that significantly them because maybe ],

institutional they'll have have to in going ticks. tighter so may to you to to any of out liquidity, -- names. they're a to But access spreads go meaningful And investors the number some forced nominally be want extent

institutional and see trades And lot very and transaction we going -- effect you'll of the that net price think very, creates multiple this more our so volatility, will is clients increased a why happy more are orders larger have levels, is through costs. which actually

on there's that net-net So that to whatever don't right, in We side, compromise think think ability internalize friends -- we were some wholesale and to of retail the unintended they we we positives orders crafting. the consequences. we I many received. at our are firm, XXX% mean, thought as said the a SEC be lot of they terms the don't of there because our going I've got times,

flow and those We improve price of pay still payment obligated on for to are order some orders.

access result MiFID winners fail, and So having exchanges our actually end was, wiping from and this will net the the I another proposal opposite to again, negative. think And of to this II, But it's ultimately that think, losers the exchanges. to if the [indiscernible] be which because markets, driven less of I we against is institutional overall, intent think price firm. and up be is will the example trying to -- more there liquidity her away going drive regulators and just liquidity liquidity like to net result. dark for yet I clients, pick ability a at our it positive a think to cheaper strong was a And being to

comes question from Our Chris Citi. next from Allen

dig I little wanted bit on in options. a to

APAC you wondering Obviously, Just talked the about opportunity.

obviously in great a Is the versus opportunity of then in frame U.S. how options the international U.S.? you moving competitive going is it in forward terms how a, opportunity which progress market set is And international? would set wondering, marketplace. Just a the specifically,

Yes. analogy up what It's made the We've ] It investments, bad and on I really Thanks, is XXX ramped in symbols. obviously, mean room, remains medium- real good can a to use elephant options plans. question. exchange the GBP of long-term we've becoming Chris. I wholesaler. a retail [ other in in our a trading number

remember. aware, exchange transactions, further think at on of to you're unlike in or was the options There's equities all having -- been we're up 'XX. cash options As XX I can't I a exchanges. quite those there, happen [indiscernible] maybe proliferation

that's So opportunity. an

to the parts symbol opportunity. So that's in of we smaller world, I medium Japan, expanded cetera, certainly in et there some think an I options, that's the India, the particularly of plans, Asia. our small think are we've well. range long-term at But Malaysia, businesses as and countries mentioned like Korea,

built Again, tuning the on XXX the people understanding here years, getting blocking how for there. market. It's up ground we've the out finding It's nuance. last exceptionally is It's various the Virtu. a that Virtu we've connectivity in capability of our right So local partner. it's tackling. setting there. Every It's Every with to exchange. marketplace XX center, technology the It's Mumbai and stuff marketplace data doing ins been the different. the it's a and has well of the outs work understand exchanges broker

kind and that's the market inch the really, It's at. we're really good last of of what

investments long fluctuate We've we're and so successful. term, of trading a quarters our proprietary down. made to noncustomer And to rest will committed the up It's typical been businesses. it. that's But margin the we've

large the results. with what And example another and great trading having provides pleased of global very we're scale just infrastructure to very, a you. firm with it's So global

optimistic to long to medium it. continue be So term, about

want earlier. just question to revisit Ken's And

that opportunity of adding incremental how market-making And activity, thinking moving Robinhood players a retail is opportunity? the as more you on such Futures from on-exchange then wholesale an are index Just options forward? Was opportunity? there about

great because ours, right a it's a we firm them. to index of obviously do mean is wheelhouse. is really with and of Robinhood partner I And exciting offerings I the a interesting -- things terrific really, Yes. lot a now that's kind us of mean terrific really great and

we different different have not It's of little futures a any a that be or exchanges, more be to marketplace to is the CME the on those competes. Future concern because really need executed executed. one

partners an earlier in will, a said, to within more subgroup, interest trader to It's get will, a the of get question good retail that and ultimately active thing that Again, asked, that little a and kind Ken more the is answer is you more wants the I an base. think pie this expands of expands for at leverage. As if if eyeballs, firm. you different their anything our we client broker

Piper from next Our question Moley comes Sandler. from Patrick

Sorry proposed on implementation had just around about regulatory the that phase margin the a the OCC earlier. risks same of The question. at rule, I the or some disconnect intraday DTE. they addressing one latest of zero perceived

but is margin expected across as radar this something if industry? not impact possibly well you on what the all at wondering other your zero and trading if that's across up have on Just volumes, goes to only asset classes DTE,

difference. really Wow, this for delivery me to the Joe, for the this settle an understanding. mean, trying based already Patrick, Would to positions that? Virtu The zero any just are adequacy deep one. capital really agree new overall guys prepare me moving looked capital unlikely with at rules changes direct maintain get thing, stuff. have it. capital very to It's We that it's on members up think you've to love a closely. Look, or I on timing dive times. don't at it's the we've just you more looked effectively margin think impact I We stipulate and options you're difference. and date our all here FINRA all it. Good

not mean we have we're Yes. members we third clear obviously party. a I through direct a --

we think it's think I manageable. So --

from question Dan from next comes Jefferies. Fannon Our

Or doing? time. output given valuation when that of you strung row all? the X at an what some Question is results, become have about ANTI more a you this together upon quarters framework on think do But you've in -- are pretty Slide is based I just X. strong this buyback, you guys it had sensitive know for is how just

appreciate investment I up. stock gone that think just question. I has our incremental it's an

when going we this every targets that embarked -- were less it's at an as We that strategic we of and XXXX, here. buying we quarter I to journey, fourth our and we're it's dollar average right? think, were cost target investment, just amount going decision how volatile to look a this stock, at we back set the given made these been in shares on so And

adequately the we're going depends adequately capitalized, we'll it. we're of we're guidance. that's meet growth these of our what going to incremental end but at going is organic stock create near we're net said value XXXX, at thought that rate the continue come that We trading income, to now. -- creation -- shares inorganic, opportunity be continue we're XXs look going I so our in It value And excited low front high run to at about front would the we us, to we're I income. we're the $XX. the these targets. obviously, an this expect and these it's in the or opportunities, we as we all for to pivot. the term exceeded and -- resourced. we this XX% and it when back midterm, buying in in So out bought us, But We've of there at trading of right? the a where where almost we be was shareholders So whether is at net levels value, to at we're done, of execute expect on compare in company want back to we exercise. not And and mean -- But see $XX, levels if doesn't the on

Great. That's And expenses. helpful. then also just on

good been consistent for year-to-date. there, backdrop have guys your messaging a again, given, thinking in pretty just You you

versus about and should the be think we Just of? color comp thinking bit a dynamic? expenses comp the there ratio of seasonal little we cash that other As quarter, fourth any

people we've isn't mean, sort of significantly continue that's want where of think ratio. we we to We've We comp accrue us hired And the that's No, care We upgraded Yes. been We've in, past try have the the of well. or compensate enormous are. we and like all to try I us. and an I accrue for maintain in years, within to where not our as been will them priority on to we right And appropriately. in is we pressure talent years. that. because time. getting always seasonal, a are we improve allowed compensation amount to do to cost when time. I we market X an we kind of I our manage data it. for and even consistent our has actively. stay guidance overhead within manage expect appropriately. I And And we been the we take a Even think our we this middle pretty plant, within -- try huge we've comp think infrastructure mean, and in robust to manage road, long And think environment of stayed the it, down there's I people

is will Cifu session remarks. over I for question-and-answer closing The it now you. closed. Doug turn Thank now to

with the you, end you Have We forward great Thank for of early look speaking holidays today. enjoy day. joining We forward us the year. everybody, and XXXX. Anton, thank you, a -- in to and everybody look the

participation today's the your you This conference. Thank program. for conclude in does

disconnect. You may now