Virtu Financial Announces First Quarter 2015 Results
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 first quarter ended March 31, 2015.
First Quarter Financial Highlights*
- 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%
* All comparisons versus first quarter 2014.
** Non-GAAP financial measures. Please see “Non-GAAP Financial Measures and Other Items” for more information on these measures.
“We benefited from our diversity and were able to realize $148.4 million in Adjusted Net Trading Income due to increased volumes and volatility across our business, with particularly strong performance in Global Commodities and Global Currencies,” said Douglas Cifu, Chief Executive Officer of Virtu Financial. “Given our fixed cost platform this activity translated into increased profitability and margins. Our Adjusted EBITDA margin was 70.5% for the first quarter.”
GAAP Financial Results
Total revenues increased 27.8% to $221.5 million for this quarter, compared to $173.3 million for the same period in 2014. Trading income, net, increased 29.5% to $213.9 million for this quarter, compared to $165.2 million for the same period in 2014. GAAP Pre-tax income increased 60.8% to $80.2 million for this quarter, compared to $49.9 million for the same period in 2014. GAAP net income on a non-comprehensive basis, which excludes the effect of changes in the U.S. dollar value of our non-U.S. subsidiaries, increased 58.4% to $77.4 million for this quarter, compared to $48.9 million for the same period in 2014. GAAP net income on a comprehensive basis increased 48.8% to $72.8 million for this quarter, compared to $48.9 million for the same period in 2014.
Business Overview
Adjusted Net Trading Income increased 40.2% to $148.4 million for this quarter, compared to $105.8 million for the same period in 2014. Adjusted Net Income increased 57.3% to $87.9 million for this quarter, compared to $55.8 million for the same period in 2014. Adjusted EBITDA increased 50.2% to $106.4 million for this quarter, compared to $70.8 million for the same period in 2014.
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 March 31, 2015, we achieved a diverse mix of Adjusted Net Trading Income results, with no one category constituting more than 28.4% of our total Adjusted Net Trading Income. Daily Adjusted Net Trading Income was approximately $2.433 million for this quarter compared to $1.735 million for the same period in the previous year.
The increase in Adjusted Net Trading Income this quarter, in comparison to the same period in the previous year, was primarily driven by increased market volumes and volatility in the Global Commodities and Global Currencies instruments which we make markets in, as well as strong performance from EMEA Equities, Americas Equities, and improved performance from APAC Equities trading relative to the market benchmark volumes.
Adjusted Net Trading Income
Our total Adjusted Net Trading Income is the primary metric used by management in evaluating performance, making strategic decisions and allocating resources, and the primary factor influencing Adjusted Net Trading Income is volume levels. Adjusted Net Trading Income provides an indicator of the performance of our market making activities that is not affected by revenues or expenses that are not directly associated with such activities. Rather than analyzing these components of our operating results individually, we generally view them on an aggregate basis in the context of Adjusted Net Trading Income.
The following table shows our Adjusted Net Trading Income, average daily Adjusted Net Trading Income and percentage of Adjusted Net Trading Income by category for the quarters ended March 31, 2015 and 2014.
Three Months Ended March 31, | |||||
Adjusted Net Trading Income: | 2015 |
% of Total |
2014 |
% of Total |
% Change |
Category | (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 Average 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 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
Source: Virtu Financial