Virtu Financial, Inc. Class A

Good day, and thank you for standing by. Welcome to the Virtu Financial 2024 third quarter results conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised. that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Andrew Smith, Head of Investor Relations. Please go ahead.

Thank you, Anton, 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 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 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 condition may differ materially from what is indicated in these forward-looking statements. It is important to note that any forward-looking statements made on the 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 industrial portion of our website, where you'll find additional supplemental information referred to on this call, as well as 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 management uses these measures. And with that, I'd like to turn the call over to Doug.

Good morning, and thank you, Andrew. This morning, we reported our third quarter results. The quarter ended September 30th. Virtue earned 80%. 82 cents of adjusted EPS on $6.1 million per day of adjusted net trading income. We generated a 55% EBITDA margin and $215 million of EBITDA, both on an adjusted basis. We delivered strong performance this quarter in both our customer and non-customer market-making businesses. We continue to progress our growth initiatives with strong performances in crypto options and ETF blocks. Our businesses performed well against headline volatility and volume metrics across the globe. Our Virtu Execution Services business was flat quarter over quarter, which we count as a solid performance given the muted environment for institutional volumes. We will talk more about VES in a minute. Overall, these results are especially impressive considering that global volumes remain quite low. U.S. equity share volume and notional turnover were down 4% and 1% respectively versus the second quarter. Volumes and notional in Europe were down 20% and 9% versus the second quarter, while volumes in Asia Pacific were up about 4%. Beginning this quarter again with Virtu Execution Services, our business performed very well. Adjusted net trading income was essentially flat from the second quarter, delivering $100 million of ante or $1.6 million per day. This performance combined with a similar result in the second quarter represents the highest levels of daily adjusted net trading income since the second quarter of 2022, when volumes were 10% higher and volatility was 61% higher. I spoke last quarter about how Virtu's scaled operations afford us the unique ability to continually invest in our global multi-asset platform to meet clients' needs. We have evidence. that our multi-year investments are yielding positive results as demonstrated through third-party validation and recent client successes. A major contributor to this is what we are calling Virtu Technology Solutions, a trading and data analytics infrastructure offering for growing midsize and or major regional broker-dealers. VTS allows us to distribute our scale technology efficiently and strategically to other brokers empowering them with leading technology to better serve their clients in a cost-effective manner. Along with our global suite of multi-asset class enabled product and solutions, we expect to continue growing our VES business long-term. In addition to our VTS offering, we expect our growth to be fueled by our flagship products and solutions, including industry-standard data analytics platform, global workflow and execution management systems, or Triton, and our world class of trading algos. Our multi-asset class EMS platform, Triton, covers equities, fixed income, FX, and derivatives, and our next generation algos integrate machine learning techniques to further align our clients' investment decisions with their implementation results. Additionally, we are focused on increasing our reach in regions and markets previously underpenetrated by Virtu, such as the Middle East, India, and Japan, as well as expanding into new client segments in existing markets to efficiently address opportunities to offer technology solutions. In the past few months, we've seen several client wins in VES as we increase and expand our client relations. These wins include adoption of our new switcher algo, developed with machine learning and allows Virtu to increase its position on broker trade rankings across global clients. We've seen increasing adoption of VTS, as I mentioned earlier, and while it is still early days, our new agency fixed income RFQ offering is in production and growing. The senior hires we made to help us address this important opportunity have been in place for most of 2024 now and are leading key efforts to broaden the distribution of our offerings. I have mentioned before, we are as excited about the future of this business as ever. As always, our VES business is anchored in long-term partnerships and our evolving offerings are driven by client demand and built on our global multi-athlete class scalable technology. Turning to market making, our business performed very well in the third quarter with our customer and non-customer market making businesses both delivering a solid quarter. We continue to improve our team's cross-desk internalization enhancements to help us manage risk and to explore ways to reduce our trading costs and address more of the opportunities we see in the market. Our Asia and U.S. equity segments showed particularly strong performance this quarter. For our customer market making business, the market opportunities as measured through July and August 605 reports suggest an elevated opportunity of about 9% compared to the second quarter. However, based on preliminary 605 reports for September, the opportunity declined significantly in September, reducing the quarter-over-quarter increase in quoted spread to a low single-digit percentage. As we expand the products and markets we trade, we remain very well positioned to capitalize on future volatility and opportunities. We continue to deliver success in new areas where we had no presence only a short few years ago. Our organic growth initiatives generated $632,000 per day in adjusted net training income this quarter, contributing about 10% of our ante. I will highlight results from the standout performance this quarter. Building our global options capabilities continues to be a top priority. Our growing options business delivered a strong performance in the quarter. In addition to our U.S. cash equity options, We are leveraging our growing capabilities and options to target global opportunities by optimizing the brokers we're using, increasing our local data center footprint, and streamlining our technical integrations within local markets. We continue to grow in ETF block by onboarding new clients and broadening our distribution. In addition, our growing symbol and underlier coverage capabilities have opened the door for broader relationships with ETF issuers and fund managers, enabling us to service their regular trading and rebalance execution needs. Our crypto market-making business continued to pace. Spot Bitcoin ETF volumes were up about 2% compared to Q2, and the new spot Ethereum ETFs are trading about 50% to 60% as many shares as the spot Bitcoin ETFs. US options on crypto ETFs are getting closer to launching and it is a natural extension of our crypto and options market making abilities to support these exciting products. We continue to expand our crypto market making efforts by supporting new listed products and thoughtfully adding new exchanges and tokens. As we grow, we continue to build out our cross product internalization capabilities, which allow us to be more competitive, keep more of the spread, and reduce trading fees. With that, I will turn it over to Jeff.