Virtu Financial, Inc. Class A

Hello all and welcome to the Virtue Financial 2023 Quarterly Results Conference Call. My name is Harry and I'll be your operator today. If you would like to enter the key for questions, you may do so by pressing star 1 on your telephone keypad. It is now my pleasure to hand you over to Andrew Smith, Head of Investor Relations for Virtue Financial to begin. Andrew, please go ahead when you're ready.

Thank you Harry and good morning everyone. Thank you for joining us. Our second quarter results were released this morning and are available on our website. With us today on this morning's call, we have Mr. Douglas Sisu, our Chief Executive Officer, Mr. Joseph Maluso, our Co-President and Co-Chief Operating Officer, Ms. Cindy Lee, our Deputy Chief Financial Officer, and Mr. Sean Galvin, 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 included 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 margins. 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 a reconciliation of non-GAAP measures to the equivalent GAAP term in the earnings materials, with an explanation of why it's we deem this information to be meaningful, as well as how management uses these measures. And with all that, I'd like to turn the call over to Doug.

Thank you, Andrew, and good morning, everyone. Thank you for joining us this morning. In my remarks today, I will focus on Virtu's second quarter 2023 financial and business performance and strategic initiatives. Following my remarks, Joe and Cindy will provide additional details on our performance. Looking at our year-to-date and second quarter results, which are summarized on slide two, of the supplemental material, we generated $4.5 million of adjusted trading net income per day in the quarter and normalized adjusted EPS of 37 cents. Slide three highlights that our market-making segment earned an average of $3.1 million per day of adjusted net trading income, outperforming the public market metrics for the quarter, and our execution services businesses delivered $1.4 million per day. In the second quarter, Our customer market making saw decreased opportunity as the overall bid offer spread and retail participation levels declined relative to the prior quarter. Although these factors led to decreased opportunity for our customer market making business, we performed in line with our own internal performance projections. As we've said previously, market making share alone is limited as a gauge of performance, but it's worth noting that our market share in the wholesale market making business remains within historic ranges. Our non-customer market-making business, which provides liquidity across asset classes globally, performed well in the quarter, although its opportunity was also impacted by the muted volumes and volatility environment. Our organic growth initiatives, including our expansion into options market-making, continue to perform well and make meaningful progress. We remain excited and optimistic about our growing abilities to address the global opportunities that await, especially in options ETF lock, and fixed income. On the execution services side, our adjusted net trading income averaged $1.4 million per day in the second quarter. Much like the last two quarters, institutional activity remained muted as our clients continued to look for more clarity from the macroeconomic environment. Most pronounced pan-European volumes were 16% lighter in the second quarter, with institutionally sized large and scale volumes down over 20%. Despite these challenging markets, VES performed in line with its opportunity quarter over quarter, as well as year to year. Our multi-year focus on efficiency and new business development has yielded a scale, multi-asset class global business that is laser focused on our clients. As I've mentioned in the past, we are particularly excited about the expansion to new asset classes. We're seeing increased uptake of our automation analytics, especially in fixed income markets, which continues to drive new opportunities for growth and enhances our current business. While the overall environment in the second quarter was softer, especially characterized by a very slow start in April, we were encouraged by improving performance in the latter part of the quarter. In these very early days of the third quarter, we are seeing some modest enhanced opportunity in particular in our customer market making business. While we are generally pleased with how we performed against the adjustable opportunities in the second quarter, and how we continue to deploy these new businesses, we continue to focus on ways to improve in any environment and seek out new opportunities. It is important to note that we continue to invest in recruiting talent in any market environment. While Virtu's headcount has remained relatively stable after years of ups and downs due to integration, the steady headcount total matched the significant investments that we have made in people and talent in strategic areas of focus. Since January 2021, we have hired almost 300 full-time employees, including quants and developers in options, ETF blocks, fixed income, our at-the-money market business, and other growth areas. We have also invested in hiring the right team of client-facing folks to continue to grow our VES business. Most recently, we hired Keith Casuccio, a respected industry veteran, to lead client engagement and product efforts within VES. As always, we remain relentlessly focused on cost and realized a 44% adjusted EBITDA margin during the period. Coming off a record 2023, our options business has performed well against declining opportunities set in the corner. We continue to expand across venues and geographies. However, in the U.S., market-wide customer index options volumes were down 11% in Q2, impacting results in the quarter. We've continued to build out our block ETF desk by improving our competitive edge and expanding our offering to cover more products in more regions, including fixed income, both in credit and rates. The operating scale we enjoy from our standardized global technology platform allows multi-tool players to immediately contribute to the growing business in any region or asset class as we reallocate personnel to focus on the biggest opportunities. However, this quarter we're slower in ETF lock, as you may have seen from other announcements from our competitors recently. I will now turn it over to Joe, who will provide additional details about the quarter. Joseph?