Virtu Announces Fourth Quarter 2023 Results
- Virtu Financial reported a net income of $6.7 million for the fourth quarter of 2023, with total revenues of $536.0 million.
- The company's trading income, net, was $266.6 million for the quarter.
- Virtu Financial declared a quarterly cash dividend of $0.24 per share.
- Decrease in trading income, net, by 14.9% to $266.6 million for the quarter compared to the same period in 2022.
- Net income decreased to $6.7 million for the quarter, compared to $39.6 million for the same period in 2022.
Insights
The financial results reported by Virtu Financial, Inc. present a mixed picture, with a year-over-year decrease in total revenues and net income for both the fourth quarter and full year of 2023. A Financial Analyst would note the 7.7% increase in total revenues for Q4 2023 compared to Q4 2022, which could be indicative of a positive revenue trajectory. However, the 14.9% decrease in trading income, net for the quarter and the 31.3% decrease in Normalized Adjusted Net Income for the same period, suggest a contraction in profitability.
From an investor's perspective, the decrease in EBITDA by 20.7% and the Adjusted EBITDA Margin contraction from the previous year are concerning as they reflect a potential decrease in operational efficiency. The share buybacks totaling $210 million for the full year and the declaration of a quarterly cash dividend might be seen as management's confidence in the company's cash flow and commitment to returning value to shareholders. However, the significant share repurchase could also be viewed as an attempt to support the stock price in light of declining earnings.
Long-term debt levels and the company's liquidity position, with $855.5 million in cash and equivalents against $1,751.8 million in long-term debt, will be critical for assessing the company's financial stability and its ability to weather potential market downturns.
As a Market Research Analyst, the segmentation of Virtu Financial's operations into Market Making and Execution Services provides insight into the company's diverse revenue streams. Market Making, which showed a decrease in trading income, net, indicates that there may be challenges in the trading environment or increased competition affecting profitability. On the other hand, the Execution Services segment, which includes agency-based trading and trading venues, along with technology services, is becoming increasingly important for the company's strategy.
Industry trends such as the growing demand for advanced trading technologies and analytics services could benefit Virtu's Execution Services. The company's investment in technology and infrastructure, as well as its capital markets business, could be leveraged to differentiate its offerings in a competitive market. The year-over-year decrease in total revenues by 3.0% for the full year 2023, however, suggests that the company may need to further innovate or adjust its strategy to maintain or grow its market share.
From a legal perspective, the emphasis on Non-GAAP financial measures such as Adjusted Net Trading Income, EBITDA and Adjusted EBITDA in Virtu Financial's report is noteworthy. These metrics are intended to provide a clearer picture of the company's operational performance by excluding certain items that may obscure the underlying business trends. However, a Legal Expert would caution that these measures do not have standardized definitions and may vary across companies, making it difficult to compare performance across the industry.
The use of these non-GAAP measures requires careful disclosure and reconciliation with GAAP measures to ensure compliance with SEC regulations and to avoid misleading investors. The company's detailed reconciliation of these measures, as provided in the report, is essential for transparency and allows for a more informed analysis of the company's financial health and operational efficiency.
NEW YORK, Jan. 25, 2024 (GLOBE NEWSWIRE) -- 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 fourth quarter ended December 31, 2023.
Fourth Quarter and Full Year Selected Highlights
Fourth Quarter 2023:
- Net income of
$6.7 million ; Normalized Adjusted Net Income1 of$44.1 million - Basic and diluted earnings per share of
$0.05 ; Normalized Adjusted EPS1 of$0.27 - Total revenues of
$536.0 million ; Trading income, net, of$266.6 million ; Net income Margin of1.3% 2- Adjusted Net Trading Income1 of
$260.9 million
- Adjusted Net Trading Income1 of
- Adjusted EBITDA1 of
$99.0 million ; Adjusted EBITDA Margin1 of37.9% - Share buybacks of
$44.0 million , or 2.4 million shares, under the Share Repurchase Program3
Full Year 2023:
- Net income of
$263.9 million ; Normalized Adjusted Net Income1 of$308.1 million - Basic and diluted earnings per share of
$1.42 ; Normalized Adjusted EPS1 of$1.84 - Total revenues of
$2,293.4 million ; Trading income, net of$1,301.3 million ; Net income Margin of11.5% 2- Adjusted Net Trading Income1 of
$1,210.7 million
- Adjusted Net Trading Income1 of
- Adjusted EBITDA1 of
$568.0 million ; Adjusted EBITDA Margin1 of46.9% - Share buybacks of
$210.0 million , or 11.3 million shares, under the Share Repurchase Program3
The Virtu Financial, Inc. Board of Directors declared a quarterly cash dividend of
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 revenue.
Note 3: Shares repurchased calculated on a settlement date basis.
Financial Results
Fourth Quarter 2023:
Total revenues increased
Basic and diluted earnings per share for this quarter were
Adjusted Net Trading Income decreased
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
Full Year 2023:
Total revenues decreased
Basic and diluted earnings per share were
Adjusted Net Trading Income decreased
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
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 months and full years ended December 31, 2023 and 2022.
Total revenues by segment
(in thousands, unaudited)
| Three Months Ended December 31, 2023 | Three Months Ended December 31, 2022 | ||||||||||||||||||||||||
| Market Making | Execution Services | Corporate | Total | Market Making | Execution Services | Corporate | Total | ||||||||||||||||||
| Trading income, net | $ | 262,501 | $ | 4,079 | $ | — | $ | 266,580 | $ | 308,702 | $ | 4,578 | $ | — | $ | 313,280 | |||||||||
| Commissions, net and technology services | 6,894 | 107,481 | — | 114,375 | 11,299 | 106,565 | — | 117,864 | |||||||||||||||||
| Interest and dividends income | 151,773 | 2,877 | — | 154,650 | 63,443 | 242 | — | 63,685 | |||||||||||||||||
| Other, net | 833 | (7,940 | ) | 7,479 | 372 | 2,352 | 516 | 71 | 2,939 | ||||||||||||||||
| Total Revenues | $ | 422,001 | $ | 106,497 | $ | 7,479 | $ | 535,977 | $ | 385,796 | $ | 111,901 | $ | 71 | $ | 497,768 | |||||||||
| Year Ended December 31, 2023 | Year Ended December 31, 2022 | ||||||||||||||||||||||||
| Market Making | Execution Services | Corporate | Total | Market Making | Execution Services | Corporate | Total | ||||||||||||||||||
| Trading income, net | $ | 1,283,680 | $ | 17,664 | $ | — | $ | 1,301,344 | $ | 1,607,819 | $ | 21,079 | $ | — | $ | 1,628,898 | |||||||||
| Commissions, net and technology services | 29,571 | 426,027 | — | 455,598 | 42,180 | 487,665 | — | 529,845 | |||||||||||||||||
| Interest and dividends income | 451,859 | 10,707 | — | 462,566 | 158,664 | 456 | — | 159,120 | |||||||||||||||||
| Other, net | 78,413 | (7,856 | ) | 3,308 | 73,865 | 4,176 | 5,041 | 37,732 | 46,949 | ||||||||||||||||
| Total Revenues | $ | 1,843,523 | $ | 446,542 | $ | 3,308 | $ | 2,293,373 | $ | 1,812,839 | $ | 514,241 | $ | 37,732 | $ | 2,364,812 | |||||||||
Reconciliation of trading income, net to Adjusted Net Trading Income by operating segment
(in thousands, unaudited)
| Three Months Ended December 31, 2023 | Three Months Ended December 31, 2022 | |||||||||||||||||||||||||||||
| Market Making | Execution Services | Corporate | Total | Market Making | Execution Services | Corporate | Total | |||||||||||||||||||||||
| Trading income, net | $ | 262,501 | $ | 4,079 | $ | — | $ | 266,580 | $ | 308,702 | $ | 4,578 | $ | — | $ | 313,280 | ||||||||||||||
| Commissions, net and technology services | 6,894 | 107,481 | — | 114,375 | 11,299 | 106,565 | — | 117,864 | ||||||||||||||||||||||
| Interest and dividends income | 151,773 | 2,877 | — | 154,650 | 63,443 | 242 | — | 63,685 | ||||||||||||||||||||||
| Brokerage, exchange, clearance fees and payments for order flow, net | (96,740 | ) | (20,380 | ) | — | (117,120 | ) | (122,780 | ) | (20,153 | ) | — | (142,933 | ) | ||||||||||||||||
| Interest and dividends expense | (156,941 | ) | (630 | ) | — | (157,571 | ) | (76,026 | ) | (1,791 | ) | — | (77,817 | ) | ||||||||||||||||
| Adjusted Net Trading Income | $ | 167,487 | $ | 93,427 | $ | — | $ | 260,914 | $ | 184,638 | $ | 89,441 | $ | — | $ | 274,079 | ||||||||||||||
| Year Ended December 31, 2023 | Year Ended December 31, 2022 | |||||||||||||||||||||||||||||
| Market Making | Execution Services | Corporate | Total | Market Making | Execution Services | Corporate | Total | |||||||||||||||||||||||
| Trading income, net | $ | 1,283,680 | $ | 17,664 | $ | — | $ | 1,301,344 | $ | 1,607,819 | $ | 21,079 | $ | — | $ | 1,628,898 | ||||||||||||||
| Commissions, net and technology services | 29,571 | 426,027 | — | 455,598 | 42,180 | 487,665 | — | 529,845 | ||||||||||||||||||||||
| Interest and dividends income | 451,859 | 10,707 | — | 462,566 | 158,664 | 456 | — | 159,120 | ||||||||||||||||||||||
| Brokerage, exchange, clearance fees and payments for order flow, net | (420,608 | ) | (87,750 | ) | — | (508,358 | ) | (524,762 | ) | (94,406 | ) | — | (619,168 | ) | ||||||||||||||||
| Interest and dividends expense | (497,895 | ) | (2,572 | ) | — | (500,467 | ) | (225,427 | ) | (5,633 | ) | — | (231,060 | ) | ||||||||||||||||
| Adjusted Net Trading Income | $ | 846,607 | $ | 364,076 | $ | — | $ | 1,210,683 | $ | 1,058,474 | $ | 409,161 | $ | — | $ | 1,467,635 | ||||||||||||||
Financial Condition
As of December 31, 2023, Virtu had
Share Repurchase Program
Since inception of the program in November 2020 through settlement date January 24, 2024, the Company repurchased approximately 44.2 million shares of Class A Common Stock and Virtu Financial Units for approximately
Earnings Conference Call Information
Virtu Financial will host a conference call to review its fourth quarter 2023 financial performance today, January 25nd, at 7:30 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 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, which includes gains and losses from strategic investments and the sales of businesses.
- “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, and other non-cash items, assuming that all vested and unvested Virtu Financial Units have been exchanged for 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 December 31, | Year Ended December 31, | |||||||||||||||
| (in thousands, except share and per share data) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Revenues: | ||||||||||||||||
| Trading income, net | $ | 266,580 | $ | 313,280 | $ | 1,301,344 | $ | 1,628,898 | ||||||||
| Interest and dividends income | 154,650 | 63,685 | 462,566 | 159,120 | ||||||||||||
| Commissions, net and technology services | 114,375 | 117,864 | 455,598 | 529,845 | ||||||||||||
| Other, net | 372 | 2,939 | 73,865 | 46,949 | ||||||||||||
| Total revenues | 535,977 | 497,768 | 2,293,373 | 2,364,812 | ||||||||||||
| Operating Expenses: | ||||||||||||||||
| Brokerage, exchange, clearance fees and payments for order flow, net | 117,120 | 142,933 | 508,358 | 619,168 | ||||||||||||
| Communication and data processing | 59,923 | 55,064 | 230,760 | 219,505 | ||||||||||||
| Employee compensation and payroll taxes | 97,825 | 85,608 | 394,039 | 390,947 | ||||||||||||
| Interest and dividends expense | 157,571 | 77,817 | 500,467 | 231,060 | ||||||||||||
| Operations and administrative | 26,768 | 32,958 | 98,972 | 86,069 | ||||||||||||
| Depreciation and amortization | 16,230 | 15,907 | 63,306 | 66,377 | ||||||||||||
| Amortization of purchased intangibles and acquired capitalized software | 15,953 | 16,020 | 63,960 | 64,837 | ||||||||||||
| Termination of office leases | 141 | 5,237 | 455 | 6,982 | ||||||||||||
| Debt issue cost related to debt refinancing, prepayment and commitment fees | 2,573 | 1,385 | 8,317 | 29,910 | ||||||||||||
| Transaction advisory fees and expenses | 284 | 11 | 314 | 1,124 | ||||||||||||
| Financing interest expense on long-term borrowings | 24,795 | 25,130 | 99,294 | 92,035 | ||||||||||||
| Total operating expenses | 519,183 | 458,070 | 1,968,242 | 1,808,014 | ||||||||||||
| Income before income taxes and noncontrolling interest | 16,794 | 39,698 | 325,131 | 556,798 | ||||||||||||
| Provision for income taxes | 10,093 | 61 | 61,210 | 88,466 | ||||||||||||
| Net income | $ | 6,701 | $ | 39,637 | $ | 263,921 | $ | 468,332 | ||||||||
| Noncontrolling interest | (1,163 | ) | (12,042 | ) | (121,885 | ) | (203,306 | ) | ||||||||
| Net income available for common stockholders | $ | 5,538 | $ | 27,595 | $ | 142,036 | $ | 265,026 | ||||||||
| Earnings per share: | ||||||||||||||||
| Basic | $ | 0.05 | $ | 0.27 | $ | 1.42 | $ | 2.45 | ||||||||
| Diluted | $ | 0.05 | $ | 0.27 | $ | 1.42 | $ | 2.44 | ||||||||
| Weighted average common shares outstanding | ||||||||||||||||
| Basic | 90,217,295 | 99,537,975 | 94,076,165 | 103,997,767 | ||||||||||||
| Diluted | 90,217,295 | 99,728,178 | 94,076,165 | 104,422,443 | ||||||||||||
| Comprehensive income: | ||||||||||||||||
| Net income | $ | 6,701 | $ | 39,637 | $ | 263,921 | $ | 468,332 | ||||||||
| Other comprehensive income | ||||||||||||||||
| Foreign exchange translation adjustment, net of taxes | 4,787 | 19,251 | 4,957 | (24,254 | ) | |||||||||||
| Net change in unrealized cash flow hedges gains, net of taxes | (24,381 | ) | (1,801 | ) | (36,993 | ) | 90,865 | |||||||||
| Comprehensive income | $ | (12,893 | ) | $ | 57,087 | $ | 231,885 | $ | 534,943 | |||||||
| Less: Comprehensive income attributable to noncontrolling interest | 11,151 | (19,067 | ) | (104,406 | ) | (228,117 | ) | |||||||||
| Comprehensive income available for common stockholders | $ | (1,742 | ) | $ | 38,020 | $ | 127,479 | $ | 306,826 | |||||||
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 Ended December 31, | Year Ended December 31, | |||||||||||||||
| (in thousands, except percentages) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Reconciliation of Trading income, net to Adjusted Net Trading Income | ||||||||||||||||
| Trading income, net | $ | 266,580 | $ | 313,280 | $ | 1,301,344 | $ | 1,628,898 | ||||||||
| Commissions, net and technology services | 114,375 | 117,864 | 455,598 | 529,845 | ||||||||||||
| Interest and dividends income | 154,650 | 63,685 | 462,566 | 159,120 | ||||||||||||
| Brokerage, exchange, clearance fees and payments for order flow, net | (117,120 | ) | (142,933 | ) | (508,358 | ) | (619,168 | ) | ||||||||
| Interest and dividends expense | (157,571 | ) | (77,817 | ) | (500,467 | ) | (231,060 | ) | ||||||||
| Adjusted Net Trading Income | $ | 260,914 | $ | 274,079 | $ | 1,210,683 | $ | 1,467,635 | ||||||||
| Reconciliation of Net Income to EBITDA and Adjusted EBITDA | ||||||||||||||||
| Net income | 6,701 | 39,637 | 263,921 | 468,332 | ||||||||||||
| Financing interest expense on long-term borrowings | 24,795 | 25,130 | 99,294 | 92,035 | ||||||||||||
| Debt issue cost related to debt refinancing, prepayment and commitment fees | 2,573 | 1,385 | 8,317 | 29,910 | ||||||||||||
| Depreciation and amortization | 16,230 | 15,907 | 63,306 | 66,377 | ||||||||||||
| Amortization of purchased intangibles and acquired capitalized software | 15,953 | 16,020 | 63,960 | 64,837 | ||||||||||||
| Provision for income taxes | 10,093 | 61 | 61,210 | 88,466 | ||||||||||||
| EBITDA | $ | 76,345 | $ | 98,140 | $ | 560,008 | $ | 809,957 | ||||||||
| Severance | 3,537 | 4,061 | 8,793 | 8,070 | ||||||||||||
| Transaction advisory fees and expenses | 284 | 11 | 314 | 1,124 | ||||||||||||
| Termination of office leases | 141 | 5,237 | 455 | 6,982 | ||||||||||||
| Other | 1,860 | 1,584 | (65,536 | ) | (34,229 | ) | ||||||||||
| Share based compensation | 16,825 | 16,378 | 63,933 | 67,219 | ||||||||||||
| Adjusted EBITDA | $ | 98,992 | $ | 125,411 | $ | 567,967 | $ | 859,123 | ||||||||
| Selected Operating Margins | ||||||||||||||||
| GAAP Net income Margin (1) | 1.3 | % | 8.0 | % | 11.5 | % | 19.8 | % | ||||||||
| Non-GAAP Net income Margin (2) | 2.6 | % | 14.5 | % | 21.8 | % | 31.9 | % | ||||||||
| EBITDA Margin (3) | 29.3 | % | 35.8 | % | 46.3 | % | 55.2 | % | ||||||||
| Adjusted EBITDA Margin (4) | 37.9 | % | 45.8 | % | 46.9 | % | 58.5 | % | ||||||||
| 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 December 31, | Year Ended December 31, | |||||||||||||
| (in thousands, except share and per share data) | 2023 | 2022 | 2023 | 2022 | ||||||||||
| Reconciliation of Net Income to Normalized Adjusted Net Income | ||||||||||||||
| Net income | $ | 6,701 | $ | 39,637 | $ | 263,921 | $ | 468,332 | ||||||
| Provision for income taxes | 10,093 | 61 | 61,210 | 88,466 | ||||||||||
| Income before income taxes and noncontrolling interest | $ | 16,794 | $ | 39,698 | $ | 325,131 | $ | 556,798 | ||||||
| Amortization of purchased intangibles and acquired capitalized software | 15,953 | 16,020 | 63,960 | 64,837 | ||||||||||
| Debt issue cost related to debt refinancing, prepayment and commitment fees | 2,573 | 1,385 | 8,317 | 29,910 | ||||||||||
| Severance | 3,537 | 4,061 | 8,793 | 8,070 | ||||||||||
| Transaction advisory fees and expenses | 284 | 11 | 314 | 1,124 | ||||||||||
| Termination of office leases | 141 | 5,237 | 455 | 6,982 | ||||||||||
| Other | 1,860 | 1,584 | (65,536 | ) | (34,229 | ) | ||||||||
| Share based compensation | 16,825 | 16,378 | 63,933 | 67,219 | ||||||||||
| Normalized Adjusted Net Income before income taxes | $ | 57,967 | $ | 84,374 | $ | 405,367 | $ | 700,711 | ||||||
| Normalized provision for income taxes (1) | 13,912 | 20,249 | 97,286 | 168,171 | ||||||||||
| Normalized Adjusted Net Income | $ | 44,055 | $ | 64,125 | $ | 308,081 | $ | 532,540 | ||||||
| Weighted Average Adjusted shares outstanding (2) | 163,869,845 | 172,932,785 | 167,782,513 | 177,688,188 | ||||||||||
| Normalized Adjusted EPS | $ | 0.27 | $ | 0.37 | $ | 1.84 | $ | 3.00 | ||||||
| (1) Reflects U.S. federal, state, and local income tax rate applicable to corporations of approximately | ||||||||||||||
| (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 | ||||||||||||||
| Virtu Financial, Inc. and Subsidiaries | |||||||
| Condensed Consolidated Statements of Financial Condition (Unaudited) | |||||||
| (in thousands, except share data) | December 31, 2023 | December 31, 2022 | |||||
| Assets | |||||||
| Cash and cash equivalents | $ | 820,436 | $ | 981,580 | |||
| Cash and securities segregated under regulations and other | 35,024 | 56,662 | |||||
| Securities borrowed | 1,722,440 | 1,187,674 | |||||
| Securities purchased under agreements to resell | 1,512,114 | 336,999 | |||||
| Receivables from broker-dealers and clearing organizations | 737,724 | 1,115,185 | |||||
| Receivables from customers | 106,245 | 80,830 | |||||
| Trading assets, at fair value | 7,358,611 | 4,630,552 | |||||
| Property, equipment and capitalized software, net | 100,365 | 85,194 | |||||
| Operating lease right-of-use assets | 229,499 | 187,442 | |||||
| Goodwill | 1,148,926 | 1,148,926 | |||||
| Intangibles (net of accumulated amortization) | 257,520 | 321,480 | |||||
| Deferred taxes | 133,760 | 146,801 | |||||
| Other assets | 303,720 | 303,916 | |||||
| Total assets | 14,466,384 | 10,583,241 | |||||
| Liabilities and equity | |||||||
| Liabilities | |||||||
| Short-term borrowings, net | — | 3,944 | |||||
| Securities loaned | 1,329,446 | 1,060,432 | |||||
| Securities sold under agreements to repurchase | 1,795,994 | 627,549 | |||||
| Payables to broker-dealers and clearing organizations | 1,167,712 | 273,843 | |||||
| Payables to customers | 23,229 | 46,525 | |||||
| Trading liabilities, at fair value | 6,071,352 | 4,196,974 | |||||
| Tax receivable agreement obligations | 216,480 | 238,758 | |||||
| Accounts payable and accrued expenses and other liabilities | 451,293 | 448,635 | |||||
| Operating lease liabilities | 278,317 | 239,202 | |||||
| Long-term borrowings, net | 1,727,205 | 1,795,952 | |||||
| Total liabilities | 13,061,028 | 8,931,814 | |||||
| Total equity | 1,405,356 | 1,651,427 | |||||
| Total liabilities and equity | $ | 14,466,384 | $ | 10,583,241 | |||
| As of December 31, 2023 | |||||||
| Ownership of Virtu Financial LLC Interests: | Interests | % | |||||
| Virtu Financial, Inc. - Class A Common Stock and Restricted Stock Units | 94,033,360 | 57.8 | % | ||||
| Non-controlling Interests (Virtu Financial LLC) | 68,699,738 | 42.2 | % | ||||
| Total Virtu Financial LLC Interests | 162,733,098 | 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 Relations
Andrew Smith
investor_relations@virtu.com
media@virtu.com
FAQ
What is the net income reported by Virtu Financial for the fourth quarter of 2023?
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What is the trading income, net, reported by Virtu Financial for the fourth quarter of 2023?
Did Virtu Financial declare a dividend for the fourth quarter of 2023?
