Virtu Financial, Inc. (NASDAQ: VIRT), a technology-enabled market maker and liquidity provider to the global financial markets, today reported results for the third quarter ended September 30, 2017. Highlights include:
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
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.
Virtu has recently announced it has entered into a definitive agreement to sell Virtu’s fixed income trading venue, BondPoint, to Intercontinental Exchange (NYSE:ICE).
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.
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:
- Market Making;
- Execution Services; and
- 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.