Delaware
(State or other jurisdiction of incorporation) |
001-37352
(Commission File No.) |
32-0420206
(IRS Employer Identification No.) |
900 Third Avenue
New York, NY 10022-1010 (Address of principal executive offices) |
☐
|
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
|
☐
|
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
|
☐
|
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
|
☐
|
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Exhibit No.
|
Description
|
99.1
|
Press release of Virtu Financial, Inc., dated May 6, 2015 and furnished pursuant to Item 2.02, “Results of Operations and Financial Condition.”
|
|
VIRTU FINANCIAL, INC. | |||
|
By:
|
/s/ Justin Waldie | |
Name: Justin Waldie | |||
Title: Senior Vice President, Secretary and
General Counsel
|
|||
· | GAAP Pre-tax income of $80.2 million, up 60.8% |
· | Adjusted Net Trading Income** of $148.4 million, up 40.2% |
· | Adjusted Net Income** of $87.9 million, up 57.3% |
· | Adjusted EBITDA** of $106.4 million, up 50.2% |
· | 70.5% Adjusted EBITDA Margin**, up from 65.4% |
· | Average Daily Adjusted Net Trading Income** of $2.433 million, up 40.2% |
|
Three Months Ended March 31,
|
|||||||||||||||||||
Adjusted Net Trading Income By Asset Class:
|
2015
|
% of Total
|
2014
|
% of Total
|
% Change
|
|||||||||||||||
|
||||||||||||||||||||
Asset Class
|
(in thousands, except percentages)
|
|||||||||||||||||||
Americas Equities
|
$
|
29,132
|
19.6
|
%
|
$
|
25,304
|
23.9
|
%
|
15.1
|
%
|
||||||||||
EMEA Equities
|
17,399
|
11.7
|
%
|
15,220
|
14.4
|
%
|
14.3
|
%
|
||||||||||||
APAC Equities
|
10,923
|
7.4
|
%
|
6,125
|
5.8
|
%
|
78.3
|
%
|
||||||||||||
Global Commodities
|
34,654
|
23.4
|
%
|
30,013
|
28.4
|
%
|
15.5
|
%
|
||||||||||||
Global Currencies
|
42,167
|
28.4
|
%
|
20,730
|
19.6
|
%
|
103.4
|
%
|
||||||||||||
Options, Fixed Income and Other
|
9,198
|
6.2
|
%
|
10,031
|
9.5
|
%
|
-8.3
|
%
|
||||||||||||
Unallocated1
|
4,935
|
3.3
|
%
|
(1,602
|
)
|
-1.6
|
%
|
NM
|
||||||||||||
Total Adjusted Net Trading Income
|
$
|
148,408
|
100.0
|
%
|
$
|
105,821
|
100.0
|
%
|
40.2
|
%
|
||||||||||
|
||||||||||||||||||||
|
||||||||||||||||||||
|
Three Months Ended March 31,
|
|||||||||||||||||||
Average Daily Adjusted Net Trading Income:
|
2015
|
% of Total
|
2014
|
% of Total
|
% Change
|
|||||||||||||||
Category
|
(in thousands, except percentages)
|
|||||||||||||||||||
Americas Equities
|
$
|
478
|
19.6
|
%
|
$
|
415
|
23.9
|
%
|
15.1
|
%
|
||||||||||
EMEA Equities
|
285
|
11.7
|
%
|
250
|
14.4
|
%
|
14.3
|
%
|
||||||||||||
APAC Equities
|
179
|
7.4
|
%
|
100
|
5.8
|
%
|
78.3
|
%
|
||||||||||||
Global Commodities
|
568
|
23.4
|
%
|
492
|
28.4
|
%
|
15.5
|
%
|
||||||||||||
Global Currencies
|
691
|
28.4
|
%
|
340
|
19.6
|
%
|
103.4
|
%
|
||||||||||||
Options, Fixed Income and Other
|
151
|
6.2
|
%
|
164
|
9.5
|
%
|
-8.3
|
%
|
||||||||||||
Unallocated1
|
81
|
3.3
|
%
|
(26
|
)
|
-1.6
|
%
|
NM
|
||||||||||||
Total Adjusted Net Trading Income
|
$
|
2,433
|
100.0
|
%
|
$
|
1,735
|
100.0
|
%
|
40.2
|
%
|
||||||||||
|
||||||||||||||||||||
|
||||||||||||||||||||
|
Three Months Ended March 31,
|
|||||||||||||||||||
Selected Market Metrics:
|
2015
|
2014
|
% Change
|
|||||||||||||||||
US Equities Average Daily Volume, in millions2
|
6,916
|
6,944
|
-0.4
|
%
|
||||||||||||||||
EU Equities Average Daily Volume, in millions2
|
6,581
|
6,241
|
5.4
|
%
|
||||||||||||||||
TSE Equities Average Daily Volume, in millions3
|
2,707
|
2,835
|
-4.5
|
%
|
||||||||||||||||
CME Average Daily Energy Contracts4
|
2,140,644
|
1,628,834
|
31.4
|
%
|
||||||||||||||||
CME Average Daily FX Contracts4
|
951,064
|
802,089
|
18.6
|
%
|
||||||||||||||||
OCC Average Daily Volume, in millions5
|
16.3
|
17.9
|
-8.8
|
%
|
||||||||||||||||
VIX (Average)6
|
16.57
|
14.81
|
11.9
|
%
|
||||||||||||||||
VIX (High)6
|
22.39
|
21.44
|
4.4
|
%
|
||||||||||||||||
VIX (Low)6
|
13.02
|
12.14
|
7.2
|
%
|
||||||||||||||||
Trading Days (US)7
|
61
|
61
|
||||||||||||||||||
|
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
|
BATS
|
3
|
Tokyo Stock Exchange
|
4
|
Chicago Mercantile Exchange Group
|
5
|
Options Clearing Corporation
|
6
|
Chicago Board Options Exchange
|
7
|
Based on NYSE/NASDAQ trading calendar
|
· | "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, stock-based compensation and stock-based compensation vested upon the IPO expense. |
· | "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, stock-based compensation and stock-based compensation vested upon IPO expense. |
· | 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. |
|
Three Months Ended March 31,
|
|||||||||||
|
2015 Pro Forma
|
2015 Actual
|
2014
|
|||||||||
|
||||||||||||
|
(in thousands, except share and per share data)
|
|||||||||||
Revenues:
|
||||||||||||
Trading income, net
|
$
|
213,930
|
$
|
213,930
|
$
|
165,163
|
||||||
Interest and dividends income
|
5,182
|
5,182
|
5,555
|
|||||||||
Technology services
|
2,416
|
2,416
|
2,577
|
|||||||||
Total revenues
|
221,528
|
221,528
|
173,295
|
|||||||||
|
||||||||||||
Expenses:
|
||||||||||||
Brokerage, exchange and clearance fees, net
|
61,138
|
61,138
|
54,434
|
|||||||||
Communication and data processing
|
17,943
|
17,943
|
15,807
|
|||||||||
Employee compensation and payroll taxes
|
31,667
|
26,900
|
21,613
|
|||||||||
Interest and dividends expense
|
9,566
|
9,566
|
10,463
|
|||||||||
Operations and administrative
|
5,762
|
5,762
|
5,771
|
|||||||||
Depreciation and amortization
|
8,195
|
8,195
|
6,482
|
|||||||||
Amortization of purchased intangibles and
|
||||||||||||
acquired capitalized software
|
53
|
53
|
53
|
|||||||||
Acquisition related retention bonus
|
-
|
-
|
1,266
|
|||||||||
Termination of office leases
|
2,729
|
2,729
|
-
|
|||||||||
Equipment write-off
|
1,468
|
1,468
|
-
|
|||||||||
Financing interest expense on senior secured credit facility
|
6,974
|
7,602
|
7,551
|
|||||||||
Total operating expenses
|
145,495
|
141,356
|
123,440
|
|||||||||
|
||||||||||||
Income before income taxes
|
76,033
|
80,172
|
49,855
|
|||||||||
Provision for income taxes
|
9,416
|
2,728
|
966
|
|||||||||
Net income
|
$
|
66,617
|
$
|
77,444
|
$
|
48,889
|
||||||
|
||||||||||||
Net income attributable to non-controlling interest
|
(55,141
|
)
|
-
|
-
|
||||||||
|
||||||||||||
Net income attributable to Virtu Financial, Inc.
|
$
|
11,476
|
$
|
-
|
$
|
-
|
||||||
|
||||||||||||
Other comprehensive income, net of taxes:
|
||||||||||||
Foreign exchange translation adjustment
|
(1,148
|
)
|
(4,633
|
)
|
48
|
|||||||
|
||||||||||||
Comprehensive net income
|
$
|
10,328
|
$
|
72,811
|
$
|
48,937
|
|
Three Months Ended March 31,
|
|||||||||||
|
2015 Pro Forma
|
2015 Actual
|
2014
|
|||||||||
|
||||||||||||
|
(in thousands, except percentages)
|
|||||||||||
Reconciliation of Trading income, net to Adjusted Net Trading Income
|
||||||||||||
Trading income, net
|
$
|
213,930
|
$
|
213,930
|
$
|
165,163
|
||||||
Interest and dividends income
|
5,182
|
5,182
|
5,555
|
|||||||||
Brokerage, exchange and clearance fees, net
|
(61,138
|
)
|
(61,138
|
)
|
(54,434
|
)
|
||||||
Interest and dividends expense
|
(9,566
|
)
|
(9,566
|
)
|
(10,463
|
)
|
||||||
Adjusted Net Trading Income
|
$
|
148,408
|
$
|
148,408
|
$
|
105,821
|
||||||
|
||||||||||||
Reconciliation of Net Income to Adjusted Net Income
|
||||||||||||
Net Income
|
$
|
66,617
|
$
|
77,444
|
$
|
48,889
|
||||||
Amortization of purchased intangibles and acquired capitalized software
|
53
|
53
|
53
|
|||||||||
Severance
|
303
|
303
|
365
|
|||||||||
Termination of office leases
|
2,729
|
2,729
|
-
|
|||||||||
Equipment write-off
|
1,468
|
1,468
|
-
|
|||||||||
Acquisition related retention bonus
|
-
|
-
|
1,266
|
|||||||||
Stock-based compensation
|
5,853
|
5,853
|
5,267
|
|||||||||
Stock-based compensation vested upon IPO
|
4,767
|
-
|
-
|
|||||||||
Adjusted Net Income
|
$
|
81,790
|
$
|
87,850
|
$
|
55,840
|
||||||
|
||||||||||||
Reconciliation of Net Income to EBITDA and Adjusted EBITDA
|
||||||||||||
Net Income
|
$
|
66,617
|
$
|
77,444
|
$
|
48,889
|
||||||
Financing interest expense on senior secured credit facility
|
6,974
|
7,602
|
7,551
|
|||||||||
Depreciation and amortization
|
8,195
|
8,195
|
6,482
|
|||||||||
Amortization of purchased intangibles and acquired capitalized software
|
53
|
53
|
53
|
|||||||||
Equipment write-off
|
1,468
|
1,468
|
-
|
|||||||||
Provision for Income Taxes
|
9,416
|
2,728
|
966
|
|||||||||
EBITDA
|
$
|
92,723
|
$
|
97,490
|
$
|
63,941
|
||||||
|
||||||||||||
Severance
|
303
|
303
|
365
|
|||||||||
Termination of office leases
|
2,729
|
2,729
|
-
|
|||||||||
Acquisition related retention bonus
|
-
|
-
|
1,266
|
|||||||||
Stock-based compensation
|
5,853
|
5,853
|
5,267
|
|||||||||
Stock-based compensation vested upon IPO
|
4,767
|
-
|
-
|
|||||||||
Adjusted EBITDA
|
$
|
106,375
|
$
|
106,375
|
$
|
70,839
|
||||||
|
||||||||||||
|
||||||||||||
Selected Operating Margins
|
||||||||||||
Net Income Margin1
|
44.2
|
%
|
51.3
|
%
|
45.1
|
%
|
||||||
Adjusted Net Income Margin2
|
54.2
|
%
|
58.2
|
%
|
51.5
|
%
|
||||||
EBITDA Margin3
|
61.5
|
%
|
64.6
|
%
|
59.0
|
%
|
||||||
Adjusted EBITDA Margin4
|
70.5
|
%
|
70.5
|
%
|
65.4
|
%
|
||||||
|
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.
|
|
Three Months Ended March 31,
|
|||||||||||
|
2015 Pro Forma
|
2015 Actual
|
2014
|
|||||||||
|
||||||||||||
|
(in thousands, except share and per share data)
|
|||||||||||
Reconciliation of Net Income to Pro forma Normalized Adjusted Net Income
|
||||||||||||
Net income
|
$
|
66,617
|
$
|
77,444
|
$
|
48,889
|
||||||
GAAP provision for income taxes
|
9,416
|
2,728
|
966
|
|||||||||
Income before income taxes
|
$
|
76,033
|
$
|
80,172
|
$
|
49,855
|
||||||
|
||||||||||||
Amortization of purchased intangibles and acquired capitalized software
|
53
|
53
|
53
|
|||||||||
Severance
|
303
|
303
|
365
|
|||||||||
Termination of office leases
|
2,729
|
2,729
|
-
|
|||||||||
Equipment write-off
|
1,468
|
1,468
|
-
|
|||||||||
Acquisition related retention bonus
|
-
|
-
|
1,266
|
|||||||||
Stock-based compensation
|
5,853
|
5,853
|
5,267
|
|||||||||
Stock-based compensation vested upon IPO
|
4,767
|
-
|
-
|
|||||||||
Pro forma Adjusted income before income taxes
|
$
|
91,206
|
$
|
90,578
|
$
|
56,806
|
||||||
Normalized provision for income taxes1
|
32,378
|
32,155
|
20,166
|
|||||||||
Pro forma Normalized Adjusted Net Income
|
$
|
58,828
|
$
|
58,423
|
$
|
36,640
|
||||||
|
||||||||||||
Adjusted shares outstanding2
|
138,447,359
|
138,447,359
|
138,447,359
|
|||||||||
|
||||||||||||
Pro forma Normalized Adjusted Net Income per share
|
$
|
0.42
|
$
|
0.42
|
$
|
0.26
|
||||||
|
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.
|
|
March 31,
|
December 31,
|
||||||
|
2015
|
2014
|
||||||
|
||||||||
|
(in thousands, except share data)
|
|||||||
Assets
|
||||||||
Cash and equivalents
|
$
|
66,571
|
$
|
75,864
|
||||
Securities borrowed
|
691,084
|
484,934
|
||||||
Securities purchased under agreements to resell
|
272
|
31,463
|
||||||
Receivables from broker-dealers and clearing organizations
|
461,170
|
387,652
|
||||||
Trading assets, at fair value
|
2,077,107
|
1,544,308
|
||||||
Property, equipment and capitalized software, net
|
41,775
|
44,644
|
||||||
Goodwill
|
715,379
|
715,379
|
||||||
Intangibles (net of accumulated amortization)
|
1,362
|
1,414
|
||||||
Other assets
|
44,774
|
38,903
|
||||||
Total assets
|
$
|
4,099,494
|
$
|
3,324,561
|
||||
|
||||||||
Liabilities, redeemable interest and members' equity
|
||||||||
Liabilities
|
||||||||
Securities loaned
|
$
|
956,897
|
$
|
497,862
|
||||
Securities sold under agreements to repurchase
|
10,973
|
2,006
|
||||||
Payables to broker-dealers and clearing organizations
|
726,085
|
686,203
|
||||||
Trading liabilities, at fair value
|
1,292,269
|
1,037,634
|
||||||
Accounts payable and accrued expenses and other liabilities
|
117,383
|
93,331
|
||||||
Senior secured credit facility
|
496,100
|
500,827
|
||||||
Total liabilities
|
$
|
3,599,707
|
$
|
2,817,863
|
||||
|
||||||||
Class A-1 redeemable membership interest
|
294,433
|
294,433
|
||||||
Members' equity
|
205,354
|
212,265
|
||||||
|
||||||||
Total liabilities, redeemable interest and members' equity
|
$
|
4,099,494
|
$
|
3,324,561
|
||||
|
||||||||
|
Pro Forma
|
|||||||
|
As of March 31, 2015
|
|||||||
Economic Ownership of Virtu Financial LLC Interests:
|
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
|
%
|
|
Three Months Ended March 31, 2015
|
||||||||||||
|
Historical
|
Adjustments
|
|
Pro Forma
|
|||||||||
|
|
||||||||||||
|
(in thousands, except share and per share data)
|
||||||||||||
Revenues:
|
|
||||||||||||
Trading income, net
|
$
|
213,930
|
$
|
-
|
|
$
|
213,930
|
||||||
Interest and dividends income
|
5,182
|
-
|
|
5,182
|
|||||||||
Technology services
|
2,416
|
-
|
|
2,416
|
|||||||||
Total revenues
|
221,528
|
-
|
|
221,528
|
|||||||||
|
|
||||||||||||
Expenses:
|
|
||||||||||||
Brokerage, exchange and clearance fees, net
|
61,138
|
-
|
|
61,138
|
|||||||||
Communication and data processing
|
17,943
|
-
|
|
17,943
|
|||||||||
Employee compensation and payroll taxes
|
26,900
|
4,767
|
(a)
|
31,667
|
|||||||||
Interest and dividends expense
|
9,566
|
-
|
|
9,566
|
|||||||||
Operations and administrative
|
5,762
|
-
|
|
5,762
|
|||||||||
Depreciation and amortization
|
8,195
|
-
|
|
8,195
|
|||||||||
Amortization of purchased intangibles and
|
|
||||||||||||
acquired capitalized software
|
53
|
-
|
|
53
|
|||||||||
Termination of office leases
|
2,729
|
-
|
|
2,729
|
|||||||||
Equipment write-off
|
1,468
|
-
|
|
1,468
|
|||||||||
Financing interest expense on senior secured credit facility
|
7,602
|
(628
|
)
|
(b)
|
6,974
|
||||||||
Total operating expenses
|
141,356
|
4,139
|
|
145,495
|
|||||||||
|
|
||||||||||||
Income before income taxes
|
80,172
|
(4,139
|
)
|
|
76,033
|
||||||||
Provision for income taxes
|
2,728
|
6,688
|
(c)
|
9,416
|
|||||||||
|
|
||||||||||||
Net income
|
$
|
77,444
|
$
|
(10,827
|
)
|
|
$
|
66,617
|
|||||
|
|
||||||||||||
Net income attributable to non-controlling interest
|
-
|
(55,141
|
)
|
(d)
|
(55,141
|
)
|
|||||||
|
|
||||||||||||
Net income attributable to Virtu Financial, Inc.
|
$
|
-
|
$
|
-
|
|
|
$
|
11,476
|
|||||
|
|
||||||||||||
Pro forma earnings per share to Class A stockholders:
|
|
||||||||||||
Basic
|
|
$
|
0.33
|
||||||||||
Diluted
|
|
$
|
0.33
|
||||||||||
|
|
||||||||||||
Pro forma weighted average number of shares used in computing earnings per share:
|
|
||||||||||||
Basic
|
|
34,305,052
|
|||||||||||
Diluted
|
|
34,305,052
|