Virtu Financial, Inc. Class A

Hello, and welcome to the Virtue Financial 2023 fourth quarter results. My name is Alex, and I'll be coordinating the call today. If you'd like to ask a question at the end of the presentation, you can press star one on your telephone keypad. If you'd like to remove your question, you may press star two. I'll now hand it over to your host, Andrew Smith of Investor Relations. Please go ahead.

Thank you, Alex, and good morning, everyone. Thank you for joining us. Our fourth 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 Ms. Cindy Lee, our Deputy 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 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, 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 gap measures, we may refer to terms in the earning materials with an explanation of why we deem this information to be meaningful as well as how management uses these metrics. And with that, I would 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 Virtue's fourth quarter 2023 financial and business performance and strategic initiatives. Following my remarks, Joe and Cindy will provide additional details on our results. Looking at our full year and fourth quarter 2023 results, which are summarized on slide two of supplemental material, we generated $4.8 million and $4.14 million of adjusted debt trading income per day for the full year 2023 and the fourth quarter 2023, respectfully. We reported normalized adjusted EPS of $0.27 for the fourth quarter and $1.84 for the full year 2023. Slide 3 highlights that our market-making segment earned an average of $2.7 million per day in adjusted net trading income in the quarter, while our execution services business delivered $1.5 million per day, an increase of 4% per day over the prior quarter. This quarter's performance reflects a significant reduction in opportunity, particularly for our customer market-making business compared to the prior quarter, driven by a combination of reduced addressable volumes and spreads as evidenced by an especially weak two-month stretch of volatility to the end of the year. We have seen episodic periods of softer volumes and volatility in the past, most recently in the fourth quarter of 2022, and today we are better positioned than ever from an expense, capital structure, and trading capabilities perspective to convert opportunity into ante in any environment. As we have said before, our disciplined focus on expense management and building operating leverage means Virtu remains uniquely ready to deliver results in any environment. While it remains very early in 2024, we have seen improvements in the overall market conditions and market-making opportunities so far in January, particularly around crypto products, as I will address later in my remarks. As we said previously, while market share alone is limited as a gauge of performance, we would like to note that our market share in the wholesale market-making business remains within historic ranges. We are confident that our growth initiatives, combined with our efforts to enhance our spread capture rate through greater internalization, thanks to our global scale and diversity, will yield benefits in any environment. Our non-customer market-making business, which provides liquidity across asset classes globally, performed well in the quarter relative to the opportunities. Our organic growth initiatives, including our expansion to options market making, continue to expand and perform well, making meaningful progress every quarter. In the fourth quarter, we generated $423,000 per day from organic growth, which represents 10% of ante in the period. We remain very optimistic about the opportunities across all our growth initiatives, and we are excited for these initiatives to reach new heights in 2024. On the execution services side, our adjusted net trading income averages by about 4% from the third quarter. We continue to see incremental and impressive results despite the general softening in the market opportunity for VES. In addition to general wallet compression, institutional activity remained slow as investors reacted and adjusted to the sustained higher rate environment. Despite these challenges, VES performed in line with its opportunity quarter over quarter, as well as the full year 2023. We have incremental growth plans outside the United States, which are materializing as we transition resources from a multi-year integration of technology across a long tail of clients towards expanding our footprint. To this end, in 2023, VES leveraged our investments and enhancements to accomplish key growth milestones, including winning the remit to be the fixed income EMS for a world-class asset manager in Europe, as well as successfully deploying Virtu's Triton Valor Execution Management System trading analytics, positive alert, and global equity execution algorithms, one of the largest asset managers in Asia. Most importantly, overall productivity and profitability within the VES segment has grown significantly since we began the technology rebuild, and modernization and streamlining the business. We are very excited about the growth opportunities in 2024 for VES. Taking a step back, I look at our 2023 results, and despite the recent softness, We believe our strategic focus and areas of growth align us for long-term success as we expand our addressable market by adding more asset classes and offerings to our suite of products. 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 and volumes that typically accompany increasing global tensions and economic uncertainty. change in monetary policy, and elections. We continue to hire and make investments in our business. It is worth noting that of our current employees, only 36% of them were at Virtue prior to 2019. This means that we have made a significant multi-year investment in new traders, developers, and clients, which we expect to continue to bear fruit in the near to medium term. And, as you would expect, we remain this one as ever around costs throughout the year. which enabled us to realize a 47% adjusted EBITDA margin. Touching briefly on our growth initiatives and options in 2023 was another impressive year for us as we continued to expand our capabilities despite the declining opportunity set in general. In 2023, the options team exceeded expectations as its capability and capacity to address opportunities increased globally. As I mentioned on our last call, we saw a meaningful uptick in our crypto market-making to the fourth quarter. It's probably no surprise that our crypto market making is off to a record start in 2024 as a result of the elevated interest in new opportunities related to the recently approved spot Bitcoin ETF in the United States. As I'm sure you well know, on January 10th, the SEC approved 11 spot Bitcoin ETFs for trading, and as a global 24 by 7 market maker, Virtu was among the first trades in these products when they began trading at 4 a.m. on the first day. proudly act as an authorized participant for all 11 issuers. While it's only been a few weeks since the Spot Bitcoin ETFs were approved, the ETFs have presented significant market-making opportunities. It's worth noting that these initial 11 Bitcoin ETFs are just the first wave of crypto ETFs that the market expects to be approved, so expect there will be many more coming. Issuers have already filed applications with the SEC to list Spot Ethereum ETFs, as well as a number of novel crypto-related ETFs. Additionally, while crypto ETFs may not interest all investors, we're also seeing an uptick in general retail trading activity across all NMS securities, coinciding with the launch of SpotBitcoin ETFs, which suggests that retail investors are curious. To bring it full circle and highlight how these ETFs benefit several of our organic growth initiatives, we've already seen significant opportunities for our ETF block business, as new and existing clients approach us to transact in Bitcoin ETFs, and we are optimistic about the options market-making opportunities that await once options are listed on these ETFs. Our ETF block business had a respectable year as well, and we continue to expand our offerings to cover more products in more regions, including crypto ETFs, as I just mentioned, and fixed-income ETFs, which is especially helpful for our rates trading, where we continue to make key hires as well as make corporate credits. And last, but certainly not least, our Virtue Capital Markets business saw increased activity in the fourth quarter as financing activity began to return to the market, and a number of issuers used our at-the-money service to raise primary capital. I'll now turn it over to Joe and Cindy, who will provide additional details about the quarter. Joe?