EX-99.1 2 a17-26091_1ex99d1.htm EX-99.1

Exhibit 99.1

 

 

Virtu Announces Third Quarter 2017 Results

 

NEW YORK, NY,  November 7, 2017 — Virtu Financial, Inc. (NASDAQ: VIRT), a leading technology-enabled market maker and liquidity provider to the global financial markets, today reported results for the third quarter ended September 30, 2017.

 

Third Quarter Highlights

 

Reported results include KCG from July 20 through September 30, 2017

 

·                  Net loss of $40.0 million, burdened by costs associated with the KCG acquisition and amortization of purchased intangibles; Normalized Adjusted Net Income* of $22.2 million

·                  Basic and Diluted loss per share of $0.17; Normalized Adjusted EPS* of $0.08

·                  Total revenues of $271.3 million; Adjusted Net Trading Income* of $159.8 million

·                  Adjusted EBITDA* of $58.9 million; Adjusted EBITDA Margin* of 36.8%

·                  KCG integration on track; Expense and Capital Synergy progress ahead of plan

·                  Made total to-date voluntary pre-payments of $200 million on the $1.15B term loan debt incurred in connection with KCG acquisition

·                  Quarterly cash dividend of $0.24 per share payable on December 15, 2017

 


* 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, 2017 to shareholders of record as of December 1, 2017.

 

“The integration of Virtu and KCG is going extraordinarily well.  After a very slow start in July, and despite the continued extremely challenging environment, we generated $3.1 million per day in Adjusted Net Trading Income for the combined company for the months of August, September and October.  Barely four months in to the acquisition, we have identified cost savings in excess of our original estimates and have a clear view of the run-rate expenses of the combined organization.”  Mr. Cifu continued, “The market making businesses of legacy Virtu and KCG are quite complimentary, and the trading efficiencies we have begun to realize and pass on to our clients are real and tangible.”

 

Third Quarter Financial Results

 

Total revenues increased 64.6% to $271.3 million for this quarter, compared to $164.8 million for the same period in 2016. Trading income, net, increased 30.1% to $203.9 million for this quarter, compared to $156.7 million for the same period in 2016. Net income (loss) decreased to $(40.0) million for this quarter, compared to $33.0 million for the same period in 2016.

 

Basic and Diluted earnings (loss) per share for this quarter were both $(0.17), compared to $0.18 each for the same period in 2016.

 

Adjusted Net Trading Income increased 64.4% to $159.8 million for this quarter, compared to $97.2 million for the same period in 2016. Adjusted EBITDA increased 3.5% to $58.9 million for this quarter, compared to $56.9 million for the same period in 2016. Normalized Adjusted Net Income decreased 47.6% to $22.2 million for this quarter, compared to $42.4 million for the same period in 2016.

 

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 $0.08 for this quarter and $0.20 for the same period in 2016.

 

1



 

Operating Segment Information

 

Prior to the acquisition of KCG, the Company was managed and operated as one business, and, accordingly, operated under one reportable segment.  As a result of the acquisition of KCG, beginning in the third quarter of 2017 the Company has three operating segments: (i) Market Making; (ii) Execution Services; and (iii) Corporate.

 

Market Making principally consists of market making in the cash, futures and options markets across global equities, options, fixed income, currencies and commodities. As a market maker, the Company commits capital on a principal basis by offering to buy securities from, or sell securities to, broker dealers, banks and institutions.

 

Execution Services comprises agency-based trading and trading venues, offering execution services in global equities, options, futures and fixed income on behalf of institutions, banks and broker dealers.

 

Corporate contains the Company’s investments, principally in strategic trading-related opportunities maintains corporate overhead expenses.

 

The following tables show the reconciliations from trading income, net; to Adjusted Net Trading Income for the three and nine months ended September 30, 2017 and 2016 (in thousands, except percentages).

 

2



 

 

 

Three Months Ended September 30, 2017

 

Reconciliation of Trading income, net to

 

Market

 

Execution

 

 

 

 

 

Adjusted Net Trading Income

 

Making

 

Services

 

Corporate

 

Total

 

 

 

 

 

 

 

 

 

 

 

Trading income, net

 

$

206,543

 

$

(3,341

)

$

705

 

$

203,907

 

Commissions, net and technology services

 

1,563

 

41,788

 

 

43,351

 

Interest and dividends income

 

20,056

 

103

 

271

 

20,430

 

Brokerage, exchange and clearance fees, net

 

(52,321

)

(12,263

)

 

(64,584

)

Payments for order flow

 

(12,452

)

381

 

 

(12,071

)

Interest and dividends expense

 

(31,360

)

1,561

 

(1,443

)

(31,242

)

 

 

 

 

 

 

 

 

 

 

Adjusted Net Trading Income

 

$

132,029

 

$

28,229

 

$

(467

)

$

159,791

 

 

 

 

Nine Months Ended September 30, 2017

 

Reconciliation of Trading income, net to

 

Market

 

Execution

 

 

 

 

 

Adjusted Net Trading Income

 

Making

 

Services

 

Corporate

 

Total

 

 

 

 

 

 

 

 

 

 

 

Trading income, net

 

$

482,281

 

$

(3,342

)

$

705

 

$

479,644

 

Commissions, net and technology services

 

1,563

 

47,674

 

 

49,237

 

Interest and dividends income

 

30,558

 

104

 

271

 

30,933

 

Brokerage, exchange and clearance fees, net

 

(157,991

)

(12,262

)

 

(170,253

)

Payments for order flow

 

(12,452

)

381

 

 

(12,071

)

Interest and dividends expense

 

(58,575

)

1,562

 

(1,443

)

(58,456

)

 

 

 

 

 

 

 

 

 

 

Adjusted Net Trading Income

 

$

285,384

 

$

34,117

 

$

(467

)

$

319,034

 

 

3



 

The following tables show our Adjusted Net Trading Income, average daily Adjusted Net Trading Income by category for the three and nine months ended September 30, 2017 and 2016 (in thousands, except percentages).

 

 

 

Three Months Ended September 30,

 

Adjusted Net Trading Income by Category:

 

2017

 

2016

 

% Change

 

 

 

 

 

 

 

 

 

Market Making:

 

 

 

 

 

 

 

Americas Equities

 

$

82,588

 

$

24,738

 

233.9

%

ROW Equities

 

16,995

 

20,790

 

-18.3

%

Global FICC, Options and Other

 

32,204

 

45,327

 

-29.0

%

Unallocated(1)

 

242

 

3,390

 

NM

 

Total market making

 

$

132,029

 

$

94,245

 

40.1

%

 

 

 

 

 

 

 

 

Execution Services

 

28,229

 

2,931

 

863.1

%

 

 

 

 

 

 

 

 

Corporate

 

(467

)

 

NM

 

 

 

 

 

 

 

 

 

Adjusted Net Trading Income

 

$

159,791

 

$

97,176

 

64.4

%

 

 

 

Three Months Ended September 30,

 

Average Daily Adjusted Net Trading Income by Category:

 

2017

 

2016

 

% Change

 

 

 

 

 

 

 

 

 

Market Making:

 

 

 

 

 

 

 

Americas Equities

 

$

1,311

 

$

387

 

239.1

%

ROW Equities

 

270

 

325

 

-17.0

%

Global FICC, Options and Other

 

511

 

708

 

-27.8

%

Unallocated(1)

 

4

 

53

 

NM

 

Total market making

 

$

2,096

 

$

1,473

 

42.3

%

 

 

 

 

 

 

 

 

Execution Services

 

448

 

46

 

878.4

%

 

 

 

 

 

 

 

 

Corporate

 

(7

)

 

NM

 

 

 

 

 

 

 

 

 

Adjusted Net Trading Income

 

$

2,536

 

$

1,518

 

67.0

%

 

 

 

Nine Months Ended September 30,

 

Adjusted Net Trading Income by Category:

 

2017

 

2016

 

% Change

 

 

 

 

 

 

 

 

 

Market Making:

 

 

 

 

 

 

 

Americas Equities

 

$

134,590

 

$

92,837

 

45.0

%

ROW Equities

 

57,443

 

73,536

 

-21.9

%

Global FICC, Options and Other

 

97,145

 

151,319

 

-35.8

%

Unallocated(1)

 

(3,794

)

(3,854

)

NM

 

 

 

 

 

 

 

 

 

Total market making

 

$

285,384

 

$

313,838

 

-9.1

%

 

 

 

 

 

 

 

 

Execution Services

 

34,117

 

7,224

 

372.3

%

 

 

 

 

 

 

 

 

Corporate

 

(467

)

 

NM

 

 

 

 

 

 

 

 

 

Adjusted Net Trading Income

 

$

319,034

 

$

321,062

 

-0.6

%

 

 

 

Nine Months Ended September 30,

 

Average Daily Adjusted Net Trading Income by Category:

 

2017

 

2016

 

% Change

 

 

 

 

 

 

 

 

 

Market Making:

 

 

 

 

 

 

 

Americas Equities

 

$

716

 

$

491

 

45.7

%

ROW Equities

 

306

 

389

 

-21.5

%

Global FICC, Options and Other

 

517

 

801

 

-35.5

%

Unallocated(1)

 

(20

)

(20

)

NM

 

 

 

 

 

 

 

 

 

Total market making

 

$

1,518

 

$

1,661

 

-8.6

%

 

 

 

 

 

 

 

 

Execution Services

 

181

 

38

 

374.8

%

 

 

 

 

 

 

 

 

Corporate

 

(2

)

 

NM

 

 

 

 

 

 

 

 

 

Adjusted Net Trading Income

 

$

1,697

 

$

1,699

 

-0.1

%

 


(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 Adjusted Net Trading Income calculation can defer or accelerate the amount in a particular asset class from one day to another, and, at the end of a reporting period, from one reporting period to another. The purpose of the Unallocated category is to ensure that ANTI by category sums to total Adjusted Net Trading Income, which can be reconciled to Trading Income, Net, calculated in accordance with GAAP. We do not allocate any resulting differences based on the timing of revenue recognition.

 

4



 

KCG Acquisition Update

 

On July 20, 2017 (the “Closing Date”), the Company completed the acquisition (the “Acquisition”) of KCG Holdings, Inc. (“KCG”).  Pursuant to the terms of the Agreement and Plan of Merger, dated as of April 20, 2017 (the “Merger Agreement”), by and among the Company, Orchestra Merger Sub, Inc., a Delaware corporation and an indirect wholly-owned subsidiary of the Company (“Merger Sub”), and KCG, Merger Sub merged with and into KCG (the “Merger”), with KCG surviving the Merger as a wholly-owned subsidiary of the Company, in a cash transaction valued at $20.00 per KCG share, or a total of approximately $1.4 billion.

 

BondPoint Sale

 

On October 24, 2017, the Company announced that it has entered into a definitive agreement to sell Virtu’s fixed income trading venue, BondPoint, to Intercontinental Exchange (NYSE: ICE) for $400 million in cash. The transaction is expected to be completed in the first quarter of 2018, and the closing is subject to the satisfaction of customary closing conditions and receipt of certain regulatory clearances.

 

BondPoint is a leading provider of electronic fixed income trading solutions for the buy-side and sell-side offering access to centralized liquidity and automated trade execution services through its ATS, linking more than 500 financial services firms.

 

5



 

Financial Condition

 

As of September 30, 2017, Virtu had $558.0 million in cash and cash equivalents, and total long-term debt outstanding in an aggregate principal amount of $1,481.1 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 commissions, net and technology services, plus interest and dividends income and expense, net, less direct costs associated with those revenues, including brokerage, exchange and clearance fees, net and payments for order flow. 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, debt issue cost related to debt refinancing, 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, reserve for legal matter, transaction advisory fees and expenses, termination of office leases, other losses (revenues) net, 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 between 35.5% and 37%.

 

Total 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. Additional information provided regarding the breakdown of Total Adjusted Net Trading Income by category is also a non-GAAP financial measure but is not used by the Company 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

 

6



 

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.

 

7



 

Virtu Financial, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2017

 

2016

 

2017

 

2016

 

 

 

(in thousands, except share and per share data)

 

Revenues:

 

 

 

 

 

 

 

 

 

Trading income, net

 

$

203,907

 

$

156,706

 

$

479,644

 

$

509,542

 

Commissions, net and technology services

 

43,351

 

2,931

 

30,933

 

7,224

 

Interest and dividends income

 

20,430

 

5,271

 

49,237

 

14,961

 

Other, net

 

3,598

 

(102

)

3,647

 

(102

)

Total revenues

 

271,286

 

164,806

 

563,461

 

531,625

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

Brokerage, exchange and clearance fees, net

 

64,584

 

52,118

 

170,253

 

167,416

 

Communication and data processing

 

45,998

 

17,903

 

83,190

 

53,578

 

Employee compensation and payroll taxes

 

72,341

 

20,816

 

111,053

 

64,182

 

Payments for order flow

 

12,071

 

 

12,071

 

 

Interest and dividends expense

 

31,242

 

15,615

 

58,456

 

43,249

 

Operations and administrative

 

24,183

 

5,543

 

38,107

 

16,353

 

Depreciation and amortization

 

15,602

 

7,158

 

29,157

 

22,685

 

Amortization of purchased intangibles and acquired capitalized software

 

6,440

 

53

 

6,546

 

159

 

Debt issue cost related to debt refinancing

 

4,869

 

 

9,351

 

 

Transaction advisory fees and expenses

 

15,677

 

 

24,188

 

 

Reserve for legal matter

 

 

 

(2,176

)

 

Charges related to share based compensation at IPO

 

181

 

333

 

545

 

1,444

 

Financing interest expense on long-term borrowings

 

24,593

 

7,393

 

40,141

 

21,569

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

317,781

 

126,932

 

580,882

 

390,635

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes and noncontrolling interest

 

(46,495

)

37,874

 

(17,421

)

140,990

 

Provision (benefit) for income taxes

 

(6,505

)

4,851

 

(2,918

)

17,325

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(39,990

)

$

33,023

 

$

(14,503

)

$

123,665

 

 

 

 

 

 

 

 

 

 

 

Noncontrolling interest

 

26,472

 

(25,997

)

6,466

 

(97,913

)

 

 

 

 

 

 

 

 

 

 

Net income (loss) available for common stockholders

 

$

(13,518

)

$

7,026

 

$

(8,037

)

$

25,752

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.17

)

$

0.18

 

$

(0.17

)

$

0.66

 

Diluted

 

$

(0.17

)

$

0.18

 

$

(0.17

)

$

0.66

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

 

Basic

 

79,199,142

 

38,230,684

 

53,520,346

 

38,264,139

 

Diluted

 

79,199,142

 

38,230,684

 

53,520,346

 

38,264,139

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

Net income

 

$

(39,990

)

$

33,023

 

$

(14,503

)

$

123,665

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

Foreign exchange translation adjustment, net of taxes

 

2,558

 

519

 

8,300

 

1,783

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

$

(37,432

)

$

33,542

 

$

(6,203

)

$

125,448

 

Less: Comprehensive income attributable to noncontrolling interest

 

25,122

 

(26,370

)

1,014

 

(99,195

)

 

 

 

 

 

 

 

 

 

 

Comprehensive income available for common stockholders

 

$

(12,310

)

$

7,172

 

$

(5,189

)

$

26,253

 

 

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 Trading Income, EBITDA, Adjusted EBITDA, and selected Operating Margins.

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2017

 

2016

 

2017

 

2016

 

 

 

(in thousands, except percentages)

 

Reconciliation of Trading income, net to Adjusted Net Trading Income

 

 

 

 

 

 

 

 

 

Trading income, net

 

$

203,907

 

$

156,706

 

$

479,644

 

$

509,542

 

Commissions, net and technology services

 

43,351

 

2,931

 

30,933

 

7,224

 

Interest and dividends income

 

20,430

 

5,271

 

49,237

 

14,961

 

Brokerage, exchange and clearance fees, net

 

(64,584

)

(52,118

)

(170,253

)

(167,416

)

Payments for order flow

 

(12,071

)

 

(12,071

)

 

Interest and dividends expense

 

(31,242

)

(15,615

)

(58,456

)

(43,249

)

 

 

 

 

 

 

 

 

 

 

Adjusted Net Trading Income

 

$

159,791

 

$

97,175

 

$

319,034

 

$

321,062

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Net Income to EBITDA and Adjusted EBITDA

 

 

 

 

 

 

 

 

 

Net income

 

$

(39,990

)

$

33,023

 

$

(14,503

)

$

123,665

 

Financing interest expense on senior secured credit facility

 

24,593

 

7,393

 

40,141

 

21,569

 

Debt issue cost related to debt refinancing

 

4,869

 

 

9,351

 

 

Depreciation and amortization

 

15,602

 

7,158

 

29,157

 

22,685

 

Amortization of purchased intangibles and acquired capitalized software

 

6,440

 

53

 

6,546

 

159

 

Provision for income taxes

 

(6,505

)

4,851

 

(2,918

)

17,325

 

 

 

 

 

 

 

 

 

 

 

EBITDA

 

$

5,009

 

$

52,478

 

$

67,774

 

$

185,403

 

 

 

 

 

 

 

 

 

 

 

Severance

 

9,295

 

77

 

10,172

 

270

 

Reserve for legal matter

 

 

 

(2,176

)

 

Transaction advisory fees and expenses

 

15,677

 

521

 

24,188

 

676

 

Termination of office leases

 

1,811

 

 

1,811

 

(319

)

Acquisition related retention bonus

 

23,050

 

 

23,050

 

 

Trading related settlement income

 

 

(2,975

)

 

(2,975

)

Other, net

 

(300

)

102

 

(289

)

102

 

Equipment write-off

 

544

 

 

544

 

428

 

Share based compensation

 

2,270

 

4,892

 

17,102

 

14,587

 

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

 

1,336

 

1,512

 

4,134

 

4,212

 

Charges related to share based compensation awards at IPO

 

181

 

333

 

545

 

1,444

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

58,873

 

$

56,940

 

$

146,855

 

$

203,828

 

 

 

 

 

 

 

 

 

 

 

Selected Operating Margins

 

 

 

 

 

 

 

 

 

Net Income Margin(1)

 

-25.0

%

34.0

%

-4.5

%

38.5

%

EBITDA Margin(2)

 

3.1

%

54.0

%

21.2

%

57.7

%

Adjusted EBITDA Margin(3)

 

36.8

%

58.6

%

46.0

%

63.5

%

 


(1) Calculated by dividing net income by Adjusted Net Trading Income.

(2) Calculated by dividing EBITDA by Adjusted Net Trading Income.

(3) Calculated by dividing Adjusted EBITDA by Adjusted Net Trading Income.

 

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 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,

 

 

 

2017

 

2016

 

2017

 

2016

 

 

 

(in thousands, except share and per share data)

 

Reconciliation of Net Income to Normalized Adjusted Net Income

 

 

 

 

 

 

 

 

 

Net income

 

$

(39,990

)

$

33,023

 

$

(14,503

)

$

123,665

 

Provision for income taxes

 

(6,505

)

4,851

 

(2,918

)

17,325

 

Income before income taxes

 

$

(46,495

)

$

37,874

 

$

(17,421

)

$

140,990

 

Amortization of purchased intangibles and acquired capitalized software

 

6,440

 

53

 

6,546

 

159

 

Financing interest expense related to KCG transaction

 

3,010

 

 

4,626

 

 

Debt issue cost related to debt refinancing

 

4,869

 

 

9,351

 

 

Severance

 

9,295

 

77

 

10,172

 

270

 

Reserve for legal matter

 

 

 

(2,176

)

 

Transaction advisory fees and expenses

 

15,677

 

521

 

24,188

 

676

 

Termination of office leases

 

1,811

 

 

1,811

 

(319

)

Equipment write-off

 

1,075

 

 

2,177

 

428

 

Acquisition related retention bonus

 

23,050

 

 

23,050

 

 

Trading related settlement income

 

 

(2,975

)

 

(2,975

)

Other losses (revenues)

 

(300

)

102

 

(289

)

102

 

Share based compensation

 

2,270

 

4,892

 

17,102

 

14,587

 

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

 

1,336

 

1,512

 

4,134

 

4,212

 

Charges related to share based compensation awards at IPO

 

181

 

333

 

545

 

1,444

 

Normalized Adjusted Net Income before income taxes

 

$

22,219

 

$

42,389

 

$

83,816

 

$

159,574

 

Normalized provision for income taxes(1)

 

8,221

 

15,048

 

31,012

 

56,649

 

Normalized Adjusted Net Income

 

$

13,998

 

$

27,341

 

$

52,804

 

$

102,925

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Adjusted shares outstanding(2)

 

178,490,856

 

139,687,848

 

152,812,060

 

139,685,124

 

 

 

 

 

 

 

 

 

 

 

Normalized Adjusted EPS

 

$

0.08

 

$

0.20

 

$

0.35

 

$

0.74

 

 


(1)         Reflects U.S. federal, state, and local income tax rate applicable to corporations of approximately 37% for 2017 and 35.5% for 2016

(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 nine months ended September 30, 2017 and 2016.

 

10



 

Virtu Financial, Inc. and Subsidiaries

Condensed Consolidated Statements of Financial Condition (Unaudited)

 

 

 

September 30,

 

December 31,

 

 

 

2017

 

2016

 

 

 

(in thousands, except share data)

 

Assets

 

 

 

 

 

Cash and cash equivalents

 

$

557,990

 

$

181,415

 

Cash and securities segregated under federal and other regulations

 

3,000

 

 

Securities borrowed

 

1,525,403

 

220,005

 

Securities purchased under agreements to resell

 

8,249

 

 

Receivables from broker-dealers and clearing organizations

 

980,518

 

448,728

 

Trading assets, at fair value

 

2,902,400

 

1,827,882

 

Property, equipment and capitalized software, net

 

144,686

 

29,660

 

Goodwill

 

859,598

 

715,379

 

Intangibles (net of accumulated amortization)

 

152,748

 

992

 

Deferred taxes

 

224,804

 

193,859

 

Other assets

 

379,949

 

74,470

 

Total assets

 

$

7,739,345

 

$

3,692,390

 

 

 

 

 

 

 

Liabilities and equity

 

 

 

 

 

Liabilities

 

 

 

 

 

Short-term borrowings

 

$

15,000

 

$

25,000

 

Securities loaned

 

582,915

 

222,203

 

Securities sold under agreements to repurchase

 

620,887

 

 

Payables to broker-dealers and clearing organizations

 

839,067

 

695,978

 

Payables to customers

 

25,550

 

 

Trading liabilities, at fair value

 

2,535,891

 

1,349,155

 

Tax receivable agreement obligations

 

232,552

 

231,404

 

Accounts payable and accrued expenses and other liabilities

 

287,327

 

69,281

 

Long-term borrowings, net

 

1,434,629

 

564,957

 

Total liabilities

 

$

6,573,818

 

$

3,157,978

 

 

 

 

 

 

 

Total equity

 

1,165,527

 

534,412

 

 

 

 

 

 

 

Total liabilities and equity

 

$

7,739,345

 

$

3,692,390

 

 

 

 

As of September 30, 2017

 

Ownership of Virtu Financial LLC Interests:

 

Interests

 

%

 

 

 

 

 

 

 

Virtu Financial, Inc. - Class A Common Stock

 

90,593,964

 

48.0

%

Non-controlling Interests (Virtu Financial LLC)

 

97,954,713

 

52.0

%

Total Virtu Financial LLC Interests

 

188,548,677

 

100.0

%

 

11



 

About Virtu Financial, Inc.

 

Virtu is a leading financial firm that leverages cutting edge technology to deliver liquidity to the global markets and innovative, transparent trading solutions to our clients. As a market maker, Virtu provides deep liquidity that helps to create more efficient markets around the world. Our market structure expertise, broad diversification, and execution technology enables us to provide competitive bids and offers in over 19,000 securities, at over 235 venues, in 36 countries worldwide.

 

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, including with respect to integration of KCG and synergy realization. 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