Virtu Financial, Inc. Class A

Good day and thank you for standing by. Welcome to the Virtu Financial 2024 fourth quarter results conference call. At this time, all participants are in a listen-only mode. After the presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the call over to Andrew. Please go ahead. Please stand by. Your conference will resume momentarily. Thank you.

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, Ms. Cindy Lee, our Chief Financial Officer, and Mr. Joseph Maluso, our Co-President and Co-Chief Operating 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 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 in 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 terms in the earnings material 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.

Thank you, Andrew. Good morning, everyone. Apologies for the delay. We will check in with the service. We're not sure what happened. Thank you for joining us this morning. In my remarks today, I will focus on Virtu's fourth quarter financial and business performance and strategic initiatives. Following my remarks, Cindy and Joe will provide additional details on our results. Looking at our full year and fourth quarter 2024 results, which are summarized on slide two of the supplemental material, we generated $6.38 million and $7.27 million of adjusted net trading income per day for the full year 2024 and the fourth quarter, respectively. We reported normalized adjusted EPS of $1.14 for the fourth quarter and $3.55 for the full year 2024. In the fourth quarter, we delivered another strong performance in both our customer and non-customer market making businesses and our virtual execution service business against the mixed opportunity in the quarter. We remain committed to making further technology enhancements and investments in our capabilities to improve our performance in every environment, and there are still significant improvements to make, and we'll touch on these further in a moment. Slide three highlights that our market-making segment earned an average of $5.5 million per day of adjusted net trading income in the quarter, while execution services delivered $1.7 million per day, increases of 23% and 12% per day, respectively, over the quarter. In 2024, we saw firsthand the unique benefits of our scaled operations that allow us to continually invest in our global multi-asset platform to further increase our operating leverage and meet clients' needs with new and innovative offerings. On the execution services side, this past quarter's $1.7 million of ante per day represents VES best quarter since the first quarter of 22, with our Algo product achieving increased revenue for the fifth consecutive quarter. This was VES's best quarter since the first quarter of 2022. We continue to see institutions adopt VES's broad product set, leading to deep integration with our clients' trading workflows. This has resulted in the improved consistency of results you've seen despite a very competitive market segment. We have incremental growth plans for VES and Virtu technology solutions, both within and outside the United States, which we discussed at length on our last earnings call. These efforts are beginning to materialize as our team expands our footprint with existing clients and generates new long-term business from new clients. To this end, in 2024, VES leveraged our investments and enhancements to accomplish key growth milestones Winning remits include adoption of our Triton Valor execution management system for fixed income by a world-class asset manager in Europe, successfully deployed our Triton Valor EMS, trading analytics, positive alert, and global equity execution algorithms for one of the largest asset managers in Asia. Most importantly, overall productivity and profitability within our VES business segment has grown significantly since we began the technology rebuild and modernization and streamlining of that business. Needless to say, we remain very excited about the growth opportunities, increasing operating leverage, and compounding benefits of our VES expansion in 2025. Now on to market making. Both our customer and non-customer market making businesses performed well in the quarter relative to the opportunity set, but even in a strong quarter like this, we know that there is room to improve. Our market-making results were up almost 23% in the fourth quarter, an impressive result considering realized volatility was down across the board. The opportunity was markedly lower in October, but conditions improved in November, and the opportunity so far has been the same or better every month since. Further, quoted spread and executed shares per our 605 reports for the fourth quarter show an increase of 12% and 11%, respectively, versus the third quarter. Our ability to outperform market metrics is a function of many factors, including the success and development of our growth initiatives, as well as internalization enhancements and continuous strategy iteration. For example, in 2024, we saw meaningful contributions to our results from new and redesigned market-making models that did not exist in 2023. We are confident that our growth initiatives, combined with our efforts to enhance spread capture rates through smarter internalization, will yield increased benefits in any environment. Touching on our organic growth initiatives, including our expansion into crypto, ETF block options, and fixed income market making, continue to expand and perform well and have made meaningful progress throughout the year. We generated $787,000 per day from organic growth in 2024 the highest ante per day for any year since we began reporting this four to five years ago. In the fourth quarter and for the full year 2024, ante from organic growth initiatives represented 12% of firm-wide ante. Our crypto growth initiative performed very well in the fourth quarter, delivering strong results despite market volumes and spot crypto ETFs being down almost 20% compared to the first quarter of 2024 when they were first launched. Our strong results were driven by investments we made in the second and third quarters this year. After the excitement around crypto ETFs tapered off and the market became more efficient, we enhanced our crypto capabilities by expanding our market access and liquidity distribution and improving our operational efficiency. Our decision to invest in building our scaled crypto capabilities paid dividends by enabling us to generate sizable returns in the relatively muted second and third quarters this and really set us up to capture a significant opportunity that was presented in the fourth quarter. We aren't done expanding in our global crypto footprint to meet growing institutional demand. We are in the early days of building our 24 by 7 crypto native offering and continue to build out our connectivity to reputable markets and capital efficient framework to enhance our market making and risk management capabilities. Importantly, despite growing our crypto footprint, We remain committed to risk management and capital efficiency. We are excited for the growing opportunity in crypto and digital assets more broadly. We believe that the new regulatory tailwinds will kick off a wave of new products in 2025, which will further expand the addressable market of our market making and execution services, which plays to our core strengths. In addition, we continue to grow our ETF block offering by onboarding more clients and broadening our liquidity distribution. This disciplined work delivered sizable results in the fourth quarter as we saw greater client activity across both new and existing clients. Taking a step back, I look at our full year 2024 results and despite the recent strong performance, I believe there is so much more to come. Our strategic focus and areas of growth align us for even greater long-term success as we expand our adjustable market by adding more asset classes and offerings to our suite of market-making capabilities and execution service solutions. Our focus on enhancing our core businesses and the continuous success of our growth initiatives positions us well for any macro environment, whether it be reduced volatility or significant spikes in volatility and volumes that typically accompany increasing global tensions and the economic uncertainty, changes in monetary policy, or elections. we continue to hire and make investments in our business. For example, it is worth noting that of our current employees, only 34% of them were at Virtu prior to 2019. This means that we continue to make significant multi-year investments in new traders, developers, quants, and other great employees. Notably, about 20% of our new hires since 2023 were to support our organic growth initiatives. As you've come to expect from Virtu, we remain disciplined as ever around costs throughout the year, which enabled us to realize a 58% adjusted EBITDA margin in 2024. Now we'll turn the call over to Ms. Cindy Lee, our CFO. Cindy?