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8-K - 8-K - Virtu Financial, Inc.a15-21742_18k.htm

Exhibit 99.1

 

 

Virtu Announces Third Quarter 2015 Results

 

NEW YORK, NY, November 4, 2015 — Virtu Financial, Inc. (NASDAQ: VIRT) a leading technology-enabled market maker and liquidity provider to the global financial markets, which priced its initial public offering on April 15, 2015, today reported results for the third quarter ended September 30, 2015.

 

Third Quarter Selected Results*

 

·                  Net Income of $69.5 million; Adjusted Net Income** of $76.2 million, which excludes IPO related adjustments

·                  Adjusted EPS** of $0.40; GAAP Basic EPS of $0.36 and Diluted EPS of $0.35

·                  Adjusted Net Trading Income** of $138.6 million, up 34.3%

·                  Adjusted EBITDA** of $100.7 million, up 52.3%; Adjusted EBITDA Margin of 71.3%

·                  Quarterly cash dividend of $0.24 per share payable on December 15, 2015

 


* All comparisons are versus third quarter 2014.

** Non-GAAP financial measures. Please see “Non-GAAP Financial Measures and Other Items” for more information.

 

The Virtu Financial, Inc. Board of Directors declared a quarterly cash dividend of $0.24 per share. This dividend is payable on December 15, 2015 to shareholders of record as of December 1, 2015.

 

“Our business recorded $138.6 million in Adjusted Net Trading Income and $0.40 per share in Adjusted EPS in the third quarter of 2015. Favorable operating conditions for Virtu drove our performance in the third quarter; global volumes were up this quarter vs. the third quarter of 2014, as well as quarter-over-quarter and YTD comparisons.  In particular, the U.S. equity market volatility in August spurred significant volumes and corresponding increased demand for Virtu’s liquidity.  As a result, our Americas Equities category recorded $45.8 million of Adjusted Net Trading Income and comprised 33.1% of our overall Adjusted Net Trading Income.  As I have stated publicly, Virtu has the capacity to thrive in high volume environments with increased volatility.  Our overall performance in the third quarter reflects this favorable environment,” said Douglas Cifu, Chief Executive Officer of Virtu Financial.

 

1



 

GAAP Financial Results

 

Total revenues increased 24.6% to $215.8 million for this quarter, compared to $173.2 million for the same period in 2014. Trading income, net, increased 27.5% to $206.8 million for this quarter, compared to $162.3 million for the same period in 2014. Net Income increased 67.9% to $69.5 million for this quarter, compared to $41.4 million for the same period in 2014.

 

GAAP Basic EPS was $0.36 and Diluted EPS was $0.35.

 

Historical quarterly results from first quarter 2014 to date are available at http://ir.virtu.com.

 

Business Performance

 

Adjusted Net Trading Income increased 34.3% to $138.6 million for this quarter, compared to $103.2 million for the same period in 2014. Adjusted Net Income increased 56.8% to $76.2 million for this quarter, compared to $48.6 million for the same period in 2014. Adjusted EBITDA increased 52.3% to $100.7 million for this quarter, compared to $66.1 million for the same period in 2014. Assuming all non-controlling interests had been exchanged for common stock, and the Company’s Normalized Adjusted Net Income before income taxes was subject to corporation taxation, Adjusted EPS was $0.40 for this quarter.

 

Since our inception, we have sought to broadly diversify our market making across securities, asset classes and geographies, and as a result, for the quarter ended September 30, 2015, we achieved a diverse mix of Adjusted Net Trading Income results, with no one category constituting more than 33.1% of our total Adjusted Net Trading Income. Daily Adjusted Net Trading Income was approximately $2.166 million for this quarter compared to $1.612 million for the same period in the previous year. For 2015 year to date, no single category constituted more than 26.0% of our total Adjusted Net Trading Income and our Daily Adjusted Net Trading Income was approximately $2.090 million compared to $1.614 million for the same period in the previous year.

 

The increase in Adjusted Net Trading Income this quarter, in comparison to the same period in the previous year, was primarily driven by strong performances in Americas equities, EMEA equities, APAC equities and Global Commodities, and reflected the overall increased volumes in most of the global markets we serve. As of September 30, 2015, Virtu was connected to more than 225 unique market venues in 35 countries and makes markets in over 11,000 financial instruments.

 

The following tables show our Adjusted Net Trading Income, average daily Adjusted Net Trading Income and percentage of Adjusted Net Trading Income by category for the three months ended

 

2



 

September 30, 2015 and 2014, and nine months ended September 30, 2015 and 2014, respectively.

 

 

 

Three Months Ended September 30,

 

Adjusted Net Trading Income:

 

2015

 

% of
Total

 

2014

 

% of
Total

 

% Change

 

 

 

(in thousands, except percentages)

 

Category

 

 

 

 

 

 

 

 

 

 

 

Americas Equities

 

$

45,815

 

33.1

%

$

25,982

 

25.2

%

76.3

%

EMEA Equities

 

15,087

 

10.9

%

12,324

 

11.9

%

22.4

%

APAC Equities

 

13,144

 

9.5

%

7,032

 

6.8

%

86.9

%

Global Commodities

 

28,273

 

20.4

%

18,457

 

17.9

%

53.2

%

Global Currencies

 

23,289

 

16.8

%

25,211

 

24.4

%

-7.6

%

Options, Fixed Income and Other

 

10,988

 

7.9

%

10,063

 

9.8

%

9.2

%

Unallocated(1)

 

2,020

 

1.4

%

4,120

 

4.0

%

NM

 

Total Adjusted Net Trading Income

 

$

138,616

 

100.0

%

$

103,189

 

100.0

%

34.3

%

 

 

 

Three Months Ended September 30,

 

Average Daily Adjusted Net Trading Income:

 

2015

 

% of
Total

 

2014

 

% of
Total

 

% Change

 

 

 

(in thousands, except percentages)

 

Category

 

 

 

 

 

 

 

 

 

 

 

Americas Equities

 

$

716

 

33.1

%

$

406

 

25.2

%

76.3

%

EMEA Equities

 

236

 

10.9

%

193

 

12.1

%

22.4

%

APAC Equities

 

205

 

9.5

%

110

 

6.8

%

86.9

%

Global Commodities

 

442

 

20.4

%

288

 

17.9

%

53.2

%

Global Currencies

 

364

 

16.8

%

394

 

24.4

%

-7.6

%

Options, Fixed Income and Other

 

172

 

7.9

%

157

 

9.7

%

9.2

%

Unallocated(1)

 

31

 

1.4

%

64

 

3.9

%

NM

 

Total Adjusted Net Trading Income

 

$

2,166

 

100.0

%

$

1,612

 

100.0

%

34.3

%

 

 

 

Three Months Ended September 30,

 

Selected Market Metrics:

 

2015

 

2014

 

% Change

 

US Equities Average Daily Volume, in millions(2)

 

7,321

 

5,678

 

28.9

%

EU Equities Average Daily Volume, in millions(2)

 

5,448

 

4,701

 

15.9

%

TSE Equities Average Daily Volume, in millions(3)

 

2,834

 

2,411

 

17.5

%

CME Average Daily Energy Contracts(4)

 

1,964,824

 

1,560,565

 

25.9

%

CME Average Daily FX Contracts(4)

 

854,505

 

795,217

 

7.5

%

OCC Average Daily Volume, in millions(5)

 

18.1

 

16.3

 

11.4

%

VIX (Average)(6)

 

19.31

 

13.09

 

47.5

%

VIX (High)(6)

 

40.74

 

17.03

 

139.2

%

VIX (Low)(6)

 

11.95

 

10.32

 

15.8

%

Trading Days (US)(7)

 

64

 

64

 

 

 

 

3



 

 

 

Nine Months Ended September 30,

 

Adjusted Net Trading Income:

 

2015

 

% of
Total

 

2014

 

% of
Total

 

% Change

 

 

 

(in thousands, except percentages)

 

Category

 

 

 

 

 

 

 

 

 

 

 

Americas Equities

 

$

102,278

 

26.0

%

$

78,122

 

25.7

%

30.9

%

EMEA Equities

 

46,013

 

11.7

%

38,283

 

12.6

%

20.2

%

APAC Equities

 

33,875

 

8.6

%

20,450

 

6.7

%

65.6

%

Global Commodities

 

90,514

 

23.0

%

67,848

 

22.4

%

33.4

%

Global Currencies

 

90,147

 

22.9

%

70,557

 

23.2

%

27.8

%

Options, Fixed Income and Other

 

24,911

 

6.3

%

27,831

 

9.2

%

-10.5

%

Unallocated(1)

 

5,151

 

1.5

%

425

 

0.2

%

NM

 

Total Adjusted Net Trading Income

 

$

392,889

 

100.0

%

$

303,516

 

100.0

%

29.4

%

 

 

 

Nine Months Ended September 30,

 

Average Daily Adjusted Net Trading Income:

 

2015

 

% of
Total

 

2014

 

% of
Total

 

% Change

 

 

 

(in thousands, except percentages)

 

Category

 

 

 

 

 

 

 

 

 

 

 

Americas Equities

 

$

544

 

26.0

%

$

416

 

25.7

%

30.9

%

EMEA Equities

 

245

 

11.7

%

204

 

12.6

%

20.2

%

APAC Equities

 

180

 

8.6

%

109

 

6.7

%

65.6

%

Global Commodities

 

481

 

23.0

%

361

 

22.4

%

33.4

%

Global Currencies

 

480

 

22.9

%

375

 

23.2

%

27.8

%

Options, Fixed Income and Other

 

133

 

6.3

%

148

 

9.2

%

-10.5

%

Unallocated(1)

 

27

 

1.5

%

1

 

0.2

%

NM

 

Total Adjusted Net Trading Income

 

$

2,090

 

100.0

%

$

1,614

 

100.0

%

29.4

%

 

 

 

Nine Months Ended September 30,

 

Selected Market Metrics:

 

2015

 

2014

 

% Change

 

US Equities Average Daily Volume, in millions(2)

 

6,865

 

6,214

 

10.5

%

EU Equities Average Daily Volume, in millions(2)

 

5,964

 

5,357

 

11.3

%

TSE Equities Average Daily Volume, in millions(3)

 

2,761

 

2,574

 

7.3

%

CME Average Daily Energy Contracts(4)

 

1,949,387

 

1,572,980

 

23.9

%

CME Average Daily FX Contracts(4)

 

902,461

 

749,287

 

20.4

%

OCC Average Daily Volume, in millions(5)

 

16.6

 

16.6

 

-0.2

%

VIX (Average)(6)

 

16.55

 

13.53

 

22.4

%

VIX (High)(6)

 

40.74

 

21.44

 

90.0

%

VIX (Low)(6)

 

11.95

 

10.32

 

15.8

%

Trading Days (US)(7)

 

188

 

188

 

 

 

 


(1)

Under our methodology for recording ‘‘trading income, net’’ in our condensed consolidated statements of comprehensive income, we recognize revenues based on the exit price of assets in accordance with applicable U.S. GAAP rules, and when we calculate Adjusted Net Trading Income for corresponding reporting periods, we start with trading income, net. By contrast, when we calculate Adjusted Net Trading Income by category, we recognize revenues on a daily basis, and as a result prices used in recognizing revenues may differ. Because we provide liquidity on a global basis, across asset classes and time zones, the timing of any particular daily Adjusted Net Trading Income calculation can effectively defer or accelerate revenue from one day to another or one reporting period to another, as the case may be. We do not allocate any resulting differences based on the timing of revenue recognition.

(2)

Source: BATS

(3)

Source: Tokyo Stock Exchange

(4)

Source: Chicago Mercantile Exchange Group

(5)

Source: Options Clearing Corporation

(6)

Source: Chicago Board Options Exchange

(7)

Based on NYSE/NASDAQ trading calendar

 

4



 

Financial Condition

 

As of September 30, 2015, Virtu had $161.5 million in cash and cash equivalents, and total long-term debt outstanding in an aggregate principal amount of $501.1 million.  The increase in cash and cash equivalents from prior periods is primarily due to the net proceeds contributed to Virtu Financial LLC as a result of the Initial Public Offering.

 

Virtu’s headcount was 150 full-time employees as of September 30, 2015.

 

Non-GAAP Financial Measures and Other Items

 

To supplement our unaudited condensed consolidated financial statements presented in accordance with generally accepted accounting principles (“GAAP”), we use the following non-GAAP measures of financial performance:

 

·                  “Adjusted Net Trading Income”, which is the amount of revenue we generate from our market making activities, or trading income, net, plus interest and dividends income and expense, net, less direct costs associated with those revenues, including brokerage, exchange and clearance fees, net. Management believes that this measurement is useful for comparing general operating performance from period to period. Although we use Adjusted Net Trading Income as a financial measure to assess the performance of our business, the use of Adjusted Net Trading Income is limited because it does not include certain material costs that are necessary to operate our business. Our presentation of Adjusted Net Trading Income should not be construed as an indication that our future results will be unaffected by revenues or expenses that are not directly associated with our market making activities.

·                  “Adjusted Net Income”, which measures our operating performance by adjusting Net Income to exclude amortization of purchased intangibles and acquired capitalized software, severance, termination of office leases, equipment write-off, acquisition related retention bonus, share based compensation, charges related to one-time share based compensation at IPO, 2015 Management Incentive Plan, and charges related to share based compensation awards at IPO.

·                  “EBITDA”, which measures our operating performance by adjusting Net Income to exclude financing interest expense on senior secured credit facility, depreciation and amortization, amortization of purchased intangibles and acquired capitalized software, equipment write-off and income tax expense, and “Adjusted EBITDA”, which measures our operating performance by further adjusting EBITDA to exclude severance, termination of office leases, acquisition related retention bonus, share based compensation, charges related to one-time share based compensation at IPO, 2015 Management Incentive Plan, and charges related to share based compensation at IPO.

·                  “Normalized Adjusted Net Income”, “Normalized Adjusted Net Income before income taxes”, “Normalized provision for income taxes”, and “Normalized Adjusted EPS”, which we calculate by adjusting Net Income to exclude certain items including IPO related adjustments and other non-cash items, assuming that all vested and unvested Virtu

 

5



 

Financial LLC units have been exchanged for Class A Common Stock, and applying a corporate tax rate of 35.5%.

 

Adjusted Net Trading Income, Adjusted Net Income, EBITDA, Adjusted EBITDA, Normalized Adjusted Net Income, Normalized Adjusted Net Income before income taxes, Normalized provision for income taxes and Normalized Adjusted EPS are non-GAAP financial measures used by management in evaluating operating performance and in making strategic decisions. In addition, these non-GAAP financial measures or similar non-GAAP measures are used by research analysts, investment bankers and lenders to assess our operating performance. Management believes that the presentation of Adjusted Net Trading Income, Adjusted Net Income, EBITDA, Adjusted EBITDA, Normalized Adjusted Net Income, Normalized Adjusted Net Income before income taxes, Normalized provision for income taxes and Normalized Adjusted EPS provide useful information to investors regarding our results of operations because it assists both investors and management in analyzing and benchmarking the performance and value of our business. Adjusted Net Trading Income, Adjusted Net Income, EBITDA, Adjusted EBITDA, Normalized Adjusted Net Income, Normalized Adjusted Net Income before income taxes, Normalized provision for income taxes and Normalized Adjusted EPS provide indicators of general economic performance that are not affected by fluctuations in certain costs or other items. Accordingly, management believes that these measurements are useful for comparing general operating performance from period to period. Furthermore, our credit agreement contains covenants and other tests based on metrics similar to Adjusted EBITDA. Other companies may define Adjusted Net Trading Income, Adjusted Net Income, Adjusted EBITDA, Normalized Adjusted Net Income, Normalized Adjusted Net Income before income taxes, Normalized provision for income taxes and Normalized Adjusted EPS differently, and as a result our measures of Adjusted Net Trading Income, Adjusted Net Income, Adjusted EBITDA, Normalized Adjusted Net Income, Normalized Adjusted Net Income before income taxes, Normalized provision for income taxes and Normalized Adjusted EPS may not be directly comparable to those of other companies. Although we use these non-GAAP financial measures as financial measures to assess the performance of our business, such use is limited because they do not include certain material costs necessary to operate our business.

 

Adjusted Net Trading Income, Adjusted Net Income, EBITDA, Adjusted EBITDA and Normalized Adjusted Net Income should be considered in addition to, and not as a substitute for, Net Income in accordance with U.S. GAAP as a measure of performance. Our presentation of Adjusted Net Trading Income, Adjusted Net Income, EBITDA, Adjusted EBITDA, Normalized Adjusted Net Income, Normalized Adjusted Net Income before income taxes, Normalized provision for income taxes and Normalized Adjusted EPS should not be construed as an indication that our future results will be unaffected by unusual or nonrecurring items. Adjusted Net Trading Income, Adjusted Net Income, Normalized Adjusted Net Income, Normalized Adjusted Net Income before income taxes, Normalized provision for income taxes, Normalized Adjusted EPS and our EBITDA-based measures have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results as reported under U.S. GAAP. Some of these limitations are:

 

6



 

·                  they do not reflect every cash expenditure, future requirements for capital expenditures or contractual commitments;

·                  our EBITDA-based measures do not reflect the significant interest expense or the cash requirements necessary to service interest or principal payment on our debt;

·                  although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced or require improvements in the future, and our EBITDA-based measures do not reflect any cash requirement for such replacements or improvements;

·                  they are not adjusted for all non-cash income or expense items that are reflected in our statements of cash flows;

·                  they do not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations; and

·                  they do not reflect limitations on our costs related to transferring earnings from our subsidiaries to us.

 

Because of these limitations, Adjusted Net Trading Income, Adjusted Net Income, EBITDA, Adjusted EBITDA and Normalized Adjusted Net Income are not intended as alternatives to Net Income as indicators of our operating performance and should not be considered as measures of discretionary cash available to us to invest in the growth of our business or as measures of cash that will be available to us to meet our obligations. We compensate for these limitations by using Adjusted Net Trading Income, Adjusted Net Income, EBITDA, Adjusted EBITDA and Normalized Adjusted Net Income along with other comparative tools, together with U.S. GAAP measurements, to assist in the evaluation of operating performance. These U.S. GAAP measurements include operating income (loss), Net Income (loss), cash flows from operations and cash flow data. See below a reconciliation of each non-GAAP measure to the most directly comparable GAAP measure.

 

7



 

Virtu Financial, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2015

 

2014

 

2015

 

2014

 

 

 

(in thousands, except share and per share data)

 

Revenues:

 

 

 

 

 

 

 

 

 

Trading income, net

 

$

206,832

 

$

162,260

 

$

590,554

 

$

480,799

 

Interest and dividends income

 

6,425

 

8,518

 

21,022

 

21,287

 

Technology services

 

2,545

 

2,456

 

7,733

 

7,419

 

Total revenues

 

215,802

 

173,234

 

619,309

 

509,505

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

Brokerage, exchange and clearance fees, net

 

61,814

 

55,861

 

179,453

 

164,132

 

Communication and data processing

 

16,110

 

17,256

 

51,602

 

50,568

 

Employee compensation and payroll taxes

 

24,736

 

24,768

 

66,801

 

63,636

 

Interest and dividends expense

 

12,827

 

11,728

 

39,234

 

34,438

 

Operations and administrative

 

4,857

 

4,392

 

17,288

 

16,517

 

Depreciation and amortization

 

8,176

 

8,552

 

26,025

 

22,514

 

Amortization of purchased intangibles and

 

 

 

 

 

 

 

 

 

acquired capitalized software

 

53

 

53

 

159

 

159

 

Acquisition related retention bonus

 

 

152

 

 

2,639

 

Termination of office leases

 

 

 

2,729

 

849

 

Initial public offering fees and expenses

 

 

60

 

 

8,961

 

Charges related to share based compensation at IPO

 

1,107

 

 

45,301

 

 

Financing interest expense on senior secured credit facility

 

7,205

 

7,815

 

22,066

 

23,114

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

136,885

 

130,637

 

450,658

 

387,527

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes and non-controlling interest

 

78,917

 

42,597

 

168,651

 

121,978

 

Provision for income taxes

 

9,378

 

1,179

 

14,103

 

829

 

Net income

 

$

69,539

 

$

41,418

 

$

154,548

 

$

121,149

 

 

 

 

 

 

 

 

 

 

 

Non-controlling interest

 

(57,233

)

 

 

(141,768

)

 

 

 

 

 

 

 

 

 

 

 

 

Net income available for common stockholders

 

$

12,306

 

 

 

$

12,780

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.36

 

 

 

$

0.37

 

 

 

Diluted

 

$

0.35

 

 

 

$

0.37

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

 

Basic

 

34,305,052

 

 

 

34,305,052

 

 

 

Diluted

 

34,738,733

 

 

 

34,641,497

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

Net income

 

$

69,539

 

$

41,418

 

$

154,548

 

$

121,149

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

Foreign exchange translation adjustment, net of taxes

 

3,596

 

(3,520

)

595

 

(3,683

)

Comprehensive income

 

$

73,135

 

$

37,898

 

$

155,143

 

$

117,466

 

Less: Comprehensive income attributable to noncontrolling interests

 

(59,931

)

 

 

(141,053

)

 

 

Comprehensive income available for common stockholders

 

$

13,204

 

 

 

$

14,090

 

 

 

 

8



 

Virtu Financial, Inc. and Subsidiaries

Reconciliation to Non-GAAP Operating Data (Unaudited)

 

The following tables reconcile Condensed Consolidated Statements of Comprehensive Income to arrive at Adjusted Net Income, EBITDA, Adjusted EBITDA, Adjusted Net Trading Income, and selected Operating Margins.

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2015

 

2014

 

2015

 

2014

 

 

 

(in thousands, except percentages)

 

Reconciliation of Trading income, net to Adjusted Net Trading Income

 

 

 

 

 

 

 

 

 

Trading income, net

 

$

206,832

 

$

162,260

 

$

590,554

 

$

480,799

 

Interest and dividends income

 

6,425

 

8,518

 

21,022

 

21,287

 

Brokerage, exchange and clearance fees, net

 

(61,814

)

(55,861

)

(179,453

)

(164,132

)

Interest and dividends expense

 

(12,827

)

(11,728

)

(39,234

)

(34,438

)

Adjusted Net Trading Income

 

$

138,616

 

$

103,189

 

$

392,889

 

$

303,516

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Net Income to Adjusted Net Income

 

 

 

 

 

 

 

 

 

Net income

 

$

69,539

 

$

41,418

 

$

154,548

 

$

121,149

 

Amortization of purchased intangibles and acquired capitalized software

 

53

 

53

 

159

 

159

 

Severance

 

342

 

2,742

 

645

 

3,136

 

Initial public offering fees and expenses

 

 

60

 

 

8,961

 

Termination of office leases

 

 

 

2,729

 

849

 

Equipment write-off

 

251

 

 

1,719

 

 

Acquisition related retention bonus

 

 

152

 

 

2,639

 

Share based compensation

 

3,254

 

4,170

 

11,907

 

11,299

 

Charges related to one-time share based compensation at IPO, 2015 Management Incentive Plan

 

1,655

 

 

2,913

 

 

Charges related to share based compensation at IPO

 

1,107

 

 

45,301

 

 

Adjusted Net Income

 

$

76,201

 

$

48,595

 

$

219,921

 

$

148,192

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Net Income to EBITDA and Adjusted EBITDA

 

 

 

 

 

 

 

 

 

Net income

 

$

69,539

 

$

41,418

 

$

154,548

 

$

121,149

 

Financing interest expense on senior secured credit facility

 

7,205

 

7,815

 

22,066

 

23,114

 

Depreciation and amortization

 

8,176

 

8,552

 

26,025

 

22,514

 

Amortization of purchased intangibles and acquired capitalized software

 

53

 

53

 

159

 

159

 

Provision for income taxes

 

9,378

 

1,179

 

14,103

 

829

 

EBITDA

 

$

94,351

 

$

59,017

 

$

216,901

 

$

167,765

 

 

 

 

 

 

 

 

 

 

 

Severance

 

342

 

2,742

 

645

 

3,136

 

Initial public offering fees and expenses

 

 

60

 

 

8,961

 

Termination of office leases

 

 

 

2,729

 

849

 

Acquisition related retention bonus

 

 

152

 

 

2,639

 

Share based compensation

 

3,254

 

4,170

 

11,907

 

11,299

 

Charges related to one-time share based compensation at IPO, 2015 Management Incentive Plan

 

1,655

 

 

2,913

 

 

Charges related to share based compensation at IPO

 

1,107

 

 

45,301

 

 

Adjusted EBITDA

 

$

100,709

 

$

66,141

 

$

280,396

 

$

194,649

 

 

 

 

 

 

 

 

 

 

 

Selected Operating Margins

 

 

 

 

 

 

 

 

 

Net Income Margin(1)

 

49.3

%

39.2

%

38.6

%

39.0

%

Adjusted Net Income Margin(2)

 

54.0

%

46.0

%

54.9

%

47.7

%

EBITDA Margin(3)

 

66.8

%

55.9

%

54.1

%

54.0

%

Adjusted EBITDA Margin(4)

 

71.3

%

62.6

%

70.0

%

62.6

%

 


(1) Calculated by dividing net income by the sum of Adjusted Net Trading Income and technology services revenue.

(2) Calculated by dividing Adjusted Net Income by the sum of Adjusted Net Trading Income and technology services revenue.

(3) Calculated by dividing EBITDA by the sum of Adjusted Net Trading Income and technology services revenue.

(4) Calculated by dividing Adjusted EBITDA by the sum of Adjusted Net Trading Income and technology services revenue.

 

9



 

Virtu Financial, Inc. and Subsidiaries

Reconciliation to Non-GAAP Operating Data (Unaudited)

(Continued)

 

The following tables reconcile Condensed Consolidated Statements of Comprehensive Income to arrive at Normalized Adjusted Net Income and Normalized Adjusted Net Income per share.

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2015

 

2014

 

2015

 

2014

 

 

 

(in thousands, except share and per share data)

 

Reconciliation of Net Income to Normalized Adjusted Net Income

 

 

 

 

 

 

 

 

 

Net income

 

$

69,539

 

$

41,418

 

$

154,548

 

$

121,149

 

GAAP provision for income taxes

 

9,378

 

1,179

 

14,103

 

829

 

Income before income taxes

 

$

78,917

 

$

42,597

 

$

168,651

 

$

121,978

 

Amortization of purchased intangibles and acquired capitalized software

 

53

 

53

 

159

 

159

 

Severance

 

342

 

2,742

 

645

 

3,136

 

Initial public offering fees and expenses

 

 

60

 

 

8,961

 

Termination of office leases

 

 

 

2,729

 

849

 

Equipment write-off

 

251

 

 

1,719

 

 

Acquisition related retention bonus

 

 

152

 

 

2,639

 

Share based compensation

 

3,254

 

4,170

 

11,907

 

11,299

 

Charges related to one-time share based compensation at IPO, 2015 Management Incentive Plan

 

1,655

 

 

2,913

 

 

Charges related to share based compensation at IPO

 

1,107

 

 

45,301

 

 

Normalized Adjusted Net Income before income taxes

 

$

85,579

 

$

49,774

 

$

234,024

 

$

149,021

 

Normalized provision for income taxes(1)

 

30,381

 

17,670

 

83,079

 

52,902

 

Normalized Adjusted Net Income

 

$

55,198

 

$

32,104

 

$

150,945

 

$

96,119

 

 

 

 

 

 

 

 

 

 

 

Adjusted shares outstanding(2)

 

138,881,040

 

138,447,359

 

138,783,804

 

138,447,359

 

 

 

 

 

 

 

 

 

 

 

Adjusted Net Income per share

 

$

0.40

 

$

0.23

 

$

1.09

 

$

0.69

 

 


(1) Reflects U.S. federal, state, and local income tax rate applicable to corporations of approximately 35.5%.

(2) Assumes that (1) holders of all vested and unvested Virtu Financial LLC Units (together with corresponding shares of Class C common stock), have exercised their right to exchange such Virtu Financial LLC Units for shares of Class A common stock on a one-for-one basis,  (2) holders of all Virtu Financial LLC Units (together with corresponding shares of Class D common stock), have exercised their right to exchange such Virtu Financial LLC Units for shares of Class B common stock on a one-for-one basis, and subsequently exercised their right to convert the shares of Class B common stock into shares of Class A common stock on a one-for-one basis.

Includes 433,681 and 336,445 additional shares from dilutive impact of options and RSU’s granted under the 2015 MIP for the three and nine months ended September 30, 2015, respectively.

 

10



 

Virtu Financial, Inc. and Subsidiaries

Condensed Consolidated Statements of Financial Condition (Unaudited)

 

 

 

September 30,

 

December 31,

 

 

 

2015

 

2014

 

 

 

(in thousands, except share data)

 

Assets

 

 

 

 

 

Cash and cash equivalents

 

$

161,538

 

$

75,864

 

Securities borrowed

 

510,600

 

484,934

 

Securities purchased under agreements to resell

 

 

31,463

 

Receivables from broker-dealers and clearing organizations

 

560,716

 

387,652

 

Trading assets, at fair value

 

1,454,558

 

1,544,308

 

Property, equipment and capitalized software, net

 

42,442

 

44,644

 

Goodwill

 

715,379

 

715,379

 

Intangibles (net of accumulated amortization)

 

1,255

 

1,414

 

Deferred taxes

 

160,782

 

 

Other assets

 

34,676

 

33,800

 

Total assets

 

$

3,641,946

 

$

3,319,458

 

 

 

 

 

 

 

Liabilities, redeemable interest and equity

 

 

 

 

 

Liabilities

 

 

 

 

 

Short-term borrowings

 

$

28,000

 

$

 

Securities loaned

 

741,728

 

497,862

 

Securities sold under agreements to repurchase

 

9,000

 

2,006

 

Payables to broker-dealers and clearing organizations

 

328,054

 

686,203

 

Trading liabilities, at fair value

 

1,198,881

 

1,037,634

 

Tax receivable agreement obligations

 

184,679

 

 

Accounts payable and accrued expenses and other liabilities

 

128,278

 

93,331

 

Senior secured credit facility, net

 

494,498

 

495,724

 

Total liabilities

 

$

3,113,118

 

$

2,812,760

 

 

 

 

 

 

 

Class A-1 redeemable membership interest

 

 

294,433

 

 

 

 

 

 

 

Total equity

 

528,828

 

212,265

 

 

 

 

 

 

 

Total liabilities, redeemable interest and equity

 

$

3,641,946

 

$

3,319,458

 

 

 

 

As of September 30, 2015

 

 

 

Interests

 

%

 

Ownership of Virtu Financial LLC Interests:

 

 

 

 

 

Virtu Financial, Inc. - Class A Common Stock

 

34,305,052

 

24.8

%

Non-controlling Interests (Virtu Financial LLC)

 

104,142,307

 

75.2

%

Total Virtu Financial LLC Interests

 

138,447,359

 

100.0

%

 

11



 

Conference Call Information

 

Douglas Cifu, Chief Executive Officer, and Joseph Molluso, Chief Financial Officer, will host a conference call to discuss the Company’s financial results and outlook on Wednesday, November 4, 2015, at 8:00 a.m. Eastern Time. To access the conference call, please dial (855) 645-0552 (U.S.) or (720) 634-9067 (international). The Company will also host a live audio Webcast of the conference call on the Investor Relations section of the Company’s website at http://ir.virtu.com/events.cfm. The Webcast will also be archived on http://ir.virtu.com/events.cfm for 90 days following the announcement.

 

About Virtu Financial, Inc.

 

Virtu is a leading technology-enabled market maker and liquidity provider to the global financial markets. We stand ready, at any time, to buy or sell a broad range of securities and other financial instruments, and we generate revenue by buying and selling securities and other financial instruments and earning small amounts of money on individual transactions based on the difference between what buyers are willing to pay and what sellers are willing to accept, which we refer to as “bid/ask spreads,” across a large volume of transactions. We make markets by providing quotations to buyers and sellers in more than 11,000 securities and other financial instruments on more than 225 unique exchanges, markets and liquidity pools in 35 countries around the world. We believe that our broad diversification, in combination with our proprietary technology platform and low-cost structure, enables us to facilitate risk transfer between global capital markets participants by supplying liquidity and competitive pricing while at the same time earning attractive margins and returns.

 

Cautionary Note Regarding Forward-Looking Statements

 

The foregoing information contains certain forward-looking statements that reflect the company’s current views with respect to certain current and future events and financial performance. These forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and factors relating to the company’s operations and business environment which may cause the company’s actual results to be materially different from any future results, expressed or implied, in these forward-looking statements. Any forward-looking statements in this release are based upon information available to the company on the date of this release. The company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any statements expressed or implied therein will not be realized. Additional information on risk factors that could potentially affect the company’s financial results may be found in the company’s filings with the Securities and Exchange Commission.

 

CONTACT

 

Investor Relations

Andrew Smith

Virtu Financial, Inc.

(212) 418-0195

investor_relations@virtu.com

 

Media Relations

media@virtu.com

 

12