Virtu Financial, Inc.

third quarter 2025 earnings call. My name is Elliot, and I'll be coordinating your call today. If you would like to register a question during today's event, please press star one on your telephone keypad. And I'll hand over to Andrew Smith, head of investor relations. Please go ahead.

Thank you, Elliot, and good morning, everyone. Thank you for joining us. Our third quarter 2025 results were released this morning and are available on our website. With us today, this morning, We have Mr. Aaron Simons, our Chief Executive Officer, Mr. Joseph Meluso, our Co-President and Co-Chief Operating Officer, and Ms. Cindy Lee, our Chief Financial Officer. We will begin with prepared remarks and then take your questions. First, a few reminders. Today's call may include forward-looking statements which represent Virtue's current beliefs regarding future events and are therefore subject to risks, assumptions, and uncertainties which may be outside the company's control. Please note that our actual results and financial conditions may differ materially from what is indicated in these forward-looking statements. It is important to note that any forward-looking statements made on this call are based on information presently available to the company, and we do not undertake to update or revise any forward-looking statements as new information becomes available. We refer you to disclaimers in our press release and encourage you to review the description of risk factors contained in our annual report, Form 10-K, and other public violence. During today's call, in addition to GAAP measures, we may refer to certain non-GAAP measures, including adjusted net trading income, adjusted net income, adjusted EBITDA, and adjusted EBITDA margin. These non-GAAP measures should be considered as supplemental to and not as superior to financial measures as reported in accordance with GAAP. We direct listeners to consult the investor portion of our website, where you'll find additional supplemental information referred to on this call as well as the reconciliation of non-GAAP measures to the equivalent GAAP term in the earnings materials with an explanation of why we deem this information meaningful as well as how management uses these measures. And with that, I'd like to turn the call over to Aaron.

Thanks, Andrew. Morning. Let me begin by noting this quarter's prepared marks are brief in order to leave more time for questions. As usual, all the relevant performance data are included in our earnings release and supplemental material. Before I turn it over to Cindy to discuss our results, I just wanted to make a few high-level marks to orient everyone as the company's direction moving forward. Over the past several years, we've completed major integrations, established trading and new asset classes, and returned significant capital to shareholders. Our edge in the market is created by our technology, our risk management, and our operational efficiency. Additionally, as a business, we carry over our attention to detail to expense management, as well as our client relationships. None of that is changing. However, now we feel ready to focus on growing our trading results through investing in our infrastructure, acquiring talent, and expanding our capital base. Importantly, this will not be limited to a small number of previously highlighted growth initiatives, rather an overall focus on growth everywhere in the firm. You may recall in the past we have provided earning scenarios at different levels of adjusted net trading income in the range of $6 to $10 million per day, and our goal is to grow our business to trend toward the higher end of this range as a base case. Just on a personal note, I took over the role of CEO on August 1st, almost exactly 17 years after first starting at Virtu. An unbelievable amount has changed since then, and somehow now is always the most exciting time to be a part of this company. With that, I'd like to turn it over to Cindy for details on this quarter's performance.

Thank you, Aaron. Good morning, everyone. Turning to this quarter's results, the firm reported normalized adjusted EPS of $1.05. Adjusted net trading income, or ANTI, was $467 million, or $7.4 million per day, predominantly driven by a positive operating environment, which has persisted for most of the year, as well as a renewed focus on growth. Market making reported ante of $344 million, or $5.4 million per day, driven by strong performance across all businesses, particularly global equities, crypto, and currencies and commodities. We're also seeing continued momentum in virtual execution services and are excited about our work expanding the DES product set to include multi-asset class capabilities. DES reported ante of $123 million, or $1.9 million per day, marking its best quarter since early 2021 and its sixth consecutive quarter of increased ante. Earlier this year, We know this goal of $2 million per day through the cycle for VES. We're encouraged by VES performance and consistent quarter-on-quarter growth, regardless of the environment. VES offers market-leading financial trading products globally across the entire lifecycle of a trade. Novo VES has a suite of workflow and analytics products led by Triton, which was recently awarded the top spot in TRADE's 2025 EMS survey for the third year in a row. These products represent a strong embedded base of revenue. On a trailing 12-month basis, the workflow and analytics business generated $137 million of ANTI. In terms of legacy revenue disclosures, we achieved strong results on our existing growth initiatives, which delivered ANTI per day that was slightly ahead of the prior quarter. Well, the areas included within the existing growth initiatives are important and represent businesses have grown meaningfully over the years. We will look to grow more rapidly in all areas of our business. Well, we will, of course, maintain our annual dividend. We will seek to grow our capital base to take advantage of the trading opportunities as they arrive. Now we can turn it over for Q&A.

Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to withdraw your question, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. First question comes from Patrick Molly with Piper Sandler. Your line is open. Please go ahead.

Yeah, thanks. Good morning and welcome, Aaron. Really looking forward to working with you. So I have a two-part question. Appreciate all the disclosure around the focus shifting to growth opportunities. I was hoping you could break that down for us a little bit more and maybe speak to some of the areas where you see the most significant opportunity for growth, how much of that's going to be expanding into existing areas where you already have a presence versus entirely new opportunities. And then as a second part, you mentioned in the deck that you'll look to dial back share repurchases in order to build more capital. I was hoping you could flesh out for us Patrick Corbett- Maybe how much capital, you could potentially be looking to build and what that means for your longer term capital return priorities thanks.

Patrick Corbett- Sure thanks Patrick I think you know it's hard to predict in advance we're always been a firm that reacts to the opportunity that's in front of us, so you know currently. I think there's a pretty good growth opportunity everywhere in the firm. I mean, obviously, the areas that we've highlighted previously, like crypto options, ETF block, continue to be fast-growing areas, especially given the environment. And so you, you know, you'll probably continue to see growth there. In terms of the additional capital, I think we provided the supplemental materials already in 2025 through retained earnings as well as debt financing. We've raised over $500 million of new trading capital, which is Already been immediately deployed, I think, you know, in terms of a long term plan, you know, we, we want to significantly grow the P and L. So, if you look at our. Our return on capital rates, they've always been in the upper sixties to a 100% return on capital. So, if we want to double the P and L of the firm, we're probably gonna have to double the capital base. But, but that's a long term plan. It may take a few years and. You know, if you look at the reports of the free cash flow that the business generates. I think there's pretty significant opportunity to just accumulate that organically overtime, and we've always been incremental in our approach to growing and will just continue to do that.

OK, thank you, Aaron. That's it for me.

We now turn to Alex Bloestein with Goldman Sachs. Your line is open. Please go ahead.

Hey, thank you guys. Good morning and welcome to the call. I would love to get just a little bit more meat around those bones. Obviously, it sounds like it's a bit of a pivot in the strategy and I guess a multi-part question on this, but I guess first is why now? What prevented Virtu in the past going after these opportunities that you feel like this is the right time to sort of do this today? And when you think about the existing asset classes, you spoke about Obviously, the newer things, whether it's digital and crypto or options, we know you guys have been on the past for a while. But when you think about the traditional kind of market making businesses that you're already in, do you see an opportunity to accelerate market share gain within that as well? And what would it take, I guess, for you guys to do that?

Yeah, I can answer some of that. So as to the why now question, well, there's not like a step change, but there's been like a confluence of factors. So, you know, over the past several years, we've pulled off some pretty large integrations and, you know, a lot from a technical standpoint, some from a people cultural standpoint, added significant new business line. And now that we sort of have a handle on that, and things are coming to an end, we're able to refocus some of our talent based on attacking new opportunities. So that's certainly part of it. You know, the world hasn't gotten quieter, so there's definitely just been an uptick in overall External opportunity, and so we just sort of feel it's the right time. And I think the employees are excited about refocusing on growth. In terms of the areas, like, obviously the ones I highlighted, but yes, in our core. Businesses, there's definitely room to grow. So 1 of the things that we've always done. Right is that our platform is scaled. It operates the same way everywhere in the world. It's sort of easy for us to redeploy to new asset classes with flexibility. and compete technologically in any market. So when you say our core business, even that encompasses many, many different types of trades in different areas. So there's always interesting new corners of the markets. There's always sort of idiosyncratic opportunities in ETF trades or foreign markets or commodities. And we're always just going to try to adapt to what's in front of us and just focus on our processes.

You know, Alex, I would just add to that, Joe, you know, the area that we always outlined is growth, continue to be growth areas, right? So we've given that number, but I think, you know, the pivot here is, as you describe it, is really to include options. It includes crypto, it includes ETF block, it includes rates, but it doesn't exclude other areas of our business, right? And I think we put in the supplement the capital management priorities slide, and this is a little bit to Patrick's question as well, right? We have shown, and this is the management team that's in here, right? We have shown a long-term track record that demonstrates that we know how to manage capital, right? So we have a long-term track record of managing capital. We have a long-term track record of integrating acquisitions. We have a long-term track record of operating a scale business. And we have a long-term track record of growing in select businesses. So I think with Aaron at the helm, there's a set of opportunities that we all agree are getting bigger. And that includes a lot of the things that I'm sure we'll talk about on this call. But we wanted to sort of look at it as being limited to just a handful of things that we've talked about in the past as growth initiatives.

Right, right. And as an addition to capital, do you guys anticipate there is a larger OPEX lift that this will be required? Or do you think you can largely leverage the existing footprint? So the incremental revenues presumably will come in at a fairly high incremental margin?

There should be a, you should still see very strong positive operating leverage in our business. That doesn't mean that we won't need to attract top talent, retain top talent. That doesn't mean that we're committed to a particular ratio of comp to net revenue that we've had in the past, but I think it'll still be reasonable. It'll look more like the past than not, but I think if it grows, it's going to grow because we're experiencing very high levels of positive operating leverage, good growth, And I think there's no big bang here. As Aaron said, right, we've always been incremental, and we'll continue to be incremental.

I got you. Great. Thank you.

We now turn to Eli Abood with Bank of America. Your line is open. Please go ahead.

Good morning. Thanks for taking the question. And Aaron, congrats on the new role. Craig and I look forward to working with you. You highlighted options as an area where there'll be a larger focus on growth going forward. I was wondering if you have a timeline in mind for when Virtu can start customer market making and options. Is that a near term 2026 objective or more of a five or even 10 year target? And then could M&A be part of your roadmap and options?

Sure. So I don't, we're not, In the business, specifically with the goal of doing customer market making 605, if we get to the point where our business is scaled and more profitable, then we have the infrastructure and the relationships where we'd love to get into that business. But really, our focus is on just being excellent at trading options. And we're focused on that. And where it leads is where it leads.

Yeah, Eli, and in terms of M&A, It goes back to the answer on capital management priorities. I think if you look at our history, we used leverage and our capital to execute two very highly accretive, important acquisitions to what Virtu is today. We used our capital to buy back our shares and we thought they were undervalued. And we're using our capital today to grow. And should an opportunity present itself, you know, where the returns that we can, you know, get from an M&A deal are superior to what we have looking in front of us, you know, then we'll explore it. I mean, I think we've got a track record, you know, of doing that prudently and not paying, you know, I think if you look at the acquisitions we've done, you know, we've bought volatility at very low prices. And so I think the purchase price going in was attractive. And the execution was excellent in terms of value creation and synergies. There's nothing that we're looking at today that competes with Aaron's plan to grow revenue. And so therefore, our incremental capital dollar is going to growing the business. But we're here to create shareholder value and allocate capital to do that.

Got it. And for our follow-up, can you hit on the revenue capture in the market-making segment this quarter? Your 605 quoted spread opportunity declined 3% sequentially, but your market-making revenue fell 26% sequentially. How should we reconcile that delta there?

You know, it is always good to kind of look at that. I think there's a great focus on the retail business. You know, some very smart guys And a research report yesterday wrote that we sit downstream from a long-term secular trend in retail. And we agree with that. But the way we look at it is we perform well against the opportunity overall. Yes, those indicators were down. The volumes of volatility as well as the 605 reports showed declining activity. But we're very happy about how we performed. And I think, you know, I mentioned that focus on retail. Because if you look at our performance this quarter overall, there's always this hyper focus on retail, but our business is a lot broader. We have a global operation in multiple asset classes around the world. We did very well in crypto. We did very well in our proprietary market making business, in commodities, for example. We haven't talked about VES. So I think if you look at us, I think there's this hyper focus on retail for good reason, but there's a lot more there.

Perfect. Thanks, guys.

We now turn to Chris Allen with Citi. Your line is open. Please go ahead.

Good morning, guys. Thanks for taking the question. I wanted to ask on the third quarter results, I think in general people, the results were up-informed expectations given the environmental realized volatility. I'm just wondering, obviously raising capital during the quarter, you noted that it's been deployed. What impact that had? And then a color just on the sequential improvement in the organic growth initiatives or opportunities where the best tailwinds this past quarter.

Yeah, look, again, I think if you it's a difficult question to answer what what impact the new capital have, in terms of the debt raising, the debt raise was September 23. So that was pretty much towards the end of the quarter, are on slide for the supplement, you see we earned a 95% incremental return on our capital. So my answer would be, you know, any incremental dollar that we deploy this quarter, we earn a 95% return on. And that includes, you know, the capital from the beginning of the year. In terms of the performance and what to highlight, you know, I think we've mentioned already, I think crypto was standout and we expect that to continue. We had a strong performance in options. We had a strong quarter ETF block. I think all of the things that we've included as growth initiatives were above where we were in the second quarter, just a little bit. So it was all of the above, Chris. And again, I'll mention VES. VES is showing growth through different environments. And Steve Cavoli's done an amazing job there, and that business is set up for success.

Just as a follow-up, when we think about capital, increased capital funds moving forward, are you thinking about developing new strategies for attacking some of the existing businesses, or is this just putting capital to work with your existing strategies?

You know, it's all of the above. I'll be, make sure I want to point out that we're not looking at taking on more risk. I think everything is within the risk parameters that we've historically been comfortable with in terms of, you know, virtue as a market participant, you know, as a liquidity provider, as a service provider. You can, you may, you know, it's mainly leveraging, you know, our existing infrastructure and connectivity. You know, but we will have, you know, we'll have more capital to deploy. We'll have incremental, you know, talent to develop strategies. And, you know, that's really how I would describe it.

Thanks.

We now turn to Dan Fannin with Jefferies. Your line is open. Please go ahead.

Thanks. Good morning. So just wanted to clarify a few things. So as we think about, you know, Virtu's strategy over the last, you know, kind of couple of years, we've seen more consistent results and less kind of peak and trough. And given this change in putting more capital work, do you expect to see more variability in the quarter-to-quarter revenue and or ANTI, EBITDA, however you want to think about it, given the as the opportunity set changes, or is this going to drive more consistent results? I guess, what's the goal here?

Well, the goal is, as Aaron stated, to move to the higher end of the range that we published in the past of different levels of net trading income. So that's always been a difficult question to answer for Virtu because you've got to give me a time parameter. If it's If you're talking about daily or weekly, maybe. If you're talking about monthly, maybe. If you're talking about quarterly, it really depends, Dan. So I think Aaron stated it clearly. The goal is to move towards the high end of that range to trend toward it as a base case. And there could be more variability, but I don't consider that being sort of less predictable or less volatile even. We're a volatile business, and we're going to remain a volatile business. I really don't think of us in the past. It's interesting to hear you say that. I don't think of us in the past year or two as being less volatile. I think we've just done a good job growing the business, and now we're going to accelerate that growth.

Okay. And then just to clarify some of the other questions. So as we think about now you're deploying more capital today, you're going to obviously accrue more capital. Where do we think about the level of investment? So level of investment will go with the revenue opportunity. We don't need to invest today more based upon having more capital, wanting to do more. So just want to understand the timing of new investment in terms of people's strategies, all of these things. versus the revenue opportunity? Are those in line with each other or one comes before the other?

Mostly in line. And there's no long term lag here. I would say that all being said, we are, as I just answered your previous question, we're still a volatile business and the environment is still going to have a big impact on our performance. So it's going to be hard to separate the the noise there in terms of the environment versus the impact of of incremental talent, incremental capital. But it's the age old question for us. I think, you know, long term up and to the right, you know, moving towards the high end of that of that range. And there'll be there'll be noise. There'll be noise quarter to quarter for sure. But none of it as a plan It requires a multi-year sort of investment before you start seeing results. It's not instant, but it should largely be in line.

Understood. Okay. Thank you.

As another reminder, if you'd like to ask a question, please press star 1 on your telephone keypad now. We now turn to Ken Worthington with JP Morgan. Your line is open. Please go ahead.

Hi. Good morning. Thanks for taking the question. So the stock price has dropped a lot more recently. You've clearly highlighted routine earning growth strategies are the priority. How do opportunistic buybacks play into capital management when you see big declines in the stock price like we've seen more recently?

Ken, I think we... have stated that the opportunity in front of us allows for the highest and best use of our incremental capital dollar uh and the best way our jobs every day you know as as manager of the business is to increase the stock price and maximize the value and you're putting dollars to work uh in in the business aaron and we all determined is the best way to to get the stock price to where we think it should be. For a very long time, we were trading at levels that we thought the incremental dollar was best spent on our stock. We're not ruling anything out publicly in terms of we still have dry powder under the buyback authorization. And perhaps, you know, as we have, you know, vesting shares from compensation plans, you know, we may look to just sort of neutralize the impact of that so that we don't have share creep. But the direction is clear that our incremental dollars are going to be spent growing the business and, you know, in our trading capital base.

Okay, perfect. Made it crystal clear. Thank you. Um, the other narrative that was sort of, you know, going around was tokenization. So maybe how is virtue positioned for an increased in tokenized assets moving on chain? Sort of what is your right to win? Will the infrastructure that you have need to change to support this sort of transition to tokenization? And if so, you know, uh, maybe to the prior question, uh, what sort of incremental investment is required if the world moves to more tokenized on-chain assets?

Yeah, I can answer that. I mean, I think it fits with our current business. So we're very active in many crypto markets around the world. You know, a lot of them obviously are the centralized exchange model, but we do participate in some direct on-chain interactions. You know, we're partnering with people in terms of Various interesting initiatives, like, we're part of the foundation, we're part of the Canton network. So we're always active in developing new, interesting trading infrastructure. And, you know, I think with regards to this and other sort of new opportunities, like, everyone's talking about prediction markets. Anything that is trading electronically and has sufficient depth of liquidity, we stand ready to make markets and our technology is adaptable to all of those opportunities. So we're, we're excited about it.

Great. Thank you.

We now turn to Michael Cypress with Morgan Stanley. Your line is open. Please go ahead.

Hey, good morning. Thanks for taking the question. I recall in the past that we heard that doubling the capital base wouldn't necessarily double earnings. So curious what's changed in that regard and what areas or what would be the top few areas that you anticipate allocating more capital toward? Like how might you rank order or prioritize that? And maybe you could touch upon some of the areas where you're looking to hire.

Yeah, again, uh, again, Michael, I think, uh, you know, we, we put a slide in the supplement. I think we have proven that we know how to allocate capital. Uh, we've proven that we're going to devote it to the highest and best use, whether it was acquisitions, integrating acquisitions, buying back our stock. And I think in the past, we identified areas where we needed to grow and grew businesses that were zero to $100 million plus businesses and increased our capital base. So I think the markets evolved. And I think we're ready now. I think we probably weren't ready in the past. And we have a... you know, the ability to do it given our infrastructure, our scaled infrastructure. And, you know, we've got the team in place, and we have, you know, a new CEO who wants us to pivot to growth, and that's what we're doing.

And just in terms of the question around prioritizing areas that you're hiring.

I mean, there's a lot of them, but, you know, we're aggressively hiring, you know, what you would call broadly developers. That's very important for our business. It's a vague term, which I hate, but we're probably hiring a lot of quants. We're hiring traders. So basically any aspect of the business. I think just going back to the question, which I think Joanne said very well, but the previous comments, I think you have to take in the context. So it's not the case that we could just, if someone gifted us a double the amount of capital tomorrow that we could just you know, turn it on and make twice the money. The comment is that, you know, yes, we can grow the earnings with more capital, but it requires a lot of hard work to do that. So it requires more people. It requires working on our strategies. It requires, you know, revamping, expanding our infrastructure. So it's not like a magic machine where we can just dump more money in and get more money out. But we're, you know, we're excited about doing the work and growing the business.

And what areas do you expect to allocate that capital to more meaningfully than others? How do you think about prioritizing that? And when you think about doubling the earnings, what areas do you think would be meaningfully contributing towards that?

It will be flexible. It will be based in part on what is going on in the market. I think if you look at an area like crypto, where we've done very well, crypto is a fragmented market, which necessitates the need for more capital intensity because there's no settlement utility and there's multiple venues. ETF Block is a big business that we've grown quite well that by its nature is more capital intensive. So it really depends on the end market, depends on the characteristics of the end market. It depends on the prime brokers. It depends on the venues. It depends on the participants. It depends on the trading format. U.S. equities, 605 business is a very capital efficient business, right? So we think we're going to grow everywhere, but the capital usage is going to go to areas where we think we can, where we need it. where we need it to grow, right? So areas like commodities, areas like foreign exchange, they're all different depending on the end market, depending on the market structure. So really, it just really depends on what is going on in the market and sort of the nature of the end market.

Great. Thank you.

That's all the time we have for questions. I'll now hand back to Aaron Simons for any final remarks.

Thanks everyone for joining. Hopefully this is informative and look forward to seeing you next quarter.

Ladies and gentlemen, today's call is now concluded. We'd like to thank you for your participation. You may now disconnect your lines.