Virtu KCG Holdings LLC - FORM 8-K - EX-99.2

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EX-99.1 - EX-99.1 - Virtu KCG Holdings LLC	d918786dex991.htm
8-K - FORM 8-K - Virtu KCG Holdings LLC	d918786d8k.htm

KCG Holdings, Inc. (NYSE: KCG)

1st Quarter 2015 Earnings Presentation

May 1, 2015

Exhibit 99.2

Certain statements contained herein may constitute "forward-looking statements" within the meaning of the safe harbor provisions of the

U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are typically identified by words such as "believe,"

"expect," "anticipate," "intend," "target," "estimate," "continue," "positions," "prospects" or "potential," by future conditional verbs such as

"will," "would," "should," "could" or "may," or by variations of such words or by similar expressions. These "forward-looking statements"

are not historical facts and are based on current expectations, estimates and projections about KCG's industry, management's beliefs and

certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Any

forward-looking statement contained herein speaks only as of the date on which it is made. Accordingly, readers are cautioned that any

such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions

that are difficult to predict including, without limitation, risks associated with: (i) the strategic business combination (the "Mergers") of

Knight Capital Group, Inc. ("Knight") and GETCO Holding Company, LLC ("GETCO"), including, among other things, (a) difficulties and

delays in integrating the Knight and GETCO businesses or fully realizing cost savings and other benefits, (b) the inability to sustain

revenue and earnings growth, and (c) customer and client reactions to the Mergers; (ii) the August 1, 2012 technology issue that resulted

in Knight's broker-dealer subsidiary sending numerous erroneous orders in NYSE-listed and NYSE Arca securities into the market and the

impact to Knight's business as well as actions taken in response thereto and consequences thereof; (iii) the sale of KCG's reverse mortgage

origination and securitization business, sale of KCG's futures commission merchant and the sale of KCG Hotspot; (iv) changes in market

structure, legislative, regulatory or financial reporting rules, including the increased focus by regulators, the New York Attorney General,

Congress and the media on market structure issues, and in particular, the scrutiny of high frequency trading, alternative trading systems,

market fragmentation, colocation, access to market data feeds, and remuneration arrangements such as payment for order flow and

exchange fee structures; (v) past or future changes to organizational structure and management; (vi) KCG's ability to develop competitive

new products and services in a timely manner and the acceptance of such products and services by KCG's customers and potential

customers; (vii) KCG's ability to keep up with technological changes; (viii) KCG's ability to effectively identify and manage market risk,

operational and technology risk, legal risk, liquidity risk, reputational risk, counterparty and credit risk, international risk, regulatory risk,

and compliance risk; (ix) the cost and other effects of material contingencies, including litigation contingencies, and any adverse judicial,

administrative or arbitral rulings or proceedings; (x) the effects of increased competition and KCG's ability to maintain and expand market

share; and (xi) the commencement and completion of the proposed tender offer. The list above is not exhaustive. Readers should carefully

review the risks and uncertainties disclosed in KCG's reports with the SEC, including, without limitation, those detailed under "Risk

Factors" in KCG's Annual Report on Form 10-K for the year-ended December 31, 2014, and other reports or documents KCG files with, or

furnishes to, the SEC from time to time.

Safe Harbor

For

additional

disclosures,

please

see

https://www.kcg.com/legal/global-disclosures.

1st Quarter 2015 Summary

Solid financial results amid a slight decline in U.S. equity market conditions quarter over

quarter

Market making grew the percentage of consolidated U.S. equity share and dollar volume

on both a quarter over quarter and year over year basis

KCG BondPoint grew trade volumes across Corporates, Municipals and CDs on both a

quarter over quarter and year over year basis

Completed the sale of KCG Hotspot to BATS

Raised $500 million in 6.875% Senior Secured Notes due in 2020, repaid $117 million in

Convertible

Notes

upon

maturity

March

2015,

and

subsequent

the

quarter

redeemed $305 million in 8.250% Senior Secured Notes due in 2018

Subsequent to 1Q15, announced plans to launch a modified Dutch auction tender offer

for up to $330 million of common stock as part of an expanded $400 million share

repurchase program

KCG Financial Results

Pre-Tax Earnings (Loss) from Continuing Operations By Business Segment

(in thousands)

(unaudited)

For the three months ended

March 31, 2014

December 31, 2014

March 31, 2015

Market Making

Revenues

$ 277,346

$ 238,740

$ 224,548

Expenses

201,314

196,030

185,208

Pre-tax earnings

76,032

42,710

39,340

Global Execution Services

Revenues

87,220

93,369

464,266

Expenses

85,204

83,401

83,208

Pre-tax earnings

2,016

9,968

381,058

Corporate and Other

Revenues

19,091

14,030

7,342

Expenses

37,755

40,177

21,612

Pre-tax loss

(18,664)

(26,147)

(14,270)

Consolidated

Revenues

383,657

346,139

696,156

Expenses

324,273

319,608

290,028

Pre-tax earnings

$ 59,384

$ 26,531

$ 406,128

Notes:¹

See addendum for a reconciliation of GAAP to non-GAAP financial results.

1st quarter 2015 results include a gain of $385.0 million from the sale of KCG Hotspot as well as expenses of $11.3 million directly related to the

sale plus lease loss accruals

4th quarter 2014 results include a $2.1 million gain from the sale of KCG’s FCM as well as expenses of $6.1 million related to lease loss accruals

1st quarter 2014 results include a gain of $9.6 million from the merger of BATS and Direct Edge as well as expenses of $7.8 million related to

debt reduction and lease loss accruals

Market Conditions

Avg. daily volume in select securities markets

1Q14

4Q14

1Q15

Consolidated U.S. equity share volume

6.9 bn

7.1 bn

6.9 bn

854.2 mn

790.9 mn

795.2 mn

ETF share volume

789.4 mn

1,024.7 mn

1,002.9 mn

Consolidated U.S. equity dollar volume

$275.8 bn

$291.3 bn

$285.6 bn

U.S. equity futures contracts

3.8 mn

3.9 mn

3.5 mn

U.S. options contracts

17.9 mn

16.3 mn

European equity notional value traded (USD)

$1,197.2 bn

$1,176.4 bn

$1,272.7 bn

Asian equity share volume

7.4 bn

6.1 bn

6.0 bn

U.S. Treasury notional volume

$522.1 bn

$507.4 bn

$531.8 bn

U.S. corporate bond notional volume

$20.8 bn

$19.8 bn

$23.9 bn

Transactions under 250 bonds

13,334

11,747

12,622

FX notional value traded (USD) among reporting venues

$232.2 bn

$271.5 bn

$271.2 bn

–

Avg. daily consolidated U.S. equity dollar and share volume

declined 2.0% and 2.8%, respectively, quarter over quarter

–

Market-wide retail trading activity remained fairly strong

relative to previous quarters

–

Avg. daily European equity notional volume rose 8.0% quarter

over quarter while Asian equity share volume declined 2.6%

–

In foreign exchange, avg. daily notional value traded among

reporting venues was flat

–

Approximate decrease in aggregate avg. daily futures volume of

4% and decrease in options volume of 9%

–

Macro events contributed to volatility among certain energy

commodities

1Q15 market conditions in U.S. equities

17.3

9.7

14.6

8,000

$400,000

6,000

$300,000

4,000

$200,000

2,000

$100,000

January February

March

1Q15

Average

daily consolidated U.S. equity share volume

Average daily consolidated U.S. equity dollar volume

Average realized volatility for the S&P 500

A slight decline in the U.S. equity market from 4Q14

Mixed market conditions in all other asset classes

“Retail”

SEC

Rule

605

U.S.

equity

volume

Sources: BATS Global Markets, VistaOne Solutions, Thomson Reuters, OCC, CSI, Bloomberg, Reuters, EBS, SIFMA, TRACE, MSRB; 1Q15 SEC Rule 605 U.S. equity share volume includes an

estimate of March 2015 total based on public and proprietary data

The Market Making Segment

Revenues from U.S. equities impacted by decline in

market volumes partially offset by KCG market share

gains

A slight decline in revenues from all other asset

classes

1Q15 Market Making revenue distribution²

-20%

-10%

10%

20%

30%

40%

50%

-$100

-$50

$50

$100

$150

$200

$250

1Q14

4Q14

1Q15

Primary drivers of revenues from U.S. equities¹

KCG revenue from U.S. equity market making

Avg. daily SEC Rule 605 U.S equity share volume*

Avg. daily consolidated U.S equity dollar volume

Avg. daily consolidated U.S equity share volume

Avg. realized volatility for the S&P 500

861.9

933.4

933.0

213.2

193.3

192.5

200

400

600

800

1,000

1Q14

4Q14

1Q15

KCG retail and total exchange-listed volume

KCG avg. daily SEC Rule 605 U.S equity share volume

78%

22%

U.S. equities

Non-U.S. equities

KCG increased market share of consolidated dollar and share

volume quarter over quarter

KCG market share of SEC Rule 605 share volume roughly flat

quarter over quarter amidst a focus on strategic clients and

persistent strong competition

Results from U.S. Treasuries, commodities and options offset

by European equities

Sources: KCG, SEC, VistaOne Solutions; ¹ 1Q15 SEC Rule 605 share volume includes an estimate of March 2015 total based on public and proprietary data. ²

Revenue from market making in U.S.

equities of $174.7 million in the first quarter of 2015 is a factor, along with total dollar volume during the quarter of $1.89 trillion that results in average revenue capture of 0.92 basis points. Market

making in non-U.S. equities includes European and Asian equities, fixed income, currencies and commodities.

KCG avg. daily exchange - listed share volume

Strong Market-Wide Net Retail Inflows in 1Q15

KCG’s Individual Investor Gauge represents estimated market-wide gross and net retail investor

flows based on public and proprietary data derived from monthly SEC Rule 605-eligible volume.

Estimated

market-wide

net

retail

inflows

$62.8

billion

1Q15

–

increase

$33.1

billion

from

4Q14

Estimated

market-wide

gross

retail

flows

$1.26

trillion

1Q15

–

decrease

$113

billion

from

4Q14

$100,000,000,000

$200,000,000,000

$300,000,000,000

$400,000,000,000

$500,000,000,000

$600,000,000,000

$15,000,000,000

$10,000,000,000

$5,000,000,000

$10,000,000,000

$15,000,000,000

$20,000,000,000

$25,000,000,000

$30,000,000,000

$35,000,000,000

Est. Market-Wide Gross and Net Retail U.S. Equity Flows

Market-Wide Net (Est.)

Market-Wide Gross (Est.)

The Global Execution Services Segment

Sources: KCG, BATS Global Markets, TRACE, MSRB, Rosenblatt

Close of sale to BATS

1Q15

4Q14

1Q14

0.0%

2.5%

5.0%

7.5%

10.0%

12.5%

15.0%

17.5%

20.0%

22.5%

25.0%

$90

$105

$120

$135

$150

$165

18.2%

19.2%

19.5%

5.8%

5.7%

6.3%

1Q14

4Q14

1Q15

Avg. daily fixed income par value traded

Market share of corporate bond transactions under 250 bonds

Market share of muni bond transactions under 250 bonds

3.0

4.0

5.0

6.0

7.0

8.0

281.0

334.3

299.0

1Q14

4Q14

1Q15

200

240

280

320

360

400

Avg. daily algorithmic trading and order routing U.S equity share volume

Avg. daily consolidated U.S. equity share volume

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

KCG Hotspot avg. daily notional dollar volume

KCG algorithmic trading and order routing

U.S. equity share volume

Growth of KCG BondPoint

In agency execution, solid results demonstrate

progress with institutional clients

Among trading venues, continued good performance

KCG BondPoint grew market share amid a seasonally strong

first quarter

KCG Hotspot sale completed on March 13th

Knight Match accounted for 3.4% of dark liquidity

–

Decline in algorithmic trading and order routing driven by

focus on strategic clients and higher margin order flow

Good contributions from sales traders in the U.S. and U.K.

as well as the reconstituted ETF trading team

Trading days

Consolidated Expenses

Compensation and Benefits declined to

$102.3 million as a result of reduced

headcount and lower bonus accruals

Communications and Data Processing

decreased $3.2 million due to reduced market

data and terminal fees, connectivity costs and

maintenance expenses

Occupancy and equipment rentals declined

$1.2 million due to reduced lease operating

expenses and real estate taxes

Other expenses declined $2.0 million in part

due to decreased VAT expenses and regulatory

dues

Among transaction-based expenses not

included in the chart, Execution and

Clearance Fees declined $13.9 million due to

reduced regulatory transaction fees and lower

trade volumes

†

See addendum for a reconciliation of GAAP to non-GAAP financial results.

Compensation and benefits

Communications and data processing

Depreciation and amortization

Debt interest expense

Professional fees

Occupancy and equipment rentals

Business development

Other

$212.8 mn

$208.4 mn

$186.6 mn

$25

$50

$75

$100

$125

$150

$175

$200

$225

$250

1Q14

4Q14

1Q15

Consolidated

non-GAAP

quarterly

expenses

†

Additional Financials

Consolidated Statements of Financial Condition

(in millions)

(unaudited)

March 31, 2014

December 31, 2014

March 31, 2015

Cash and cash equivalents

$ 651.9

$ 578.8

$ 990.5

Debt

472.3

422.3

799.8

Stockholders’

equity

1,566.2

1,522.6

1,783.3

Debt-to-tangible

equity

ratio²

0.35

0.31

0.30

Tangible

book

value

per

share³

$10.85

$11.72

$13.86

Book value per share

$12.46

$13.03

$15.10

Shares outstanding including restricted

stock units (in thousands)

125,695

116,860

118,091

Debt at March 31, 2015 includes the 8.25% $305 million Senior Secured Notes, which were redeemed subsequent to the quarter close using funds held in escrow.

Debt-to-tangible equity ratio at March 31, 2015 excludes the $305 million senior secured notes redeemed subsequent to the quarter close.

Tangible book value is calculated by subtracting goodwill and intangible assets from equity.

Announced Modified Dutch Auction Tender Offer

Subsequent to the first quarter of 2015, KCG announced plans to launch a modified Dutch

auction tender offer to repurchase for cash outstanding KCG Class A Common Stock for an

aggregate purchase price of up to $330 million

Authorization part of an expanded $400 million share repurchase program

The

tender

offer

represents

premium

the

closing

price

KCG

Class

Common

Stock on the NYSE of $12.84 on April 30, 2015

Under the proposed terms:

Expected to commence on May 4, 2015 and remain open for 20 business days

Stockholders may offer to sell stock to KCG at specified prices in the range of $13.50 to $14.00 per share

Upon expiration of the offer, KCG will select the lowest price in the range that will allow it to repurchase shares

having an aggregate purchase price of up to $330 million (or if the offer is not fully subscribed, all shares

properly tendered and not withdrawn)

All shares

tendered

below

the

clearing

price

accepted

will

repurchased

the

same

price,

subject to the

proration and the other terms of the offer

If the aggregate purchase price for shares tendered exceeds the available $330 million, allocations will be made

on a pro rata basis from stockholders tendering at or below the selected purchase price, subject to certain

priorities

Assuming the offer is fully subscribed, KCG will repurchase a minimum of 23.6 million shares, or 22%

of total shares outstanding excluding restricted stock units (RSUs) as of April 29, 2015

–

Additional Information Regarding the Tender Offer

The tender offer described in this presentation has not yet commenced. This presentation is

for informational purposes only, is not a recommendation to buy or sell KCG common

stock, and does not constitute an offer to buy or the solicitation to sell shares of KCG

common

stock.

The

tender

offer

will

made

only

pursuant

the

Offer

Purchase,

Letter

Transmittal

and

materials

that

KCG

expects

file

Monday,

May

with

the

Securities and Exchange Commission. Stockholders should read carefully the Offer to

Purchase, Letter of Transmittal and related materials because they contain important

information, including the various terms of, and conditions to, the tender offer. Once the

tender offer is commenced , stockholders will be able to obtain a free copy of the tender

offer

statement

Schedule

TO,

the

Offer

Purchase,

Letter

Transmittal

and

other

documents that KCG will be filing with the Securities and Exchange Commission at the

Commission’s

website

www.sec.gov

and

the

investor

information

section

KCG’s

website

www.kcg.com.

3 months ended March 31, 2015

Market Making

Global Execution

Services

Corporate and

Other

Consolidated

Reconciliation of GAAP revenues to non-GAAP revenues:

GAAP revenues

$ 224,548

$ 464,266

$ 7,342

$ 696,156

Gain on sale of KCG Hotspot

(385,026)

Non-GAAP revenues

$ 224,548

$ 79,240

$ 7,342

$ 311,130

Regulation G Reconciliation of Non-GAAP

Financial Measures (Continuing Operations)

3 months ended December 31, 2014

Market Making

Global Execution

Services

Corporate and

Other

Consolidated

Reconciliation of GAAP revenues to non-GAAP revenues:

GAAP revenues

$ 238,740

$ 93,369

$ 14,030

$ 346,139

Gain on sale of FCM

(2,116)

Non-GAAP revenues

$ 238,740

$ 91,253

$ 14,030

$ 344,023

Regulation G Reconciliation of Non-GAAP

Financial Measures (Continuing Operations)

3 months ended March 31, 2014

Market Making

Global Execution

Services

Corporate and

Other

Consolidated

Reconciliation of GAAP revenues to non-GAAP revenues:

GAAP revenues

$ 277,346

$ 87,220

$ 19,091

$ 383,657

Income resulting from the merger of BATS and Direct Edge, net

(9,644)

Non-GAAP revenues

$ 277,346

$ 87,220

$ 9,447

$ 374,013

Regulation G Reconciliation of Non-GAAP

Financial Measures (Continuing Operations)

Regulation G Reconciliation of Non-GAAP

Financial Measures (Continuing Operations)

3 months ended March 31, 2015

Market Making

Global Execution

Services

Corporate and

Other

Consolidated

Reconciliation of GAAP pre-tax to non-GAAP pre-tax:

GAAP income (loss) from continuing operations before

income taxes

$ 39,340

$ 381,058

$ (14,270)

$ 406,128

Gain on sale of KCG Hotspot

(385,026)

Professional fees related to sale of KCG Hotspot

6,736

Compensation expense related to sale of KCG Hotspot

4,457

Lease loss accrual, net

132

Non-GAAP income (loss) from continuing operations before

income taxes

$ 39,340

$ 7,225

$ 14,138

$ 32,427

Regulation G Reconciliation of Non-GAAP

Financial Measures (Continuing Operations)

3 months ended December 31, 2014

Market Making

Global Execution

Services

Corporate and

Other

Consolidated

Reconciliation of GAAP pre-tax to non-GAAP pre-tax:

GAAP income (loss) from continuing operations before

income taxes

$ 42,710

$ 9,968

$ (26,147)

$ 26,531

Gain on sale of FCM

(2,116)

Lease loss accrual, net

6,117

Non-GAAP income (loss) from continuing operations before

income taxes

$ 42,710

$ 7,852

$ (20,030)

$ 30,532

Regulation G Reconciliation of Non-GAAP

Financial Measures (Continuing Operations)

3 months ended March 31, 2014

Market Making

Global Execution

Services

Corporate and

Other

Consolidated

Reconciliation of GAAP pre-tax to non-GAAP pre-tax:

GAAP income (loss) from continuing operations before

income taxes

$ 76,032

$ 2,016

$ (18,664)

$ 59,384

Writedown of capitalized debt costs

7,557

Income resulting from the merger of BATS and Direct Edge, net

(9,644)

Lease loss accrual, net

359

(93)

266

Non-GAAP income (loss) from continuing operations before

income taxes

$ 76,391

$ 2,016

$ (20,844)

$ 57,563

Regulation G Reconciliation of Non-GAAP

Financial Measures (Continuing Operations)

3 months ended March 31, 2015

GAAP

Adjustments for

non-GAAP presentation

KCG non-GAAP,

normalized expenses

Reconciliation of GAAP expenses to KCG non-GAAP

normalized expenses:

Employee compensation and benefits

106,718

4,457

102,261

Communications and data processing

33,764

Depreciation and amortization

20,615

Debt interest expense

8,463

Professional fees

11,181

6,736

4,445

Occupancy and equipment rentals

7,340

Business development

1,857

Lease loss accrual, net

132

Other

7,808

Total expenses¹

$ 197,878

$ 11,325

$ 186,553

Total expenses exclude transaction-based expenses which fluctuate based on market conditions and client activity.

3 months ended December 31, 2014

GAAP

Adjustments for

non-GAAP presentation

KCG non-GAAP,

normalized expenses

Reconciliation of GAAP expenses to KCG non-GAAP

normalized expenses:

Employee compensation and benefits

116,214

Communications and data processing

36,945

Depreciation and amortization

21,224

Debt interest expense

7,721

Professional fees

5,695

Occupancy and equipment rentals

8,514

Business development

2,308

Lease loss accrual, net

6,117

Other

9,822

Total expenses¹

$ 214,561

$ 6,117

$ 208,444

Regulation G Reconciliation of Non-GAAP

Financial Measures (Continuing Operations)

Total expenses exclude transaction-based expenses which fluctuate based on market conditions and client activity.

Regulation G Reconciliation of Non-GAAP

Financial Measures (Continuing Operations)

3 months ended March 31, 2014

GAAP

Adjustments for

non-GAAP presentation

KCG non-GAAP, normalized

expenses

Reconciliation of GAAP expenses to KCG non-GAAP

normalized expenses:

Employee compensation and benefits

122,319

Communications and data processing

36,796

Depreciation and amortization

20,103

Debt interest expense

9,524

Professional fees

5,402

Occupancy and equipment rentals

8,285

Business development

1,683

Lease loss accrual and writedown of capitalized debt costs

7,823

Other

8,643

Total expenses¹

$ 220,578

$ 7,823

$ 212,755

Total expenses exclude transaction-based expenses which fluctuate based on market conditions and client activity.

Virtu KCG Holdings LLC - FORM 8-K - EX-99.2 - May 1, 2015

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