Virtu Financial : Announces Second Quarter 2023 Results

Virtu Announces Second Quarter 2023 Results

NEW YORK, NY, July 26, 2023 - 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 second quarter ended June 30, 2023.

Second Quarter 2023:

• Net income of $29.5 million; Normalized Adjusted Net Income2 of $61.7 million
• Basic and diluted earnings per share of $0.16; Normalized Adjusted EPS2 of $0.37
• Total revenues of $506.9 million; Trading income, net, of $306.2 million; Net income Margin of 5.8%1
• • Adjusted Net Trading Income2 of $278.7 million
• Adjusted EBITDA2 of $122.0 million; Adjusted EBITDA Margin2 of 43.8%
• Share buybacks of $41.5 million, or 2.3 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 September 15, 2023 to shareholders of record as of September 1, 2023.

Note 1: Calculated by dividing Net income by Total revenue

Note 2: Non-GAAP financial measures. Please see "Non-GAAP Financial Measures and Other Items" for more information.

Note 3: Shares repurchased calculated on a settlement date basis.

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Financial Results

Second Quarter 2023:

Total revenues decreased 16.2% to $506.9 million for this quarter, compared to $604.7 million for the same period in 2022. Trading income, net, decreased to $306.2 million for the quarter compared to $395.9 million for the same period in 2022. Net income totaled $29.5 million for this quarter, compared to net income of $148.9 million in the prior year quarter.

Basic and diluted earnings per share for this quarter were $0.16, compared to a basic and diluted earnings per share of $0.78, for the same period in 2022.

Adjusted Net Trading Income decreased 22.0% to $278.7 million for this quarter, compared to $357.4 million for the same period in 2022. Adjusted EBITDA decreased 41.6% to $122.0 million for this quarter, compared to $209.3 million for the same period in 2022.

Normalized Adjusted Net Income, removing one-time and non-cash items, decreased 52.5% to $61.7 million for this quarter, compared to $129.9 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 $0.37 for this quarter, compared to $0.73 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.

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The following tables show the trading income, net, total revenues and Adjusted Net Trading Income by segment for the three and six months ended June 30, 2023 and 2022.

Total revenues by segment (in thousands, unaudited)

				Three Months Ended June 30, 2023				Three Months Ended June 30, 2022
				Market			Execution												Market			Execution
				Making				Services			Corporate				Total				Making				Services			Corporate				Total
	Trading income, net		$	302,312			$	3,856			$	-			$	306,168			$	390,263			$	5,665			$	-			$	395,928
	Commissions, net and technology services		6,634				102,870				-				109,504				11,145				125,195				-				136,340
	Interest and dividends income			95,595				2,384				-				97,979				30,792				-				-				30,792
	Other, net		709				6				(7,512)				(6,797)				395				137				41,146				41,678
	Total Revenues		$	405,250			$	109,116			$	(7,512)			$	506,854			$	432,595			$	130,997			$	41,146			$	604,738
				Six Months Ended June 30, 2023					Six Months Ended June 30, 2022
				Market			Execution												Market			Execution
				Making				Services			Corporate				Total				Making				Services			Corporate				Total
	Trading income, net		$	710,655		$	8,024		$	-		$	718,679		$	906,621		$	11,614		$	-		$	918,235
	Commissions, net and technology services		16,334				214,614				-				230,948				20,194				270,801				-				290,995
	Interest and dividends income			175,283				4,940				-				180,223				51,775				29				-				51,804
	Other, net		1,897				15				(4,529)				(2,617)				568				298				44,100				44,966
	Total Revenues		$	904,169		$	227,593		$	(4,529)		$	1,127,233		$	979,158		$	282,742		$	44,100		$	1,306,000
Reconciliation of trading income, net to Adjusted Net Trading Income by operating segment
(in thousands, unaudited)
				Three Months Ended June 30, 2023				Three Months Ended June 30, 2022
				Market			Execution												Market			Execution
				Making				Services			Corporate				Total				Making				Services			Corporate				Total
	Trading income, net		$	302,312		$	3,856		$	-		$	306,168		$	390,263		$	5,665		$	-		$	395,928
	Commissions, net and technology services		6,634				102,870				-				109,504				11,145				125,195				-				136,340
	Interest and dividends income			95,595				2,384				-				97,979				30,792				-				-				30,792
	Brokerage, exchange, clearance fees and		(99,842)				(22,629)				-				(122,471)				(131,121)				(25,865)				-				(156,986)
	payments for order flow, net
	Interest and dividends expense			(111,508)				(985)				-				(112,493)				(47,355)				(1,361)				-				(48,716)
	Adjusted Net Trading Income	$	193,191		$	85,496		$	-		$	278,687		$	253,724		$	103,634		$	-		$	357,358
				Six Months Ended June 30, 2023					Six Months Ended June 30, 2022
				Market			Execution												Market			Execution
				Making				Services			Corporate				Total				Making				Services			Corporate				Total
	Trading income, net		$	710,655		$	8,024		$	-		$	718,679		$	906,621		$	11,614		$	-		$	918,235
	Commissions, net and technology services		16,334				214,614				-				230,948				20,194				270,801				-				290,995
	Interest and dividends income			175,283				4,940				-				180,223				51,775				29				-				51,804
	Brokerage, exchange, clearance fees and		(222,791)				(45,202)				-				(267,993)				(254,636)				(52,730)				-				(307,366)
	payments for order flow, net
	Interest and dividends expense			(208,431)				(1,663)				-				(210,094)				(88,382)				(2,872)				-				(91,254)
	Adjusted Net Trading Income	$	471,050		$	180,713		$	-		$	651,763		$	635,572		$	226,842		$	-		$	862,414

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Financial Condition

As of June 30, 2023, Virtu had $745.8 million in cash, cash equivalents and restricted cash, and total long-term debt outstanding in an aggregate principal amount of $1,806.3 million.

Share Repurchase Program

Since inception of the program in November 2020 through settlement date April 19, 2023, the Company repurchased approximately 38.5 million shares of Class A Common Stock and Virtu Financial Units for approximately $1,016.7 million. The Company has approximately $203.3 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 second quarter 2023 financial performance today, July 26th, 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.

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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

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