Virtu Financial, Inc. (NASDAQ:VIRT) a leading technology-enabled
market maker and liquidity provider to the global financial
markets, today reported results for the quarter ended September 30,
2016.
Third Quarter Selected Results
- Net income of $33.0 million; Normalized Adjusted Net Income* of
$27.3 million
- Basic and Diluted EPS of $0.18; Normalized Adjusted EPS* of
$0.20
- Total revenues of $164.8 million; Adjusted Net Trading Income*
of $94.2 million
- Adjusted EBITDA* of $56.9 million; Adjusted EBITDA Margin* of
58.6%
- Quarterly cash dividend of $0.24 per share payable on December
15, 2016
* 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, 2016 to shareholders of record
as of December 1, 2016.
“Except for the initial surge at the beginning
of this quarter in post-Brexit trading activity, the markets we
participate in were quiet throughout the balance of the
quarter. Market volumes were muted and realized volatility has
been at historic lows, reducing the opportunity for a market maker
to earn spread, which is the core of our model. Despite these
challenges, given our broad diversification and focus on expense
management, our business was solidly profitable in the third
quarter, producing strong margins and enabling us to continue to
return capital to our investors. We are optimistic that when
volumes and volatility return, Virtu is poised to generate strong
performance given our global market presence and disciplined market
making model,” said Douglas Cifu, Chief Executive Officer of Virtu
Financial.
GAAP Financial Results
Total revenues decreased 23.6% to $164.8 million
for this quarter, compared to $215.8 million for the same period in
2015. Trading income, net, decreased 24.2% to $156.7 million for
this quarter, compared to $206.8 million for the same period in
2015. Net income decreased 52.5% to $33.0 million for this quarter,
compared to $69.5 million for the same period in 2015.
Basic and Diluted EPS for this quarter were $0.18 and $0.18,
compared to $0.36 and $0.35 for the same period in 2015,
respectively.
Historical quarterly results from first quarter
2014 to date are available at http://ir.virtu.com.
Business Performance
For the third quarter of 2016, Adjusted Net
Trading Income decreased 32.0% to $94.2 million for this quarter,
compared to $138.6 million for the same period in 2015. Adjusted
EBITDA decreased 43.5% to $56.9 million for this quarter, compared
to $100.7 million for the same period in 2015. Normalized Adjusted
Net Income decreased 50.5% to $27.3 million for this quarter,
compared to $55.2 million for the same period in 2015. 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, Normalized Adjusted EPS was
$0.20 for this quarter and $0.40 for the same period in 2015.
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,
2016, we achieved a diverse mix of Adjusted Net Trading Income
results, with no one category constituting more than 28.2% of our
total Adjusted Net Trading Income. Average daily Adjusted Net
Trading Income was approximately $1.473 million for this quarter
compared to $2.166 million for the same period in the previous
year.
As of September 30, 2016, Virtu was connected to
more than 235 unique market venues in 36 countries and made markets
in over 12,000 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
and nine months ended September 30, 2016 and 2015,
respectively.
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
Adjusted Net
Trading Income: |
|
2016 |
|
|
% of Total |
|
|
2015 |
|
|
% of Total |
|
% Change |
|
|
|
|
|
|
|
|
|
|
Category |
(in thousands, except
percentages) |
Americas
Equities |
$ |
24,738 |
|
|
|
26.2 |
% |
|
$ |
45,815 |
|
|
|
33.1 |
% |
|
|
-46.0 |
% |
EMEA
Equities |
|
8,181 |
|
|
|
8.7 |
% |
|
|
15,087 |
|
|
|
10.9 |
% |
|
|
-45.8 |
% |
APAC
Equities |
|
12,609 |
|
|
|
13.4 |
% |
|
|
13,144 |
|
|
|
9.5 |
% |
|
|
-4.1 |
% |
Global
Commodities |
|
26,600 |
|
|
|
28.2 |
% |
|
|
28,273 |
|
|
|
20.4 |
% |
|
|
-5.9 |
% |
Global
Currencies |
|
12,883 |
|
|
|
13.7 |
% |
|
|
23,289 |
|
|
|
16.8 |
% |
|
|
-44.7 |
% |
Options,
Fixed Income and Other |
|
5,844 |
|
|
|
6.2 |
% |
|
|
10,988 |
|
|
|
7.9 |
% |
|
|
-46.8 |
% |
Unallocated1 |
|
3,390 |
|
|
|
3.6 |
% |
|
|
2,020 |
|
|
|
1.4 |
% |
|
|
NM |
|
|
|
|
|
|
|
|
|
|
|
Total Adjusted
Net Trading Income |
$ |
94,244 |
|
|
|
100.0 |
% |
|
$ |
138,616 |
|
|
|
100.0 |
% |
|
|
-32.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
Average Daily
Adjusted Net Trading Income: |
|
2016 |
|
|
% of Total |
|
|
2015 |
|
|
% of Total |
|
% Change |
Category |
(in thousands, except
percentages) |
Americas
Equities |
$ |
387 |
|
|
|
26.3 |
% |
|
$ |
716 |
|
|
|
33.1 |
% |
|
|
-45.9 |
% |
EMEA
Equities |
|
128 |
|
|
|
8.7 |
% |
|
|
236 |
|
|
|
10.9 |
% |
|
|
-45.8 |
% |
APAC
Equities |
|
197 |
|
|
|
13.4 |
% |
|
|
205 |
|
|
|
9.5 |
% |
|
|
-3.9 |
% |
Global
Commodities |
|
416 |
|
|
|
28.2 |
% |
|
|
442 |
|
|
|
20.4 |
% |
|
|
-5.9 |
% |
Global
Currencies |
|
201 |
|
|
|
13.6 |
% |
|
|
364 |
|
|
|
16.8 |
% |
|
|
-44.8 |
% |
Options,
Fixed Income and Other |
|
91 |
|
|
|
6.2 |
% |
|
|
172 |
|
|
|
7.9 |
% |
|
|
-47.1 |
% |
Unallocated1 |
|
53 |
|
|
|
3.6 |
% |
|
|
31 |
|
|
|
1.4 |
% |
|
|
NM |
|
|
|
|
|
|
|
|
|
|
|
Total Adjusted
Net Trading Income |
$ |
1,473 |
|
|
|
100.0 |
% |
|
$ |
2,166 |
|
|
|
100.0 |
% |
|
|
-32.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
Adjusted Net
Trading Income: |
|
2016 |
|
|
% of Total |
|
|
2015 |
|
|
% of Total |
|
% Change |
|
|
|
|
|
|
|
|
|
|
Category |
(in thousands, except
percentages) |
Americas
Equities |
$ |
92,837 |
|
|
|
29.6 |
% |
|
$ |
102,278 |
|
|
|
26.0 |
% |
|
|
-9.2 |
% |
EMEA
Equities |
|
34,803 |
|
|
|
11.1 |
% |
|
|
46,013 |
|
|
|
11.7 |
% |
|
|
-24.4 |
% |
APAC
Equities |
|
38,733 |
|
|
|
12.3 |
% |
|
|
33,875 |
|
|
|
8.6 |
% |
|
|
14.3 |
% |
Global
Commodities |
|
78,223 |
|
|
|
24.9 |
% |
|
|
90,514 |
|
|
|
23.0 |
% |
|
|
-13.6 |
% |
Global
Currencies |
|
50,282 |
|
|
|
16.0 |
% |
|
|
90,147 |
|
|
|
22.9 |
% |
|
|
-44.2 |
% |
Options,
Fixed Income and Other |
|
22,814 |
|
|
|
7.3 |
% |
|
|
24,911 |
|
|
|
6.3 |
% |
|
|
-8.4 |
% |
Unallocated1 |
|
(3,854 |
) |
|
|
-1.2 |
% |
|
|
5,151 |
|
|
|
1.5 |
% |
|
|
NM |
|
|
|
|
|
|
|
|
|
|
|
Total Adjusted
Net Trading Income |
$ |
313,838 |
|
|
|
100.0 |
% |
|
$ |
392,889 |
|
|
|
100.0 |
% |
|
|
-20.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
Average Daily
Adjusted Net Trading Income: |
|
2016 |
|
|
% of Total |
|
|
2015 |
|
|
% of Total |
|
% Change |
Category |
(in thousands, except
percentages) |
Americas
Equities |
$ |
491 |
|
|
|
29.6 |
% |
|
$ |
455 |
|
|
|
26.0 |
% |
|
|
7.9 |
% |
EMEA
Equities |
|
184 |
|
|
|
11.1 |
% |
|
|
249 |
|
|
|
11.7 |
% |
|
|
-26.1 |
% |
APAC
Equities |
|
205 |
|
|
|
12.3 |
% |
|
|
167 |
|
|
|
8.6 |
% |
|
|
22.8 |
% |
Global
Commodities |
|
414 |
|
|
|
24.9 |
% |
|
|
502 |
|
|
|
23.0 |
% |
|
|
-17.5 |
% |
Global
Currencies |
|
266 |
|
|
|
16.0 |
% |
|
|
539 |
|
|
|
22.9 |
% |
|
|
-50.6 |
% |
Options,
Fixed Income and Other |
|
121 |
|
|
|
7.3 |
% |
|
|
112 |
|
|
|
6.3 |
% |
|
|
8.0 |
% |
Unallocated1 |
|
(20 |
) |
|
|
-1.2 |
% |
|
|
25 |
|
|
|
1.5 |
% |
|
|
NM |
|
|
|
|
|
|
|
|
|
|
|
Total Adjusted
Net Trading Income |
$ |
1,661 |
|
|
|
100.0 |
% |
|
$ |
2,049 |
|
|
|
100.0 |
% |
|
|
-18.9 |
% |
|
|
|
|
|
|
|
|
|
|
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. |
|
|
|
|
|
|
|
|
|
|
Financial Condition
As of September 30, 2016, Virtu had $146.0
million in cash and cash equivalents, and total long-term debt
outstanding in an aggregate principal amount of $530.5 million.
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.
- "EBITDA", which measures our operating performance by adjusting
Net Income to exclude financing interest expense on our senior
secured credit facility, depreciation and amortization,
amortization of purchased intangibles and acquired capitalized
software, and income tax expense, and "Adjusted EBITDA", which
measures our operating performance by further adjusting EBITDA to
exclude severance, transaction advisory fees and expenses,
termination of office leases, trading related settlement income,
other losses (revenues), equipment write-off, share based
compensation, charges related to 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 Financial LLC units have been exchanged for Class A
Common Stock, and applying a corporate tax rate of 35.5%.
Adjusted Net Trading 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, 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 they assist both investors and management in analyzing and
benchmarking the performance and value of our business. Adjusted
Net Trading 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 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 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, 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, 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, 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:
- 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, 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, 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 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.
Virtu Financial, Inc. and Subsidiaries |
Condensed Consolidated Statements of Comprehensive
Income (Unaudited) |
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
|
|
|
|
|
|
(in thousands, except share and per share
data) |
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
Trading
income, net |
$ |
156,706 |
|
|
$ |
206,832 |
|
|
$ |
509,542 |
|
|
$ |
590,554 |
|
Interest
and dividends income |
|
5,271 |
|
|
|
6,425 |
|
|
|
14,961 |
|
|
|
21,022 |
|
Technology services |
|
2,931 |
|
|
|
2,545 |
|
|
|
7,224 |
|
|
|
7,733 |
|
Other
revenues (losses) |
|
(102 |
) |
|
|
- |
|
|
|
(102 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
Total
revenues |
|
164,806 |
|
|
|
215,802 |
|
|
|
531,625 |
|
|
|
619,309 |
|
|
|
|
|
|
|
|
|
Operating
Expenses: |
|
|
|
|
|
|
|
Brokerage, exchange and clearance fees, net |
|
52,118 |
|
|
|
61,814 |
|
|
|
167,416 |
|
|
|
179,453 |
|
Communication and data processing |
|
17,903 |
|
|
|
16,110 |
|
|
|
53,578 |
|
|
|
51,602 |
|
Employee
compensation and payroll taxes |
|
20,816 |
|
|
|
24,736 |
|
|
|
64,182 |
|
|
|
66,801 |
|
Interest
and dividends expense |
|
15,615 |
|
|
|
12,827 |
|
|
|
43,249 |
|
|
|
39,234 |
|
Operations and administrative |
|
5,543 |
|
|
|
4,857 |
|
|
|
16,353 |
|
|
|
20,017 |
|
Depreciation and amortization |
|
7,158 |
|
|
|
8,176 |
|
|
|
22,685 |
|
|
|
26,025 |
|
Amortization of purchased intangibles and acquired capitalized
software |
|
53 |
|
|
|
53 |
|
|
|
159 |
|
|
|
159 |
|
Charges
related to share based compensation at IPO |
|
333 |
|
|
|
1,107 |
|
|
|
1,444 |
|
|
|
45,301 |
|
Financing
interest expense on senior secured credit facility |
|
7,393 |
|
|
|
7,205 |
|
|
|
21,569 |
|
|
|
22,066 |
|
|
|
|
|
|
|
|
|
Total
operating expenses |
|
126,932 |
|
|
|
136,885 |
|
|
|
390,635 |
|
|
|
450,658 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes and noncontrolling interest |
|
37,874 |
|
|
|
78,917 |
|
|
|
140,990 |
|
|
|
168,651 |
|
Provision
for income taxes |
|
4,851 |
|
|
|
9,378 |
|
|
|
17,325 |
|
|
|
14,103 |
|
|
|
|
|
|
|
|
|
Net
income |
$ |
33,023 |
|
|
$ |
69,539 |
|
|
$ |
123,665 |
|
|
$ |
154,548 |
|
|
|
|
|
|
|
|
|
Noncontrolling interest |
|
(25,997 |
) |
|
|
(57,233 |
) |
|
|
(97,913 |
) |
|
|
(141,768 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income available for common stockholders |
$ |
7,026 |
|
|
$ |
12,306 |
|
|
$ |
25,752 |
|
|
$ |
12,780 |
|
|
|
|
|
|
|
|
|
Earnings per
share: |
|
|
|
|
|
|
|
Basic |
$ |
0.18 |
|
|
$ |
0.36 |
|
|
$ |
0.66 |
|
|
$ |
0.37 |
|
Diluted |
$ |
0.18 |
|
|
$ |
0.35 |
|
|
$ |
0.66 |
|
|
$ |
0.37 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding |
|
|
|
|
|
|
|
Basic |
|
38,351,465 |
|
|
|
34,305,052 |
|
|
|
38,264,139 |
|
|
|
34,305,052 |
|
Diluted |
|
38,351,465 |
|
|
|
34,738,733 |
|
|
|
38,264,139 |
|
|
|
34,641,497 |
|
|
|
|
|
|
|
|
|
Comprehensive
income: |
|
|
|
|
|
|
|
Net
income |
$ |
33,023 |
|
|
$ |
69,539 |
|
|
$ |
123,665 |
|
|
$ |
154,548 |
|
Other
comprehensive income (loss) |
|
|
|
|
|
|
|
Foreign
exchange translation adjustment, net of taxes |
|
519 |
|
|
|
3,596 |
|
|
|
1,783 |
|
|
|
595 |
|
|
|
|
|
|
|
|
|
Comprehensive
income |
$ |
33,542 |
|
|
$ |
73,135 |
|
|
$ |
125,448 |
|
|
$ |
155,143 |
|
Less:
Comprehensive income attributable to noncontrolling interest
|
|
(26,370 |
) |
|
|
(59,931 |
) |
|
|
(99,195 |
) |
|
|
(141,053 |
) |
|
|
|
|
|
|
|
|
Comprehensive income
available for common stockholders |
$ |
7,172 |
|
|
$ |
13,204 |
|
|
$ |
26,253 |
|
|
$ |
14,090 |
|
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 Trading Income,
EBITDA, Adjusted EBITDA, and selected Operating Margins. |
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
|
|
|
|
|
|
|
(in thousands, except
percentages) |
Reconciliation of Trading income, net to Adjusted Net
Trading Income |
|
|
|
|
|
|
Trading
income, net |
$ |
156,706 |
|
|
$ |
206,832 |
|
|
$ |
509,542 |
|
|
$ |
590,554 |
|
Interest
and dividends income |
|
5,271 |
|
|
|
6,425 |
|
|
|
14,961 |
|
|
|
21,022 |
|
Brokerage, exchange and clearance fees, net |
|
(52,118 |
) |
|
|
(61,814 |
) |
|
|
(167,416 |
) |
|
|
(179,453 |
) |
Interest
and dividends expense |
|
(15,615 |
) |
|
|
(12,827 |
) |
|
|
(43,249 |
) |
|
|
(39,234 |
) |
|
|
|
|
|
|
|
|
Adjusted Net
Trading Income |
$ |
94,244 |
|
|
$ |
138,616 |
|
|
$ |
313,838 |
|
|
$ |
392,889 |
|
|
|
|
|
|
|
|
|
Reconciliation
of Net Income to EBITDA and Adjusted EBITDA |
|
|
|
|
|
|
|
Net
income |
$ |
33,023 |
|
|
$ |
69,539 |
|
|
$ |
123,665 |
|
|
$ |
154,548 |
|
Financing
interest expense on senior secured credit facility |
|
7,393 |
|
|
|
7,205 |
|
|
|
21,569 |
|
|
|
22,066 |
|
Depreciation and amortization |
|
7,158 |
|
|
|
8,176 |
|
|
|
22,685 |
|
|
|
26,025 |
|
Amortization of purchased intangibles and acquired capitalized
software |
|
53 |
|
|
|
53 |
|
|
|
159 |
|
|
|
159 |
|
Provision
for income taxes |
|
4,851 |
|
|
|
9,378 |
|
|
|
17,325 |
|
|
|
14,103 |
|
|
|
|
|
|
|
|
|
EBITDA |
$ |
52,478 |
|
|
$ |
94,351 |
|
|
$ |
185,403 |
|
|
$ |
216,901 |
|
|
|
|
|
|
|
|
|
Severance |
|
77 |
|
|
|
342 |
|
|
|
270 |
|
|
|
645 |
|
Transaction advisory fees and expenses |
|
521 |
|
|
|
- |
|
|
|
676 |
|
|
|
- |
|
Termination of office leases |
|
- |
|
|
|
- |
|
|
|
(319 |
) |
|
|
2,729 |
|
Trading
related settlement income |
|
(2,975 |
) |
|
|
- |
|
|
|
(2,975 |
) |
|
|
- |
|
Other
losses (revenues) |
|
102 |
|
|
|
- |
|
|
|
102 |
|
|
|
- |
|
Equipment
write-off |
|
- |
|
|
|
- |
|
|
|
428 |
|
|
|
- |
|
Share
based compensation |
|
4,892 |
|
|
|
3,254 |
|
|
|
14,587 |
|
|
|
11,907 |
|
Charges
related to share based compensation at IPO, 2015 Management
Incentive Plan |
|
1,512 |
|
|
|
1,655 |
|
|
|
4,212 |
|
|
|
2,913 |
|
Charges
related to share based compensation awards at IPO |
|
333 |
|
|
|
1,107 |
|
|
|
1,444 |
|
|
|
45,301 |
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA |
$ |
56,940 |
|
|
$ |
100,709 |
|
|
$ |
203,828 |
|
|
$ |
280,396 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected
Operating Margins |
|
|
|
|
|
|
|
Net
Income Margin1 |
|
34.0 |
% |
|
|
49.3 |
% |
|
|
38.5 |
% |
|
|
38.6 |
% |
EBITDA
Margin2 |
|
54.0 |
% |
|
|
66.8 |
% |
|
|
57.7 |
% |
|
|
54.1 |
% |
Adjusted
EBITDA Margin3 |
|
58.6 |
% |
|
|
71.3 |
% |
|
|
63.5 |
% |
|
|
70.0 |
% |
|
|
|
|
|
|
|
|
1
Calculated by dividing net income by the sum of Adjusted Net
Trading Income and technology services revenue. |
|
|
|
|
|
|
2
Calculated by dividing EBITDA by the sum of Adjusted Net Trading
Income and technology services revenue. |
|
|
|
|
|
|
3
Calculated by dividing Adjusted EBITDA by the sum of Adjusted Net
Trading Income and technology services revenue. |
|
|
|
|
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
before income taxes, Normalized provision for income taxes,
Normalized Adjusted Net Income and Normalized Adjusted EPS. |
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
|
|
|
|
|
|
(in thousands, except share and per share
data) |
|
|
|
|
|
|
|
Reconciliation
of Net Income to Normalized Adjusted Net Income |
|
|
|
|
|
|
|
Net
income |
$ |
33,023 |
|
|
$ |
69,539 |
|
|
$ |
123,665 |
|
|
$ |
154,548 |
|
Provision
for income taxes |
|
4,851 |
|
|
|
9,378 |
|
|
|
17,325 |
|
|
|
14,103 |
|
|
|
|
|
|
|
|
|
Income
before income taxes |
$ |
37,874 |
|
|
$ |
78,917 |
|
|
$ |
140,990 |
|
|
$ |
168,651 |
|
|
|
|
|
|
|
|
|
Amortization of purchased intangibles and acquired capitalized
software |
|
53 |
|
|
|
53 |
|
|
|
159 |
|
|
|
159 |
|
Severance |
|
77 |
|
|
|
342 |
|
|
|
270 |
|
|
|
645 |
|
Transaction advisory fees and expenses |
|
521 |
|
|
|
- |
|
|
|
676 |
|
|
|
- |
|
Termination of office leases |
|
- |
|
|
|
- |
|
|
|
(319 |
) |
|
|
2,729 |
|
Equipment
write-off |
|
- |
|
|
|
251 |
|
|
|
428 |
|
|
|
1,719 |
|
Trading
related settlement income |
|
(2,975 |
) |
|
|
- |
|
|
|
(2,975 |
) |
|
|
- |
|
Other
losses (revenues) |
|
102 |
|
|
|
- |
|
|
|
102 |
|
|
|
- |
|
Share
based compensation |
|
4,892 |
|
|
|
3,254 |
|
|
|
14,587 |
|
|
|
11,907 |
|
Charges
related to share based compensation at IPO, 2015 Management
Incentive Plan |
|
1,512 |
|
|
|
1,655 |
|
|
|
4,212 |
|
|
|
2,913 |
|
Charges
related to share based compensation awards at IPO |
|
333 |
|
|
|
1,107 |
|
|
|
1,444 |
|
|
|
45,301 |
|
|
|
|
|
|
|
|
|
Normalized Adjusted Net Income before income taxes |
$ |
42,389 |
|
|
$ |
85,579 |
|
|
$ |
159,574 |
|
|
$ |
234,024 |
|
|
|
|
|
|
|
|
|
Normalized provision for income taxes1 |
|
15,048 |
|
|
|
30,381 |
|
|
|
56,649 |
|
|
|
83,079 |
|
|
|
|
|
|
|
|
|
Normalized
Adjusted Net Income |
$ |
27,341 |
|
|
$ |
55,198 |
|
|
$ |
102,925 |
|
|
$ |
150,945 |
|
|
|
|
|
|
|
|
|
Weighted
Average Adjusted shares outstanding2 |
|
139,687,848 |
|
|
|
138,881,040 |
|
|
|
139,685,124 |
|
|
|
138,783,804 |
|
|
|
|
|
|
|
|
|
Normalized
Adjusted EPS |
$ |
0.20 |
|
|
$ |
0.40 |
|
|
$ |
0.74 |
|
|
$ |
1.09 |
|
|
|
|
|
|
|
|
|
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
additional shares from dilutive impact of options and restricted
stock units outstanding under the 2015 Management Incentive
Plan during the three and six months ended September 30, 2016
and 2015. |
Virtu Financial, Inc. and Subsidiaries |
Condensed Consolidated Statements of Financial
Condition (Unaudited) |
|
|
September 30, |
|
December 31, |
|
|
2016 |
|
|
|
2015 |
|
|
|
|
|
|
(in thousands, except share data) |
Assets |
|
|
|
Cash and
cash equivalents |
$ |
145,999 |
|
|
$ |
163,235 |
|
Securities borrowed |
|
394,812 |
|
|
|
453,296 |
|
Securities purchased under agreements to resell |
|
- |
|
|
|
14,981 |
|
Receivables from broker-dealers and
clearing organizations |
|
513,292 |
|
|
|
476,536 |
|
Trading
assets, at fair value |
|
1,439,968 |
|
|
|
1,297,214 |
|
Property,
equipment and capitalized software, net |
|
30,697 |
|
|
|
37,501 |
|
Goodwill |
|
715,379 |
|
|
|
715,379 |
|
Intangibles (net of accumulated amortization) |
|
1,044 |
|
|
|
1,203 |
|
Deferred
taxes |
|
193,721 |
|
|
|
193,740 |
|
Other
assets |
|
78,509 |
|
|
|
38,845 |
|
|
|
|
|
Total
assets |
$ |
3,513,421 |
|
|
$ |
3,391,930 |
|
|
|
|
|
Liabilities and
equity |
|
|
|
Liabilities |
|
|
|
Short-term borrowings |
$ |
17,600 |
|
|
$ |
45,000 |
|
Securities loaned |
|
481,947 |
|
|
|
524,603 |
|
Payables
to broker-dealers and clearing organizations |
|
305,256 |
|
|
|
486,604 |
|
Trading
liabilities, at fair value |
|
1,318,559 |
|
|
|
979,090 |
|
Tax
receivable agreement obligations |
|
226,048 |
|
|
|
218,399 |
|
Accounts
payable and accrued expenses and other liabilities |
|
94,856 |
|
|
|
86,775 |
|
Long-term
borrowings, net |
|
526,077 |
|
|
|
493,589 |
|
|
|
|
|
Total
liabilities |
$ |
2,970,343 |
|
|
$ |
2,834,060 |
|
|
|
|
|
|
|
|
|
Total
equity |
|
543,078 |
|
|
|
557,870 |
|
|
|
|
|
|
|
|
|
Total
liabilities and equity |
$ |
3,513,421 |
|
|
$ |
3,391,930 |
|
|
|
|
|
|
|
|
|
|
As of September 30, 2016 |
Ownership of
Virtu Financial LLC Interests: |
Interests |
|
% |
|
|
|
|
Virtu
Financial, Inc. - Class A Common Stock |
|
40,209,587 |
|
|
|
28.8 |
% |
Non-controlling Interests (Virtu Financial LLC) |
|
99,421,197 |
|
|
|
71.2 |
% |
|
|
|
|
Total
Virtu Financial LLC Interests |
|
139,630,784 |
|
|
|
100.0 |
% |
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
Friday, November 4, 2016, at 7:30 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 12,000 securities and
other financial instruments on more than 235 unique exchanges,
markets and liquidity pools in 36 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 and
certain oral statements made from time to time by representatives
of the Company contain 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 RelationsAndrew SmithVirtu Financial,
Inc.(212) 418-0195investor_relations@virtu.com
Media Relationsmedia@virtu.com
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