Virtu Financial, Inc. Class A

Hello and welcome to the Virtue Financial 2023 third quarter results. My name is Terri and I'll be the conference operator for today. There will be an opportunity to ask questions today and you can do this by pressing star followed by one on your telephone keypads. I would now like to hand the call over to Andrew Smith with investor relations to begin. Please go ahead.

Thank you Terri and good morning everyone. Thank you for joining us. Our third quarter results were released this morning and are available on our website. With us today on this morning's call, we have Mr. Douglas Sifu, our chief executive officer, Mr. Joseph Maluso, our co-president and co-chief operating officer, and Mr. Sean Galvin, our chief financial officer. We'll 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 belief 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 filings. 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 a reconciliation of non-GAAP measures to the equivalent GAAP term in the earnings materials and with an explanation of why we deem this information to be meaningful as well as how as management uses these measures.

And with that, I'll turn the call over to Doug. Good morning, and thank you, Andrew. Thank you for joining us this morning. In my remarks today, I will focus on Virtu's third quarter 2023 financial and business performance and strategic initiatives. Following my remarks, Joe and Sean will provide additional details on our performance. Looking at our year to date and third quarter results, which are summarized on slide two of the supplemental material, we generated $4.7 million of adjusted net trading income per day, up 5% per day from the prior quarter, and normalized adjusted EPS at 45 cents per share, up 22% from the prior quarter. Slide three highlights that our market making segment earned an average of $3.3 million per day of adjusted net trading income in the quarter, rising 6% compared to the prior quarter, and our execution services business delivered $1.4 million per day, an increase of 4% per day over the prior quarter. The overall market environment that underlies Virtu's performance this quarter was not dissimilar to what we have seen at times in the past, and most recently in the second quarter. Periods like these are characterized primarily by reduced opportunity And while we typically see reversion, we remain focused on our growth initiatives as well as enhancing our spread capture rates in any environment thanks to our global scale and diversity. As we've said previously, market 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 solidly within historic ranges, even up slightly recently. Our non-customer market making business, which provides liquidity across asset classes globally, performed well in the quarter relative to the opportunity set. Our organic growth initiatives, including our expansion into options market making, continued to perform well and make meaningful progress. Our $488,000 per day from organic growth was 10% of adjusted net trading income in the quarter. Our ETF block business, including our fixed income business, had an excellent quarter, as did our ATM virtue capital markets business. We remain very optimistic about the opportunities across all our growth initiatives. On the execution services side, our adjusted net trading income averaged $1.4 million per day in the third quarter, about 4% per day above the prior quarter, impressive results given the general decline in market opportunity. For much of 2023, institutional activity remained slow, as institutional investors have become less active in the higher rate environment. Despite these challenging markets, thanks to our continued investments, VES performed in line with its opportunity quarter over quarter as well as year to date. Taking a step back, I look at our third quarter and year to date results and see the success of our long-term disciplined overall strategy. We continue to hire and make investments in our business. remaining disciplined around costs, which enable us to realize a 47% EBITDA margin and report a respectable 45 cents per share in a challenging environment. Our focus on enhancing our core businesses and the continued success of our growth initiatives positions us well for any macro environment, including significant spikes in volatility in volumes, increasing global tensions, and economic uncertainty. Touching briefly on our growth initiatives and options, coming off a record 2022, our options business has performed well against a declining opportunity set in the quarter. We continue to expand across venues and geographies, including single names in addition to the index complex. Our ETF block business was up meaningfully in the third quarter. We continue to expand our offering to cover more products in more regions, including fixed income, both in credit and rates. We're also seeing an uptick in our crypto market making business in the last 30 days as the SEC moves closer to what we think will be the inevitable approval of spot crypto ETFs in the United States. In addition, our Virtu Capital Markets business had an excellent quarter as financing activity began to return to the markets and a number of issuers used our service to raise primary capital. Finally, you all likely noticed the litigation brought by the SEC related to Virtu's historical internal information barriers. I do not have much to add that is not in the detailed materials and supplemental information that we have already published. Suffice to say, this is a civil litigation and we reject completely the SEC's allegations. The SEC does not assert that any customer information was ever inappropriately accessed And the period in focus ended four and a half years ago, predating Virtu's integration with any of the ITG businesses. We have engaged with many of our clients about the news, and we have not observed any impact to client engagement. As a general rule, we try to avoid litigation. And given the facts in this case and the relevant legal precedent, a proportionate commercial settlement could certainly have been achieved under different circumstances. However, it seems to be the sad and unfortunate trend, whether it involves equally serious matters such as crypto ETFs, market structure reform, private equity fee disclosures, or the funding of the consolidated audit trail, or other issues, that the Commission seems increasingly litigious and their approach and actions are inviting further litigation. So Virtu is not alone in this unfortunate trend. I'll now turn it over to Joe and Sean, who will provide some additional details about the quarter. Joseph?