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Virtu Financial, Inc.$21.55$.452.13%

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 Virtu Announces Fourth Quarter and Full Year 2017 Results
   Thursday, February 08, 2018 6:00:30 AM ET

Virtu Financial, Inc. (VIRT ), a leading technology-enabled market maker and liquidity provider to the global financial markets, today reported results for the fourth quarter and the full year ended December 31, 2017.

Fourth Quarter and Full Year Selected Highlights

Fourth Quarter 2017:

-- Net income of $47.8 million, Normalized Adjusted Net Income* of $41.4 million

-- Basic and Diluted earnings per share of $0.28; Normalized Adjusted EPS* of $0.22

-- Total revenues of $460.4 million; Adjusted Net Trading Income* of $237.3 million

-- Adjusted EBITDA* of $107.8 million; Adjusted EBITDA Margin* of 45.4%

-- Expense and capital synergies on track with forecast as integration progresses

-- Made total to-date pre-payments of $526 million on the $1.15 billion term loan debt incurred in connection with KCG acquisition

-- Quarterly cash dividend of $0.24 per share payable on March 15, 2018

-- Board authorized $50 million for future repurchases of common stock and units

Full Year 2017:

-- Net income of $33.3 million, Normalized Adjusted Net Income* of $92.1 million

-- Basic and Diluted earnings per share of $0.26; Normalized Adjusted EPS* of $0.57

-- Total revenues of $1,024 million; Adjusted Net Trading Income* of $556.3 million

-- Adjusted EBITDA* of $251.4 million; Adjusted EBITDA Margin* of 45.2%

* 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, 2018 to shareholders of record as of March 1, 2018.

The Virtu Financial, Inc. Board of Directors also approved a new share repurchase program of up to $50 million in Class A common stock and common units of Virtu Financial LLC by March 31, 2019.

"In our first complete quarter after the acquisition of KCG, the combined Virtu franchise continues to outperform. The $3.8 million per day we earned in Adjusted Net Trading Income in the fourth quarter demonstrates that this combined entity can generate profitable results in a variety of market operating environments. We also remain confident that the expense and efficiency discipline that is a hallmark of Virtu is being applied to the legacy KCG businesses, and the synergy results reported today and expense guidance we have provided demonstrate this discipline," said Douglas Cifu, Chief Executive Officer of Virtu Financial.

Financial Results

Fourth Quarter 2017:

Total revenues increased 169.8% to $460.4 million for this quarter, compared to $170.6 million for the same period in 2016. Trading income, net, increased 83.7% to $286.4 million for this quarter, compared to $155.9 million for the same period in 2016. Net income increased 37.1% to $47.8 million for this quarter, compared to $34.9 million for the same period in 2016.

Basic and Diluted earnings per share for this quarter were both $0.28, compared to $0.22 each for the same period in 2016.

Adjusted Net Trading Income increased 129.5% to $237.3 million for this quarter, compared to $103.4 million for the same period in 2016. Adjusted EBITDA increased 66.4% to $107.8 million for this quarter, compared to $64.8 million for the same period in 2016. Normalized Adjusted Net Income increased 25.8% to $41.4 million for this quarter, compared to $32.9 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 $0.22 for this quarter and $0.24 for the same period in 2016.

Full Year 2017:

Total revenues increased 45.8% to $1,024 million, compared to $702.3 million in 2016. Trading income, net, increased 15.1% to $766.0 million, compared to $665.5 million in 2016. Net income decreased 79.0% to $33.3 million, compared to $158.5 million in 2016.

Basic and Diluted earnings per share for this year were both $0.26, compared to $0.83 each in 2016.

Adjusted Net Trading Income increased 31.0% to $556.3 million, compared to $424.5 million in 2016. Normalized Adjusted Net Income decreased 32.1% to $92.1 million, compared to $135.6 million in 2016. Adjusted EBITDA decreased 6.3% to $251.4 million, compared to $268.3 million 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 $0.57 for the full year 2017 and $0.97 for the full year 2016.

Operating Segment Information

Prior to the acquisition of KCG Holdings, Inc. in July 2017, 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, and maintains corporate overhead expenses.

The following tables show the total revenues and Adjusted Net Trading Income by operating segment for the three months ended December 31, 2017 and 2016, and years ended December 31, 2017 and 2016.

Total Revenues by operating segment

(in thousands, except percentages)

                                           Three Months Ended December 31, 2017
                                           Market       Execution
                                           Making       Services         Corporate    Total
  Trading income, net                      $   287,275  $   (2,052  )    $    1,160   $   286,383
  Commissions, net and technology services     7,108        55,140            -           62,248
  Interest and dividends income                21,259       515               312         22,086
  Other, net                                   1,170        540               87,995      89,705
  Total Revenues                           $   316,812  $   54,143       $    89,467  $   460,422
                                           Three Months Ended December 31, 2016
                                           Market       Execution
                                           Making       Services         Corporate    Total
  Trading income, net                      $   155,937  $   -            $    -       $   155,937
  Commissions, net and technology services     -            3,114             -           3,114
  Interest and dividends income                11,457       -                 -           11,457
  Other, net                                   -            -                 138         138
  Total Revenues                           $   167,394  $   3,114        $    138     $   170,646
                                           Year Ended December 31, 2017
                                           Market       Execution
                                           Making       Services         Corporate    Total
  Trading income, net                      $   769,556  $   (5,394  )    $    1,865   $   766,027
  Commissions, net and technology services     8,671        102,814           -           111,485
  Interest and dividends income                51,817       619               585         53,021
  Other, net                                   1,591        1,067             90,694      93,352
  Total Revenues                           $   831,635  $   99,106       $    93,144  $   1,023,885
                                           Year Ended December 31, 2016
                                           Market       Execution
                                           Making       Services         Corporate    Total
  Trading income, net                      $   665,465  $   -            $    -       $   665,465
  Commissions, net and technology services     -            10,352            -           10,352
  Interest and dividends income                26,419       -                 -           26,419
  Other, net                                   -            -                 36          36
  Total Revenues                           $   691,884  $   10,352       $    36      $   702,272

Reconciliation of trading income, net to Adjusted Net Trading Income by operating segment

(in thousands, except percentages)

                                              Three Months Ended December 31, 2017
                                              Market          Execution
                                              Making          Services         Corporate       Total
  Trading income, net                         $  287,275      $   (2,052  )    $   1,160       $  286,383
  Commissions, net and technology services       7,108            55,140           -              62,248
  Interest and dividends income                  21,259           515              312            22,086
  Brokerage, exchange and clearance fees, net    (61,697  )       (19,958 )        -              (81,655  )
  Payments for order flow                        (15,585  )       (70     )        -              (15,655  )
  Interest and dividends expense                 (34,293  )       (347    )        (1,508 )       (36,148  )
  Adjusted Net Trading Income                 $  204,067      $   33,228       $   (36    )    $  237,259
                                              Year Ended December 31, 2017
                                              Market          Execution
                                              Making          Services         Corporate       Total
  Trading income, net                         $  769,556      $   (5,394  )    $   1,865       $  766,027
  Commissions, net and technology services       8,671            102,814          -              111,485
  Interest and dividends income                  51,817           619              585            53,021
  Brokerage, exchange and clearance fees, net    (219,688 )       (32,220 )        -              (251,908 )
  Payments for order flow                        (28,037  )       311              -              (27,726  )
  Interest and dividends expense                 (92,868  )       1,215            (2,953 )       (94,606  )
  Adjusted Net Trading Income                 $  489,451      $   67,345       $   (503   )    $  556,293
                                              Three Months Ended December 31, 2016
                                              Market          Execution
                                              Making          Services         Corporate       Total
  Trading income, net                         $  155,937      $   -            $   -           $  155,937
  Commissions, net and technology services       -                3,114            -              3,114
  Interest and dividends income                  11,457           -                -              11,457
  Brokerage, exchange and clearance fees, net    (53,798  )       -                -              (53,798  )
  Interest and dividends expense                 (13,308  )       -                -              (13,308  )
  Adjusted Net Trading Income                 $  100,288      $   3,114        $   -           $  103,402
                                              Year Ended December 31, 2016
                                              Market          Execution
                                              Making          Services         Corporate       Total
  Trading income, net                         $  665,465      $   -            $   -           $  665,465
  Commissions, net and technology services       -                10,352           -              10,352
  Interest and dividends income                  26,419           -                -              26,419
  Brokerage, exchange and clearance fees, net    (221,214 )       -                -              (221,214 )
  Interest and dividends expense                 (56,557  )       -                -              (56,557  )
  Adjusted Net Trading Income                 $  414,113      $   10,352       $   -           $  424,465

Reconciliation of trading income, net to Adjusted Net Trading Income by category - Market Making segment

(in thousands, except percentages)

                                              Three Months Ended December 31, 2017
                                              Americas       ROW            Global FICC,                       Total
                                              Equities       Equities       Options and Other  Unallocated     Market Making
  Trading income, net                         $  186,710     $  57,589      $     45,022       $   (2,046 )    $    287,275
  Commissions, net and technology services       7,103          -                 5                -                7,108
  Brokerage, exchange and clearance fees, net    (31,248 )      (19,298 )         (11,976 )        825              (61,697  )
  Payments for order flow                        (15,585 )      -                 -                -                (15,585  )
  Interest and dividends, net                    (5,858  )      (3,502  )         (2,447  )        (1,227 )         (13,034  )
  Adjusted Net Trading Income                 $  141,122     $  34,789      $     30,604       $   (2,448 )    $    204,067
                                              Year Ended December 31, 2017
                                              Americas       ROW            Global FICC,                       Total
                                              Equities       Equities       Options and Other  Unallocated     Market Making
  Trading income, net                         $  404,113     $  175,840     $     192,563      $   (2,960 )    $    769,556
  Commissions, net and technology services       7,166          342               (79     )        1,242            8,671
  Brokerage, exchange and clearance fees, net    (92,814 )      (70,180 )         (55,910 )        (784   )         (219,688 )
  Payments for order flow                        (27,599 )   $  -           $     -                (438   )         (28,037  )
  Interest and dividends, net                    (15,153 )      (13,770 )         (8,825  )        (3,303 )         (41,051  )
  Adjusted Net Trading Income                 $  275,713     $  92,232      $     127,749      $   (6,243 )    $    489,451
                                              Three Months Ended December 31, 2016
                                              Americas       ROW            Global FICC,                       Total
                                              Equities       Equities       Options and Other  Unallocated     Market Making
  Trading income, net                         $  48,331      $  40,667      $     61,747       $   5,192       $    155,937
  Brokerage, exchange and clearance fees, net    (20,998 )      (16,578 )         (15,967 )        (255   )         (53,798  )
  Interest and dividends, net                    4,090          (3,191  )         (2,063  )        (687   )         (1,851   )
  Adjusted Net Trading Income                 $  31,423      $  20,898      $     43,717       $   4,250       $    100,288
                                              Year Ended December 31, 2016
                                              Americas       ROW            Global FICC,                       Total
                                              Equities       Equities       Options and Other  Unallocated     Market Making
  Trading income, net                         $  221,687     $  171,385     $     268,274      $   4,119       $    665,465
  Brokerage, exchange and clearance fees, net    (90,151 )      (65,330 )         (64,422 )        (1,311 )         (221,214 )
  Interest and dividends, net                    (7,290  )      (11,620 )         (8,816  )        (2,412 )         (30,138  )
  Adjusted Net Trading Income                 $  124,246     $  94,435      $     195,036      $   396         $    414,113

The following tables show our Adjusted Net Trading Income and average daily Adjusted Net Trading Income by category for the three months ended December 31, 2017 and 2016, and the years ended December 31, 2017 and 2016 (in thousands, except percentages).

                                           Three Months Ended December 31,                                     Year Ended December 31,
  Adjusted Net Trading Income by Category: 2017                         2016                       % Change    2017                 2016               % Change
  Market Making:
  Americas Equities                        $            141,123         $            31,423        349.1    %  $        275,713     $        124,246   121.9 %
  ROW Equities                                          34,789                       20,898        66.5     %           92,232               94,435    -2.3  %
  Global FICC, Options and Other                        30,604                       43,717        -30.0    %           127,749              195,036   -34.5 %
  Unallocated                                           (2,449       )               4,250         NM                   (6,243   )           396       NM
  Total Market Making                      $            204,067         $            100,288       103.5    %  $        489,451     $        414,113   18.2  %
  Execution Services                                    33,228                       3,114         967.1    %           67,345               10,352    550.6 %
  Corporate                                             (36          )               -             NM                   (503     )           -         NM
  Adjusted Net Trading Income              $            237,259         $            103,402       129.5    %  $        556,293     $        424,465   31.1  %
  Average Daily                            Three Months Ended December 31,                                     Year Ended December 31,
  Adjusted Net Trading Income by Category: 2017                         2016                       % Change    2017                 2016               % Change
  Market Making:
  Americas Equities                        $            2,240           $            491           356.2    %  $        1,098       $        493       122.8 %
  ROW Equities                                          552                          327           69.1     %           367                  375       -2.0  %
  Global FICC, Options and Other                        486                          683           -28.9    %           509                  774       -34.2 %
  Unallocated                                           (39          )               66            NM                   (25      )           2         NM
  Total Market Making                      $            3,239           $            1,567         106.7    %  $        1,950       $        1,644     18.6  %
  Execution Services                                    527                          49            983.1    %           268                  41        553.1 %
  Corporate                                             (1           )               -             NM                   (2       )           -         NM
  Adjusted Net Trading Income              $            3,765           $            1,616         133.0    %  $        2,216       $        1,685     31.5  %
  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 Adjusted Net Trading Income 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.

BondPoint Sale Update

On January 2, 2018, the Company completed the sale of BondPoint to Intercontinental Exchange (ICE ) for $400 million in cash.

"We are thrilled with this outcome and think ICE is the perfect home for BondPoint and its employees," said Douglas Cifu, Chief Executive Officer of Virtu Financial.

On January 8, 2018, the Company completed a repricing transaction of its 1 Lien Senior Secured Term Loan along with a principal repayment of $276 million from the proceeds from the sale of BondPoint to ICE. The repriced term loan bears interest at LIBOR + 325 bps, reflecting a reduction of 50 bps compared to its prior rate.

Tax Cuts and Jobs Act

The Tax Cuts and Jobs Act (the "Tax Act") was enacted on December 22, 2017, which reduced the U.S. corporate income tax rate to 21%. The fourth quarter and full-year 2017 results reflect the estimated impact of the enactment. As a result of the Tax Act, the Company recorded a reduction of its tax receivable agreement obligation by approximately $84.9 million, which was included within Other, net on the condensed consolidated statement of comprehensive income for the three months and full year ended December 31, 2017. The Company also recorded approximately $75.0 million in tax provision from remeasurement of its U.S. deferred tax assets at the lower enacted corporate income tax rate. The aforementioned guidance incorporates assumptions based on the Company’s current interpretation of the Tax Act, and impact of the Tax Act recognized this quarter may change as it receives additional clarification and implementation guidance and as the interpretation of the Tax Act evolves over time.

Financial Condition

As of December 31, 2017, Virtu had $532.9 million in cash and cash equivalents, and total long-term debt outstanding in an aggregate principal amount of $1.431 billion.

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 long-term borrowings, 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, acquisition related retention bonus, trading related settlement income, other, 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%. As a result of the Tax Act, our corporate tax rate is estimated to be approximately 23% beginning January 1, 2018 due to the decrease in the U.S. federal corporate income tax rate.

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 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, cash flows from operations and cash flow data. See below a reconciliation of each non-GAAP measure to the most directly comparable GAAP measure.

Virtu Financial, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

                                                           Three Months Ended December 31,             Year Ended December 31,
                                                           2017                  2016                  2017                2016
                                                           (in thousands, except share and per share data)
 Revenues:
 Trading income, net                                       $    286,383          $    155,937          $   766,027         $   665,465
 Commissions, net and technology services                       62,248                3,114                111,485             10,352
 Interest and dividends income                                  22,086                11,457               53,021              26,419
 Other, net                                                     89,705                138                  93,352              36
 Total revenues                                                 460,422               170,646              1,023,885           702,272
 Operating Expenses:
 Brokerage, exchange and clearance fees, net                    81,655                53,798               251,908             221,214
 Communication and data processing                              48,316                17,423               131,506             71,001
 Employee compensation and payroll taxes                        66,425                21,113               177,489             85,295
 Payments for order flow                                        15,655                -                    27,726              -
 Interest and dividends expense                                 36,148                13,308               94,606              56,557
 Operations and administrative                                  29,996                6,102                65,796              22,045
 Depreciation and amortization                                  18,170                7,018                47,327              29,703
 Amortization of purchased intangibles and
 acquired capitalized software                                  8,902                 53                   15,448              211
 Debt issue cost related to debt refinancing                    1,109                 5,579                10,460              5,579
 Transaction advisory fees and expenses                         950                   318                  25,270              994
 Charges related to share based compensation at IPO             238                   312                  772                 1,755
 Financing interest expense on long-term borrowings             23,965                6,758                64,107              28,327
 Total operating expenses                                       331,529               131,782              912,415             522,681
 Income before income taxes and noncontrolling interest         128,893               38,864               111,470             179,591
 Provision for income taxes                                     81,102                4,000                78,183              21,251
 Net income                                                $    47,791           $    34,864           $   33,287          $   158,340
 Noncontrolling interest                                        (22,424    )          (25,898    )         (15,958    )        (125,360   )
 Net income available for common stockholders              $    25,367           $    8,966            $   17,329          $   32,980
 Earnings per share:
 Basic                                                     $    0.28             $    0.22             $   0.26            $   0.83
 Diluted                                                   $    0.28             $    0.22             $   0.26            $   0.83
 Weighted average common shares outstanding
 Basic                                                          89,362,838            39,354,983           62,579,147          38,539,091
 Diluted                                                        89,362,838            39,354,983           62,579,147          38,539,091
 Comprehensive income:
 Net income                                                $    47,791           $    34,864           $   33,287          $   158,340
 Other comprehensive income (loss)
 Foreign exchange translation adjustment, net of taxes          981                   (2,930     )         9,281               (1,165     )
 Comprehensive income                                      $    48,772           $    31,934           $   42,568          $   157,175
 Less: Comprehensive income attributable to noncontrolling      (22,895    )          (23,815    )         (11,503    )        (124,546   )
 interest
 Comprehensive income available for common stockholders    $    25,877           $    8,119            $   31,065          $   32,629

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 December 31,       Year Ended December 31,
                                                                         2017               2016               2017              2016
                                                                         (in thousands, except percentages)
 Reconciliation of Trading income, net to Adjusted Net Trading Income
 Trading income, net                                                     $    286,383       $    155,937       $   766,027       $   665,465
 Commissions, net and technology services                                     62,248             3,114             111,485           10,352
 Interest and dividends income                                                22,086             11,457            53,021            26,419
 Brokerage, exchange and clearance fees, net                                  (81,655 )          (53,798 )         (251,908 )        (221,214 )
 Payments for order flow                                                      (15,655 )          -                 (27,726  )        -
 Interest and dividends expense                                               (36,148 )          (13,308 )         (94,606  )        (56,557  )
 Adjusted Net Trading Income                                             $    237,259       $    103,402       $   556,293       $   424,465
 Reconciliation of Net Income to EBITDA and Adjusted EBITDA
 Net income                                                              $    47,791        $    34,864        $   33,287        $   158,340
 Financing interest expense on long-term borrowings                           23,965             6,758             64,107            28,327
 Debt issue cost related to debt refinancing                                  1,109              5,579             10,460            5,579
 Depreciation and amortization                                                18,170             7,018             47,327            29,703
 Amortization of purchased intangibles and acquired capitalized software      8,902              53                15,448            211
 Provision for income taxes                                                   81,102             4,000             78,183            21,251
 EBITDA                                                                  $    181,039       $    58,272        $   248,812       $   243,411
 Severance                                                                    4,739              982               14,911            1,252
 Reserve for legal matter                                                     2,833              -                 657               -
 Transaction advisory fees and expenses                                       950                318               25,270            994
 Termination of office leases                                                 1,860              -                 3,671             (319     )
 Acquisition related retention bonus                                          -                  -                 23,050            -
 Trading related settlement income                                            (628    )          -                 (628     )        (2,975   )
 Other, net                                                                   (89,705 )          (138    )         (93,352  )        (36      )
 Equipment write-off                                                          672                -                 1,216             428
 Share based compensation                                                     4,723              3,635             21,825            18,222
 Charges related to share based compensation at IPO, 2015 Management          1,091              1,393             5,225             5,606
 Incentive Plan
 Charges related to share based compensation awards at IPO                    223                312               740               1,755
 Adjusted EBITDA                                                         $    107,797       $    64,774        $   251,397       $   268,338
 Selected Operating Margins
 Net Income Margin                                                            20.1    %          33.7    %         6.0      %        37.3     %
 EBITDA Margin                                                                76.3    %          56.4    %         44.7     %        57.3     %
 Adjusted EBITDA Margin                                                       45.4    %          62.6    %         45.2     %        63.2     %
 Calculated by dividing net income by Adjusted Net Trading Income.
 Calculated by dividing EBITDA by Adjusted Net Trading Income.
 Calculated by dividing Adjusted EBITDA by Adjusted Net Trading Income.

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 December 31,                                                               Year Ended December 31,
                                                                        2017                                                   2016                                   2017                 2016
                                                                        (in thousands, except share and per share data)
Reconciliation of Net Income to Normalized Adjusted Net Income
Net income                                                              $                         47,791                       $                 34,864               $   33,287           $   158,340
Provision for income taxes                                                                        81,102                                         4,000                    78,183               21,251
Income before income taxes                                              $                         128,893                      $                 38,864               $   111,470          $   179,591
Amortization of purchased intangibles and acquired capitalized software                           8,902                                          53                       15,448               211
Financing interest expense related to KCG transaction                                             -                                              -                        4,626                -
Debt issue cost related to debt refinancing                                                       1,109                                          5,579                    10,460               5,579
Severance                                                                                         4,739                                          982                      14,911               1,252
Reserve for legal matter                                                                          2,833                                          -                        657                  -
Transaction advisory fees and expenses                                                            950                                            318                      25,270               994
Termination of office leases                                                                      1,860                                          -                        3,671                (319        )
Equipment write-off                                                                               672                                            -                        2,849                428
Acquisition related retention bonus                                                               -                                              -                        23,050               -
Trading related settlement income                                                                 (628                      )                    -                        (628        )        (2,975      )
Other, net                                                                                        (89,705                   )                    (138              )      (93,352     )        (36         )
Share based compensation                                                                          4,723                                          3,635                    21,825               18,222
Charges related to share based compensation at IPO, 2015 Management                               1,091                                          1,393                    5,225                5,606
Incentive Plan
Charges related to share based compensation awards at IPO                                         223                                            312                      740                  1,755
Normalized Adjusted Net Income before income taxes                      $                         65,662                       $                 50,998               $   146,222          $   210,308
Normalized provision for income taxes                                                             24,295                                         18,104                   54,102               74,659
Normalized Adjusted Net Income                                          $                         41,367                       $                 32,894               $   92,120           $   135,649
Weighted Average Adjusted shares outstanding                                                      188,248,614                                    139,681,670              161,464,923          139,685,124
Normalized Adjusted EPS                                                 $                         0.22                         $                 0.24                 $   0.57             $   0.97
Reflects U.S. federal, state, and local income tax rate applicable to corporations of approximately 37% for 2017 and 35.5% for 2016
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 months ended December 31, 2017 and 2016, and years ended December 31, 2017 and 2016.

Virtu Financial, Inc. and Subsidiaries

Condensed Consolidated Statements of Financial Condition (Unaudited)

                                                             December 31,        December 31,
                                                             2017                2016
                                                             (in thousands, except share data)
 Assets
 Cash and cash equivalents                                   $      532,887      $      181,415
 Securities borrowed                                                1,485,357           220,005
 Receivables from broker-dealers and clearing organizations         1,087,084           448,728
 Trading assets, at fair value                                      2,830,391           1,827,882
 Property, equipment and capitalized software, net                  137,018             29,660
 Goodwill                                                           844,883             715,379
 Intangibles (net of accumulated amortization)                      111,224             992
 Deferred taxes                                                     140,938             193,859
 Assets of business held for sale                                   54,342              -
 Other assets                                                       350,956             74,470
 Total assets                                                $      7,575,080    $      3,692,390
 Liabilities and equity
 Liabilities
 Short-term borrowings, net                                  $      27,883       $      25,000
 Securities loaned                                                  768,872             222,203
 Securities sold under agreements to repurchase                     390,642             -
 Payables to broker-dealers and clearing organizations              833,975             695,978
 Trading liabilities, at fair value                                 2,499,662           1,349,155
 Tax receivable agreement obligations                               148,732             231,404
 Accounts payable and accrued expenses and other liabilities        350,798             69,281
 Long-term borrowings, net                                          1,388,548           564,957
 Total liabilities                                           $      6,409,112    $      3,157,978
 Total equity                                                       1,165,968           534,412
 Total liabilities and equity                                $      7,575,080    $      3,692,390
                                                             As of December 31, 2017
 Ownership of Virtu Financial LLC Interests:                 Interests           %
 Virtu Financial, Inc. - Class A Common Stock                       90,651,656          48.2%
 Non-controlling Interests (Virtu Financial LLC)                    97,490,729          51.8%
 Total Virtu Financial LLC Interests                                188,142,385         100.0%

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

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