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8-K - 8-K - Virtu Financial, Inc.a16-3481_18k.htm

Exhibit 99.1

 

 

Virtu Announces Fourth Quarter and Full Year 2015 Results

 

NEW YORK, NY, February 4, 2016 — 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 fourth quarter ended December 31, 2015.

 

Fourth Quarter and Full Year Selected Results

 

Fourth Quarter 2015:

 

·                  Net Income of $42.9 million; Adjusted Net Income* of $52.7 million, which excludes IPO related adjustments

·                  Normalized Adjusted EPS* of $0.27; GAAP Basic and Diluted EPS of $0.22

·                  Adjusted Net Trading Income* of $107.8 million

·                  Adjusted EBITDA* of $71.9 million; Adjusted EBITDA Margin* of 64.9%

·                  Quarterly cash dividend of $0.24 per share payable on March 15, 2016

 

Full Year 2015:

 

·                  Net Income of $197.5 million; Adjusted Net Income* of $272.8 million, which excludes IPO related adjustments

·                  Adjusted Net Trading Income* of $500.7 million

·                  Adjusted EBITDA* of $352.4 million; Adjusted EBITDA Margin* of 68.9%

 


* 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 March 15, 2016 to shareholders of record as of March 1, 2016.

 

“2015 was a seminal year in Virtu’s history. We completed our Initial Public Offering in April. We ended the year with our company present on more than 230 unique venues in 35 countries. Although fourth quarter volumes and volatility trailed the pace set in the third quarter, we began 2016 in a very strong fashion and have benefitted from the sustained elevated volatility and volume levels seen in January,” said Douglas Cifu, Chief Executive Officer of Virtu Financial.

 

GAAP Financial Results

 

Total revenues decreased 17.2% to $176.9 million for this quarter, compared to $213.5 million for the same period in 2014. Trading income, net, decreased 18.3% to $166.9 million for this quarter, compared to $204.4 million for the same period in 2014. Net income decreased 37.7% to $42.9 million for this quarter, compared to $68.9 million for the same period in 2014.

 

GAAP Basic and Diluted EPS for this quarter were $0.22.

 

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

 

Business Performance

 

For the fourth quarter of 2015, Adjusted Net Trading Income decreased 18.0% to $107.8 million for this quarter, compared to $131.5 million for the same period in 2014. Adjusted Net Income decreased 30.6% to $52.7 million for this quarter, compared to $75.9 million for the same period in 2014. Adjusted EBITDA decreased 23.8% to $71.9 million for this quarter, compared to $94.3 million for the same period in 2014. Assuming all non-controlling

 

1



 

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 $0.27 for this quarter.

 

For the full year 2015, Adjusted Net Trading Income increased 15.1% to $500.7 million, compared to $435.0 million in 2014. Adjusted Net Income increased 20.4% to $272.8 million for the full year 2015, compared to $226.5 million in 2014. Adjusted EBITDA increased 20.9% to $352.4 million for the full year 2015, compared to $291.4 million 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, Normalized Adjusted EPS was $1.35 for this year.

 

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 December 31, 2015, we achieved a diverse mix of Adjusted Net Trading Income results, with no one category constituting more than 31.0% of our total Adjusted Net Trading Income. Average daily Adjusted Net Trading Income was approximately $1.685 million for this quarter compared to $2.055 million for the same period in the previous year. For the full year 2015, no single category constituted more than 27.1% of our total Adjusted Net Trading Income and our average daily Adjusted Net Trading Income was approximately $1.987 million compared to $1.726 million for the previous year.

 

As of December 31, 2015, Virtu was connected to more than 230 unique market venues in 35 countries and makes 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 months ended December 31, 2015 and 2014, and years ended December 31, 2015 and 2014, respectively.

 

2



 

 

 

Three Months Ended December 31,

 

 

 

2015

 

% of
Total

 

2014

 

% of
Total

 

% Change

 

 

 

(in thousands, except percentages)

 

Adjusted Net Trading Income:

 

 

 

 

 

 

 

 

 

 

 

Category

 

 

 

 

 

 

 

 

 

 

 

Americas Equities

 

$

33,384

 

31.0

%

$

35,280

 

26.8

%

-5.4

%

EMEA Equities

 

12,555

 

11.6

%

13,321

 

10.1

%

-5.8

%

APAC Equities

 

11,035

 

10.2

%

9,515

 

7.2

%

16.0

%

Global Commodities

 

22,102

 

20.5

%

25,235

 

19.2

%

-12.4

%

Global Currencies

 

20,346

 

18.9

%

39,136

 

29.8

%

-48.0

%

Options, Fixed Income and Other

 

7,109

 

6.6

%

14,490

 

11.0

%

-50.9

%

Unallocated(1)

 

1,279

 

1.2

%

(5,468

)

-4.1

%

NM

 

Total Adjusted Net Trading Income

 

$

107,810

 

100.0

%

$

131,509

 

100.0

%

-18.0

%

 

 

 

 

 

 

Three Months Ended December 31,

 

 

 

2015

 

% of
Total

 

2014

 

% of
Total

 

% Change

 

 

 

(in thousands, except percentages)

 

Average Daily Adjusted Net Trading Income:

 

 

 

 

 

 

 

 

 

 

 

Category

 

 

 

 

 

 

 

 

 

 

 

Americas Equities

 

$

522

 

31.0

%

$

551

 

26.8

%

-5.4

%

EMEA Equities

 

196

 

11.6

%

208

 

10.1

%

-5.8

%

APAC Equities

 

173

 

10.2

%

149

 

7.2

%

16.0

%

Global Commodities

 

346

 

20.5

%

394

 

19.2

%

-12.4

%

Global Currencies

 

318

 

18.9

%

612

 

29.8

%

-48.0

%

Options, Fixed Income and Other

 

111

 

6.6

%

226

 

11.0

%

-50.9

%

Unallocated(1)

 

19

 

1.2

%

(85

)

-4.1

%

NM

 

Total Adjusted Net Trading Income

 

$

1,685

 

100.0

%

$

2,055

 

100.0

%

-18.0

%

 

 

 

Three Months Ended December 31,

 

 

 

2015

 

2014

 

% Change

 

Selected Market Metrics:

 

 

 

 

 

 

 

US Equities Average Daily Volume, in millions(2)

 

7,050

 

7,004

 

0.7

%

EU Equities Average Daily Volume, in millions(2)

 

5,547

 

5,796

 

-4.3

%

TSE Equities Average Daily Volume, in millions(3)

 

2,482

 

2,919

 

-15.0

%

CME Average Daily Energy Contracts(4)

 

2,032,222

 

1,796,769

 

13.1

%

CME Average Daily FX Contracts(4)

 

779,324

 

957,384

 

-18.6

%

OCC Average Daily Volume, in millions(5)

 

16.0

 

17.8

 

-10.1

%

VIX (Average)(6)

 

17.03

 

16.08

 

5.9

%

VIX (High)(6)

 

24.39

 

26.25

 

-7.1

%

VIX (Low)(6)

 

14.15

 

11.82

 

19.7

%

Trading Days (US)(7)

 

64

 

64

 

 

 

 

3



 

 

 

Years Ended December 31,

 

 

 

2015

 

% of
Total

 

2014

 

% of
Total

 

% Change

 

 

 

(in thousands, except percentages)

 

Adjusted Net Trading Income:

 

 

 

 

 

 

 

 

 

 

 

Category

 

 

 

 

 

 

 

 

 

 

 

Americas Equities

 

$

135,662

 

27.1

%

$

113,402

 

26.1

%

19.6

%

EMEA Equities

 

58,568

 

11.7

%

51,604

 

11.9

%

13.5

%

APAC Equities

 

44,910

 

9.0

%

29,965

 

6.9

%

49.9

%

Global Commodities

 

112,616

 

22.5

%

93,083

 

21.4

%

21.0

%

Global Currencies

 

110,493

 

22.1

%

109,693

 

25.2

%

0.7

%

Options, Fixed Income and Other

 

32,020

 

6.4

%

42,321

 

9.7

%

-24.3

%

Unallocated(1)

 

6,430

 

1.2

%

(5,043

)

-1.2

%

NM

 

Total Adjusted Net Trading Income

 

$

500,699

 

100.0

%

$

435,025

 

100.0

%

15.1

%

 

 

 

 

 

 

Years Ended December 31,

 

 

 

2015

 

% of
Total

 

2014

 

% of
Total

 

% Change

 

 

 

(in thousands, except percentages)

 

Average Daily Adjusted Net Trading Income:

 

 

 

 

 

 

 

 

 

 

 

Category

 

 

 

 

 

 

 

 

 

 

 

Americas Equities

 

$

538

 

27.1

%

$

450

 

26.1

%

19.6

%

EMEA Equities

 

232

 

11.7

%

205

 

11.9

%

13.5

%

APAC Equities

 

178

 

9.0

%

119

 

6.9

%

49.9

%

Global Commodities

 

447

 

22.5

%

369

 

21.4

%

21.0

%

Global Currencies

 

439

 

22.1

%

435

 

25.2

%

0.7

%

Options, Fixed Income and Other

 

127

 

6.4

%

168

 

9.7

%

-24.3

%

Unallocated(1)

 

26

 

1.2

%

(20

)

-1.2

%

NM

 

Total Adjusted Net Trading Income

 

$

1,987

 

100.0

%

$

1,726

 

100.0

%

15.1

%

 

 

 

Years Ended December 31,

 

 

 

2015

 

2014

 

% Change

 

Selected Market Metrics:

 

 

 

 

 

 

 

US Equities Average Daily Volume, in millions(2)

 

6,912

 

6,415

 

7.7

%

EU Equities Average Daily Volume, in millions(2)

 

5,859

 

5,470

 

7.1

%

TSE Equities Average Daily Volume, in millions(3)

 

2,691

 

2,667

 

0.9

%

CME Average Daily Energy Contracts(4)

 

1,968,661

 

1,628,819

 

20.9

%

CME Average Daily FX Contracts(4)

 

869,232

 

802,089

 

8.4

%

OCC Average Daily Volume, in millions(5)

 

16.4

 

16.9

 

-3.0

%

VIX (Average)(6)

 

16.68

 

14.18

 

17.6

%

VIX (High)(6)

 

40.74

 

26.25

 

55.2

%

VIX (Low)(6)

 

11.95

 

10.32

 

15.8

%

Trading Days (US)(7)

 

252

 

252

 

 

 

 


(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 December 31, 2015, Virtu had $163.2 million in cash and cash equivalents, and total long-term debt outstanding in an aggregate principal amount of $499.8 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 148 full-time employees as of December 31, 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, reserve for legal matter, transaction advisory fees and expenses, termination of office leases, equipment write-off, acquisition related retention bonus, share based compensation, charges related to 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, reserve for legal matter, transaction advisory fees and expenses, termination of office leases, acquisition related retention bonus, 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, 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

 

5



 

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:

 

·                  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.

 

6



 

Virtu Financial, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income (Unaudited)

 

 

 

Three Months Ended December 31,

 

Years Ended December 31,

 

 

 

2015

 

2014

 

2015

 

2014

 

 

 

(in thousands, except share and per share data)

 

Revenues:

 

 

 

 

 

 

 

 

 

Trading income, net

 

$

166,901

 

$

204,351

 

$

757,455

 

$

685,150

 

Interest and dividends income

 

7,114

 

6,636

 

28,136

 

27,923

 

Technology services

 

2,889

 

2,561

 

10,622

 

9,980

 

Total revenues

 

176,904

 

213,548

 

796,213

 

723,053

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

Brokerage, exchange and clearance fees, net

 

53,016

 

66,833

 

232,469

 

230,965

 

Communication and data processing

 

17,046

 

18,279

 

68,647

 

68,847

 

Employee compensation and payroll taxes

 

21,219

 

20,895

 

88,026

 

84,531

 

Interest and dividends expense

 

13,189

 

12,645

 

52,423

 

47,083

 

Operations and administrative

 

5,974

 

4,557

 

23,263

 

21,074

 

Depreciation and amortization

 

7,600

 

7,927

 

31,909

 

30,441

 

Amortization of purchased intangibles and acquired capitalized software

 

53

 

52

 

211

 

211

 

Acquisition related retention bonus

 

 

 

 

2,639

 

Termination of office leases

 

 

 

2,729

 

849

 

Initial public offering fees and expenses

 

 

 

 

8,961

 

Transaction advisory fees and expenses

 

 

3,000

 

 

3,000

 

Reserve for legal matter

 

5,440

 

 

5,440

 

 

Equipment write-off

 

 

 

1,719

 

 

Charges related to share based compensation at IPO

 

(1,098

)

 

44,194

 

 

Financing interest expense on senior secured credit facility

 

7,188

 

7,780

 

29,254

 

30,894

 

Total operating expenses

 

129,627

 

141,968

 

580,284

 

529,495

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes and non-controlling interest

 

47,277

 

71,580

 

215,929

 

193,558

 

Provision for income taxes

 

4,337

 

2,672

 

18,439

 

3,501

 

Net income

 

$

42,940

 

$

68,908

 

$

197,490

 

$

190,057

 

 

 

 

 

 

 

 

 

 

 

Non-controlling interest

 

(34,834

)

 

 

(176,603

)

 

 

 

 

 

 

 

 

 

 

 

 

Net income available for common stockholders

 

$

8,106

 

 

 

$

20,887

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.22

 

 

 

$

0.60

 

 

 

Diluted

 

$

0.22

 

 

 

$

0.59

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

 

Basic

 

36,168,177

 

 

 

34,964,312

 

 

 

Diluted

 

36,689,572

 

 

 

35,339,585

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

Net income

 

$

42,940

 

$

68,908

 

$

197,490

 

$

190,057

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

Foreign exchange translation adjustment, net of taxes

 

(1,304

)

(1,042

)

(4,254

)

(5,032

)

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

$

41,636

 

$

67,866

 

$

193,236

 

$

185,025

 

Less: Comprehensive income attributable to noncontrolling interests

 

(33,873

)

 

 

(172,267

)

 

 

Comprehensive income available for common stockholders

 

$

7,763

 

 

 

$

20,969

 

 

 

 

7



 

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 December 31,

 

Years Ended December 31,

 

 

 

2015

 

2014

 

2015

 

2014

 

 

 

(in thousands, except percentages)

 

Reconciliation of Trading income, net to Adjusted Net Trading Income

 

 

 

 

 

 

 

 

 

Trading income, net

 

$

166,901

 

$

204,351

 

$

757,455

 

$

685,150

 

Interest and dividends income

 

7,114

 

6,636

 

28,136

 

27,923

 

Brokerage, exchange and clearance fees, net

 

(53,016

)

(66,833

)

(232,469

)

(230,965

)

Interest and dividends expense

 

(13,189

)

(12,645

)

(52,423

)

(47,083

)

 

 

 

 

 

 

 

 

 

 

Adjusted Net Trading Income

 

$

107,810

 

$

131,509

 

$

500,699

 

$

435,025

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Net Income to Adjusted Net Income

 

 

 

 

 

 

 

 

 

Net income

 

$

42,940

 

$

68,908

 

$

197,490

 

$

190,057

 

Amortization of purchased intangibles and acquired capitalized software

 

53

 

52

 

211

 

211

 

Severance

 

420

 

2,742

 

1,065

 

4,786

 

Reserve for legal matter

 

5,440

 

 

5,440

 

 

Initial public offering fees and expenses

 

 

 

 

8,961

 

Transaction advisory fees and expenses

 

 

 

 

3,000

 

Termination of office leases

 

 

 

2,729

 

849

 

Equipment write-off

 

 

 

1,719

 

 

Acquisition related retention bonus

 

 

 

 

2,639

 

Share based compensation

 

3,295

 

4,170

 

15,202

 

16,033

 

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

 

1,693

 

 

4,710

 

 

Charges related to share based compensation awards at IPO

 

(1,098

)

 

44,194

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Net Income

 

$

52,743

 

$

75,872

 

$

272,760

 

$

226,536

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Net Income to EBITDA and Adjusted EBITDA

 

 

 

 

 

 

 

 

 

Net income

 

$

42,940

 

$

68,908

 

$

197,490

 

$

190,057

 

Financing interest expense on senior secured credit facility

 

7,188

 

7,780

 

29,254

 

30,894

 

Debt issue cost related to debt re-financing

 

 

 

 

 

Depreciation and amortization

 

7,600

 

7,927

 

31,909

 

30,441

 

Amortization of purchased intangibles and acquired capitalized software

 

53

 

52

 

211

 

211

 

Equipment write-off

 

 

 

1,719

 

 

Provision for income taxes

 

4,337

 

2,672

 

18,439

 

3,501

 

 

 

 

 

 

 

 

 

 

 

EBITDA

 

$

62,118

 

$

87,339

 

$

279,022

 

$

255,104

 

 

 

 

 

 

 

 

 

 

 

Severance

 

420

 

2,742

 

1,065

 

4,786

 

Reserve for legal matter

 

5,440

 

 

5,440

 

 

Initial public offering fees and expenses

 

 

 

 

8,961

 

Transaction advisory fees and expenses

 

 

 

 

3,000

 

Termination of office leases

 

 

 

2,729

 

849

 

Acquisition related retention bonus

 

 

 

 

2,639

 

Share based compensation

 

3,295

 

4,170

 

15,202

 

16,033

 

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

 

1,693

 

 

4,710

 

 

Charges related to share based compensation awards at IPO

 

(1,098

)

 

44,194

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

71,868

 

$

94,251

 

$

352,362

 

$

291,372

 

 

 

 

 

 

 

 

 

 

 

Selected Operating Margins

 

 

 

 

 

 

 

 

 

Net Income Margin(1)

 

38.8

%

51.4

%

38.6

%

42.7

%

Adjusted Net Income Margin(2)

 

47.6

%

56.6

%

53.3

%

50.9

%

EBITDA Margin(3)

 

56.1

%

65.1

%

54.6

%

57.3

%

Adjusted EBITDA Margin(4)

 

64.9

%

70.3

%

68.9

%

65.5

%

 


(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.

 

8



 

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 December 31,

 

Years Ended December 31,

 

 

 

2015

 

2014

 

2015

 

2014

 

 

 

(in thousands, except share and per share data)

 

Reconciliation of Net Income to Normalized Adjusted Net Income

 

 

 

 

 

 

 

 

 

Net income

 

$

42,940

 

$

68,908

 

$

197,490

 

$

190,057

 

Provision for income taxes

 

4,337

 

2,672

 

18,439

 

3,501

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

$

47,277

 

$

71,580

 

$

215,929

 

$

193,558

 

 

 

 

 

 

 

 

 

 

 

Amortization of purchased intangibles and acquired capitalized software

 

53

 

52

 

211

 

211

 

Severance

 

420

 

2,742

 

1,065

 

4,786

 

Reserve for legal matter

 

5,440

 

 

5,440

 

 

Initial public offering fees and expenses

 

 

 

 

8,961

 

Transaction advisory fees and expenses

 

 

 

 

3,000

 

Termination of office leases

 

 

 

2,729

 

849

 

Equipment write-off

 

 

 

1,719

 

 

Acquisition related retention bonus

 

 

 

 

2,639

 

Share based compensation

 

3,295

 

4,170

 

15,202

 

16,033

 

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

 

1,693

 

 

4,710

 

 

Charges related to share based compensation awards at IPO

 

(1,098

)

 

44,194

 

 

 

 

 

 

 

 

 

 

 

 

Normalized Adjusted Net Income before income taxes

 

$

57,080

 

$

78,544

 

$

291,199

 

$

230,037

 

 

 

 

 

 

 

 

 

 

 

Normalized provision for income taxes(1)

 

20,263

 

27,883

 

103,376

 

81,663

 

 

 

 

 

 

 

 

 

 

 

Normalized Adjusted Net Income

 

$

36,817

 

$

50,661

 

$

187,823

 

$

148,374

 

 

 

 

 

 

 

 

 

 

 

Adjusted shares outstanding(2)

 

138,918,476

 

138,447,359

 

138,772,354

 

138,447,359

 

 

 

 

 

 

 

 

 

 

 

Normalized Adjusted Net Income per share

 

$

0.27

 

$

0.37

 

$

1.35

 

$

1.07

 

 


(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 521,395 and 375,273 additional shares from dilutive impact of options and RSU’s outstanding under the 2015 MIP during the three months and year ended December 31, 2015, respectively.

 

9



 

Virtu Financial, Inc. and Subsidiaries

Condensed Consolidated Statements of Financial Condition (Unaudited)

 

 

 

December 31,

 

December 31,

 

 

 

2015

 

2014

 

 

 

(in thousands, except share data)

 

Assets

 

 

 

 

 

Cash and cash equivalents

 

$

163,235

 

$

75,864

 

Securities borrowed

 

453,296

 

484,934

 

Securities purchased under agreements to resell

 

14,981

 

31,463

 

Receivables from broker-dealers and clearing organizations

 

493,093

 

387,652

 

Trading assets, at fair value

 

1,338,661

 

1,544,308

 

Property, equipment and capitalized software, net

 

37,501

 

44,644

 

Goodwill

 

715,379

 

715,379

 

Intangibles (net of accumulated amortization)

 

1,203

 

1,414

 

Deferred taxes

 

187,010

 

 

Other assets

 

45,575

 

33,800

 

 

 

 

 

 

 

Total assets

 

$

3,449,934

 

$

3,319,458

 

 

 

 

 

 

 

Liabilities, redeemable interest and equity

 

 

 

 

 

Liabilities

 

 

 

 

 

Short-term borrowings

 

$

45,000

 

$

 

Securities loaned

 

524,603

 

497,862

 

Securities sold under agreements to repurchase

 

 

2,006

 

Payables to broker-dealers and clearing organizations

 

543,002

 

686,203

 

Trading liabilities, at fair value

 

980,696

 

1,037,634

 

Tax receivable agreement obligations

 

218,399

 

 

Accounts payable and accrued expenses and other liabilities

 

86,776

 

93,331

 

Senior secured credit facility, net

 

493,589

 

495,724

 

 

 

 

 

 

 

Total liabilities

 

$

2,892,065

 

$

2,812,760

 

 

 

 

 

 

 

Class A-1 redeemable membership interest

 

 

294,433

 

 

 

 

 

 

 

Total equity

 

557,869

 

212,265

 

 

 

 

 

 

 

Total liabilities, redeemable interest and equity

 

$

3,449,934

 

$

3,319,458

 

 

 

 

As of December 31, 2015

 

 

 

Interests

 

%

 

Ownership of Virtu Financial LLC Interests:

 

 

 

 

 

Virtu Financial, Inc. - Class A Common Stock

 

37,803,165

 

27.3

%

Non-controlling Interests (Virtu Financial LLC)

 

100,593,916

 

72.7

%

 

 

 

 

 

 

Total Virtu Financial LLC Interests

 

138,397,081

 

100.0

%

 

10



 

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 Thursday, February 4, 2016, 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 12,000 securities and other financial instruments on more than 230 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

 

11