Virtu Financial Q1 2025 Earnings Call Transcript

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Provided by Quartr
April 23, 2025
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Operator

Ladies and gentlemen, thank you for standing by and welcome to Virtu Financial twenty twenty five First Quarter Results. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you would need to press 11 on your telephone. Please be advised that today's conference is being recorded.

Operator

I would like now to turn the conference over to Andrew Smith, Head of Investor Relations. Please go ahead.

Andrew Smith
Andrew Smith
Senior VP of Global Business Development & Corporate Strategy at Virtu Financial

Thank you, Michelle, and good morning, everyone. Thank you for joining us. Our first quarter twenty twenty five results were released this morning and are available on our website. With us today on this morning's call, we have Mr. Douglas Sifu, our Chief Executive Officer Mr.

Andrew Smith
Andrew Smith
Senior VP of Global Business Development & Corporate Strategy at Virtu Financial

Joseph Meluso, our Co President and Co Chief Operating Officer and Ms. Cindy Lee, our Chief Financial Officer. We'll begin with prepared remarks and then take your questions. First, a few reminders. Today's

Andrew Smith
Andrew Smith
Senior VP of Global Business Development & Corporate Strategy at Virtu Financial

call may

Andrew Smith
Andrew Smith
Senior VP of Global Business Development & Corporate Strategy at Virtu Financial

include forward looking statements, represent Virtu's current belief regarding future events and are therefore subject to risks, assumptions and uncertainties, which may be outside the company's control. Please note that our actual results and financial conditions may differ materially from what is indicated in these forward looking statements. It is important to note that any forward looking statements made on this call are based on information presently available to the company, and we do not undertake to update or revise any forward looking statements as new information becomes available. We refer you to disclaimers in our press release and encourage you to review the description of risk factors contained in our annual report, Form 10 ks and other public filings. During today's call, in addition to GAAP measures, we may refer to certain non GAAP measures, including adjusted net trading income, adjusted net income, adjusted EBITDA and adjusted EBITDA margins.

Andrew Smith
Andrew Smith
Senior VP of Global Business Development & Corporate Strategy at Virtu Financial

These non GAAP measures should be considered as supplemental to and not as superior to financial measures as reported in accordance with GAAP. We direct listeners to consult the investor portion of our website where you'll find additional supplemental information referred to on this call, as well as reconciliation of non GAAP measures to the equivalent GAAP term in the earnings materials with an explanation of why we deem this information meaningful as well as how management uses these metrics. And with that, I'd like to turn the call over to Doug.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

Thank you, Andrew, and good morning, everyone. Thank you for joining us this morning. In my remarks today, I will focus on Virtu's first quarter twenty twenty five financial and business performance and strategic initiatives. Following my remarks, Joe and Cindy will provide additional details on our results. This morning, we reported $1.3 of normalized EPS on total adjusted net trading income per day of $8,300,000 Quarterly EBITDA was $320,000,000 and our EBITDA margin was a healthy 64.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

This represents our highest net trading income per day since 2021 and reflects the continued long term improvement of our core business as well as our expansion into new markets. Market Making had its best quarter since the first quarter of twenty twenty one. Thanks to our continued enhancements, our retail wholesale business was strong and our global noncustomer Market Making businesses continued to outperform our opportunity metrics. In particular, our noncustomer Global Equities, digital asset and ETF block market banking franchises delivered outsized performances. This quarter demonstrates the benefits of our global diversified market banking operations and highlights its ability to outperform separate and apart from The U.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

S. Retail wholesale business. In addition to our noncustomer Market Making businesses in The U. S, Europe and Asia Pacific equities and options, We make markets in energy products like crude, oil and natural gas, currencies, digital assets, fixed income instruments and a range of other commodities, including precious and nonprecious metals, all of which performed well during the quarter. We continue to extend our listed options business in Asia, India and Japan, have expanded our coverage of tokens and venues in digital assets, and we are making strides in expanding our ETS block business in Europe.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

In addition, we had an outstanding quarter in metals given the tumult around tariffs, which has now been implemented. I point this out to unwind the fact that while our business does benefit from increased retail activity in The United States, we are also broadly diversified and levered to increased volumes and volatility across asset classes and geographies. In addition to the strong performance of our market banking businesses, the diverse strength of the firm was further evidenced by Virtu Execution Services' seventh straight quarter of the increasing net trading income, a trend which has persisted through a range of both favorable and less favorable operating conditions. The VES suite of scalable, highly performing products has begun to resonate with our growing and impressive global buy side and sell side client list as we continue to make significant inroads through product penetration and cross selling. We believe our VES business has significant room to run.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

Our product line is best in class and our position is rising on broker wheels. We've successfully rolled out Virtu Technology Services, or VTS, with more in the queue. We've deployed an agency fixed income RFQ platform to a handful of clients, building a dealer network of almost 20 brokers on top of our client connectivity. In 2024, we delivered on our plan to significantly increase our sales prowess with a number of key hires, further accelerating our growth in this space, and the results have been noticeable. In addition, Virtu Capital Markets, which has been a pioneer in implementing at the market offerings for corporate issuers to raise capital is off to a great start in 2025.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

What we call BES today is the combination of the Knight Execution Services business we acquired when we bought Knight and ITG's global execution workflow analytics and connectivity franchises. Since acquiring those businesses, we have completely overhauled their respective technology platforms and upgraded the entire suite of products from our algos, Deposit Alert and our extremely valuable and now multi asset class workflow and analytics products. The market penetration and adoption levels that VES is realizing today are the culmination of this hard work and our continued investments. Our VES products allow us to achieve deep integration into client workflows, resulting in growth of recurring and reoccurring revenue streams. In addition to these technological and product enhancements, we have also streamlined their operations.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

We do not break out bottom line results in our segment reporting. However, suffice to say, our EBITDA margin on these businesses are substantially higher and depending on the quarters as much as 2x or more than when we acquired Given the outlined improvements in this business and the outlook and recent performance, we do not see any reason why in the medium term we cannot achieve a $2,000,000 per day run rate for VES. Now let me comment on recent market activity. As you know, after the tariff announcements on April 2, global markets became extremely volatile. I want to make a handful of comments about the state of the market and our experience in the last few weeks.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

First and very importantly, despite some stresses, the market infrastructure performed exceedingly well. We saw no interruptions in our flows, no significant outages or liquidity concerns among any of our counterparties, which include the most important clearinghouses, prime brokers, retail brokers, banks and trading venues around the world. This performance is the culmination of years of shoring up the financial market infrastructure and sensible and prudent regulation for which we have always been an advocate. This reflects the lessons learned from prior market events and highlights how competition makes markets better by driving brokers, ATSs and exchanges to innovate and invest in their systems. Second, our operational performance was outstanding.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

The past several weeks included the highest volume and volatility days in Virtu's history. I'm proud to say that we had no counterparty issues from a risk risk standpoint or operational issues that prevented us from servicing clients. While naturally, we had increased margin requirements as we anticipated, our liquidity was more than sufficient to meet all associated obligations. Looking at retail participation. As measured by retail shares and quoted spread, the first few weeks of the second quarter were well ahead of 2024 and the first quarter of twenty twenty five.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

Indeed, the last time we saw retail participation at these levels were the pandemic days of 2020. We remain as we have been since 2020, very bullish of long term retail engagement. Of course, broader market volumes will come down for the most recent elevated levels as one would naturally anticipate. However, if you look at the long term trend of retail participation, we believe that the data shows a secular uptrend in retail engagement. In fact, if you look at the six zero five share volume, the quoted spreads over the last six years, you will notice that even after the heightened activity in 2020 and in 2021, the market settled well above its pre pandemic highs.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

We also noted several market trends,

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

including

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

the strong new account opening figures from retail brokers that are indicative of the retail participation continuing apace at the new baseline levels. Finally, I cannot conclude without commenting on our outlook, both near term and long term, without reiterating what I just said a few minutes ago. Virtu was built as a highly diversified market making business and further diversified its business with the growth of its Execution Services businesses. The current environment is favorable for both our customer and noncustomer market making businesses and our Execution Services business as well. This has also been an excellent environment for our growing options business, digital asset business as well as our ETF block business, which in recent days has handled a record number of requests for quotes and working orders from clients.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

In broad strokes, our growth is driven by three key forces: first, sharpening our edge to better capture opportunities within our existing businesses second, extending our edge into new products and markets which themselves are expanding, such as the electronification of fixed income and the growing adoption of digital assets and ETFs abroad. And third, we benefit from the broader tailwinds as market volumes and volatilities rise, thanks to our diverse, global, multi asset class market making and execution services platform, which enables us to participate in both short and long term trends wherever and whenever they emerge. Importantly, the first two drivers are within our control, powered by our execution, innovation and strategic investment regardless of how favorable or challenging the external environment may be. I think especially in times like these for our business, it's important to put these things into perspective and note how expansive Virtu's business has become over the years. With more on this point, I'd like to turn the conversation over to Joe Malusso for more commentary.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

Joseph?

Joseph Molluso
Co-President & Co-COO at Virtu Financial

Thank you. We thought it was an appropriate time to revisit briefly some analysis we had included in our supplemental materials and on our investor website in the past that are meant to provide some long term perspective on Virtu and how we have grown business in a deliberate way over the years. So first, on Slide eight in the supplemental materials, we went back to our IPO ten years ago and arrayed this data from 2015 until the first quarter. And despite the inherent volatility in our business, there is a clear up and to the right skew to our results. The next slide on Page nine is revisiting some perspective on how to analyze a volatile business such as Virtu.

Joseph Molluso
Co-President & Co-COO at Virtu Financial

The top of the page shows a sensitivity analysis based on adjusted net trading income and the resulting EPS. We introduced the sensitivity analysis about five years ago and have been able to realize results that are consistent with this analysis due to the rigor we have around cost and capital management, things we can control as opposed to the operating environment, which we obviously can't control. Our average daily pro form a net trading income going back to 2019, which was the first full year after the ITG acquisition, has been $6,300,000 per day. So through the cycle, through all the ups and downs of different market cycles, our immediate performance translates into $6,300,000 per day, which extrapolating from the chart is $3.4 of adjusted EPS. So we have real growth in our operating model, as demonstrated over the long term, which we are accelerating through our organic initiatives, as seen in the middle of the slide.

Joseph Molluso
Co-President & Co-COO at Virtu Financial

Now going back to what Doug said in his prepared remarks, while our business is volatile, we believe the pieces are in place to continue growing as we further enhance our capabilities and as we extend our ability to new products and markets. As he mentioned, we believe PES could be a $2,000,000 per day business through the cycle. Add to that the variable yet continuing contribution of our non retail wholesaling business, and this means you should be able to raise the bar around cyclical troughs over time. The final component of this plan is our continued share buyback. The top line growth we have realized is significant and enhances our bottom line given our operating leverage.

Joseph Molluso
Co-President & Co-COO at Virtu Financial

Our share buyback program has and will continue to compound this earnings growth. If you have a desire to look out two to three years and even if you conclude that our business will continue to evolve and produce a trough year in a given cycle, the cumulative impact of the share buybacks is profound, baking in meaningful growth on top of any organic growth assumption you contemplate. And with that, I'm going to turn the call over to our CFO, Cindy Lee.

Cindy Lee
Cindy Lee
Chief Financial Officer at Virtu Financial

Thank you, John. Good morning, everyone. On Slide three of our supplemental materials, we provided a summary of our quarterly performance. For the first quarter of twenty twenty five, our adjusted net trading income, or NT, which represents our trading gains, net of direct trading expenses totaled $497,000,000 or $8,300,000 per day. Market Making adjusted net trading income was $382,000,000 or $6,400,000 per day.

Cindy Lee
Cindy Lee
Chief Financial Officer at Virtu Financial

Execution Services adjusted net written income was $115,000,000 or $1,900,000 per day. Our first quarter twenty twenty five normalized adjusted EPS was $1.3 Adjusted EBITDA was $320,000,000 for the first quarter of twenty twenty five, and our adjusted EBITDA margin was 64%. On Slide 12, we provided a summary of our operating expense results. For the first quarter of twenty twenty five, we reported $193,000,000 of adjusted operating expenses. We continue to maintain an efficient cost structure and disciplined expense management, which has helped us to control our operating expenses during an inflationary environment.

Cindy Lee
Cindy Lee
Chief Financial Officer at Virtu Financial

Financing interest expense was $30,000,000 for the first quarter of twenty twenty five. With the benefit of our recent refinance and interest rate swap contracts that we entered in the prior year, our blended interest rate was approximately 7.1% for our long term debt in aggregate. In Q1, we used a portion of our free cash flow to repurchase 1,300,000.0 shares at an average price of $36.44 per share for a total of $48,000,000 To date, we have repurchased over 52,000,000 shares at an average price of $25.85 per share for a total of $1,400,000,000 Core ad share count was 160,200,000.0 shares outstanding. Since we initiated our share repurchase program, we have repurchased over 18.9% of fully diluted shares of Virtu net after new issuances. We remain committed to our $0.24 reported dividend and combined with our share repurchase program, demonstrates our continued commitment to return capital to our shareholders.

Cindy Lee
Cindy Lee
Chief Financial Officer at Virtu Financial

Now I would like to turn the call over to the operator for Q and A.

Operator

Thank And our first question is going to come from Chris Allen with Citi. Your line is open.

Christopher Allen
Christopher Allen
Managing Director at Citi

Morning, everyone. Thanks for taking my question. Maybe just to start out on the market making an NTI, helpful comments just around the retail sustainability. But maybe when we think about it from a year over year perspective, looking at the growth there, 40% year over year, can you help us think about what the balance between the wholesale business and the on exchange business? Was there a balance between the two, was there a SKU like and also the contribution from the new organic growth initiatives just to help people think about the sustainability of the overall complex moving forward?

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

Yes. Yes, thank you. It's a great question, Chris. And obviously, we've tried to be more front footed about our views of sustainability and the cyclicality, if you will, of the retail business. And yes, we obviously, as you know, don't break out customer versus non customer Market Making.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

Part of that is obviously, it's a little bit competitive. But it's also the businesses are not as separate and distinct as you would think. We've done a lot of great work over the last seven years and certainly within the last two to three years in terms of actually making the businesses work quite well together. We've done an excessive amount that I guess, is the wrong word, an incredible amount of internalization between the various trading groups. That involves the customer business in creating an internal central risk book of businesses.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

So the increase from Q4 to Q1 was pretty diverse and pretty evenly allocated, if you will, between the customer and the non customer businesses. So it wasn't as if we had some burst of activity in January, February and March in our Virtu customer market making segment as opposed to the non customer market making businesses. As I noted in the comments, we had some really good days in our precious and non precious metals business because of the fear of tariffs, which came to be, particularly in copper and silver, platinum and palladium. Our options business did exceptionally well in the block ETF business, which both is responding to anonymous RFQs, but also handling worker orders from customers did exceptionally well. So I would say overall that the businesses were quite balanced, and we're trying to emphasize the global diversification and asset scale of this business.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

I mean, obviously, we don't run away from our wholesale business. It's a great business. We inherited it from Knight, and we have improved it dramatically. We've integrated it with all of the other great things that Virtu had and continues to grow and integrate with all the product areas that we are getting into. Like for example, when we take customer orders now in crypto ETFs, be they Bitcoin, Ethereum and shortly Solana, having the ability to market make that on the non customer side just makes our edge a lot more impressive.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

Joe, do want add

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

some color?

Joseph Molluso
Co-President & Co-COO at Virtu Financial

Yes. I just wanted to frame to just underline one thing you said, Chris, in the question when you said the wholesaling retail business and then on exchange, right? So we don't think about it as off exchange, on exchange, right? We think about it as the retail wholesaling business and then kind of the non customer business, as Doug said, right? So it's really it is there is an equity component to it, but there's a U.

Joseph Molluso
Co-President & Co-COO at Virtu Financial

S. And non U. S. Equity component, pretty much all the growth initiatives, options, ETF block, crypto, capital markets within PES, but most of those are non equity businesses. And even some of the examples Doug gave, like metals and foreign exchange and energy, obviously, the distinction for us is not on exchange, off exchange, it's customer versus non customer.

Joseph Molluso
Co-President & Co-COO at Virtu Financial

Obviously, know this, but in multiple asset classes.

Christopher Allen
Christopher Allen
Managing Director at Citi

Appreciate that. And just on my one follow-up, just kind of noted continued improvement against the opportunity set. So where are we in kind of that continuous improvement? I I realized that you have a lot of different areas you can kinda tighten it tighten the dials on. Do you still see room for improvement?

Christopher Allen
Christopher Allen
Managing Director at Citi

Like, how does how does that how does it stand out kind of current environment when things when obviously spreads widen out?

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

Yeah.

Christopher Allen
Christopher Allen
Managing Director at Citi

Is it more just the environment or just you see do you actually realize increased efficiencies with the environment as well?

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

Yes. I mean, it's a really good question. And we measure it in markets that are more benign and markets that are obviously heightened. And you're right, like during times of volatility, particularly in the last couple of weeks, you see people have urgency. So there's obviously a lot more spread crossing flow, and that's nirvana for a market maker.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

But just in terms of absolute performance and growth, And I sort of made this point in my prepared remarks, but that's sure, we're very focused on new areas like options, ETF block, crypto, fixed income. But there's a continual and a lot of work being done to more of our, I guess, I'll call them our legacy businesses where we've become just better and more performant. We've added strategies and predictors within our customer Market Making segment. We've made our noncustomer global equities Market Making businesses more efficient. I can't overemphasize that this is a single unitary firm.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

It really goes back to the DNA of Virtu Financial. We're a single firm. We don't kind of trade in pods. We don't give out trading guarantees. We don't pay people based on books.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

So there's an enormous amount of collaboration within the firm, and that allows for internalization, which does a couple of things. It obviously makes you not pay exchange fees and clearing fees and things like that. So by definition, you're a lot and Section 31 fees, so by definition, you're going to be more profitable. But it also enables you to execute without having to expose your intentions to the marketplace. And so you can be more aggressive, take in larger blocks and provide better two sided pricing to your clients.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

So that's a key, key element to our success and it was a big contributor in the first quarter.

Christopher Allen
Christopher Allen
Managing Director at Citi

Thanks guys. Appreciate the color and good luck with the playoffs, Doug.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

Thank you very much.

Operator

And the next question comes from Dan Fannon with Jefferies. Your line is open.

Daniel Fannon
Daniel Fannon
Managing Director - Research Analyst at Jefferies

Thanks. Good morning. I wanted to come back to the $2,000,000 per day in the VES business. Kind of what gives you guys confidence to say this now? You talked about a lot of diversity of products and hiring.

Daniel Fannon
Daniel Fannon
Managing Director - Research Analyst at Jefferies

So maybe, I guess, where the momentum is, if you could be a little bit more specific in terms of that business? And as you think about it, is this more cross selling more of the same? Or are there more things on the come that you expect to roll out?

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

Yes. Thank you, Dan. Yes, we obviously don't typically give forecasts or talk about numbers like that. So we have a high degree of confidence based on a lot of the work that Steve Travol and a lot of great people at Virtua Execution Services have done in the last five to six years since we acquired ITG and Integra. And this was really the road map that we tried to lay out in 2019 when we made the decision strategically to become bigger in an Execution Services segment.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

And it's really a number of components, Dan, that adds up. So it's just a bunch of signals. So it's our Virtu Technology Services platform, rolling it out to small to mid sized broker dealers that need a technology solution and even asset managers that need the technology solution. We've seen huge adoption of that. You're right, there's a great deal of cross selling.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

If someone's going to take our Frontier global algo product, they very often will take an analytics product and then we try to sell and trade in our execution management system. We've made a huge amount of enhancements and improvements to our workflow solutions and analytics solutions since the acquisition of ITG, essentially replatformed those and changed the guts of them. So there are a lot more performant in regular times than in bursts. We had I didn't hear of a single complaint about Triton during this recent April. I'm sure there were some, but we handled them, but there was no systemic or global issues.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

And that's a huge improvement and we've made those products multi asset class. We are a big believer in distribution partnerships. So we're kind of agnostic. We're happy to have partners, sell side firms white label our products and be a technology provider. And in addition, we've made a number of product enhancements.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

For example, we've got this great switcher algo product, right, which is effectively like an algo of algo that uses real high level machine learning and some artificial intelligence to route orders intelligently. We have an agency RFQ product now in fixed income, which was a supplement the marketplace was asking for. As I mentioned earlier, we have multi asset class trading analytics products. So you can go to a large asset manager and say, hey, we can be a one stop solution for your credit traders, your equities traders, your fixed income excuse me, your FX traders. And so all of those one plus two plus three, the singles that we're hitting have really given us the confidence, if you will, and the results are the proof is in the pudding.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

And on top of that, once we made a number of cultural changes, shall I say, within that business segment, we've really done a terrific job. Again, I give Steve Cavoli and the guys a lot of credit by having a number of strategic hires. This is ultimately a customer facing business and customer service and understanding the products, having folks in Virtu Execution Services. Even if they aren't software engineers, they need to understand the products and why

Operator

Please stand by one moment for we are having a technical difficulty, so please stand by for one moment.

Operator

Please

Operator

stand by for one moment. We are experiencing a technical difficulty, so please stand by. Andrew?

Andrew Smith
Andrew Smith
Senior VP of Global Business Development & Corporate Strategy at Virtu Financial

Yes.

Operator

Okay. Are you ready to continue, sir?

Andrew Smith
Andrew Smith
Senior VP of Global Business Development & Corporate Strategy at Virtu Financial

Yes. Yeah. Where where did we drop?

Joseph Molluso
Co-President & Co-COO at Virtu Financial

Just ask ask Dan where we dropped.

Operator

It looks like that you were answering a question for Dan Fannon.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

Yeah. Okay. Thank you. Are we back live?

Operator

Yes, we are.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

Okay. Dan, I think I was pretty much done going through the four, five, six elements. I hope I answered your question. I don't know if you had a follow-up.

Daniel Fannon
Daniel Fannon
Managing Director - Research Analyst at Jefferies

Yeah. No, we got most of that. So appreciate it. Just as a follow-up, there obviously is a bunch of debate around the sustainability of retail. And you talked about what's been happening more recently.

Daniel Fannon
Daniel Fannon
Managing Director - Research Analyst at Jefferies

Just want to make sure that there's nothing you're seeing from the flow or other parts of the market that would basically support this idea that retail is slowing or has the potential to slow in the short term.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

No, it's good question. Obviously, we try to be front footed and address it not only in the script, but we provided it in the supplemental materials, you know, and the data doesn't lie. Sure, you know, you'll have as you will in non customer segments, you'll have surges of interest. But we've seen retail hasn't pulled back. We've seen a very healthy and sustainable level of retail engagement.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

If you look at slide seven, you can see that the baseline has elevated. And indeed, the key retail brokers have indicated that their account openings have continued to grow apace. So like every part of the markets, you'll have days where there's 10,000,000,000 shares of retail come into the market and other days where there's 2,000,000,000. But at the end of the day, the long term positive trend here has continued. I think the data is very, very clear that we provided in the supplemental materials.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

So I think that narrative is frankly just incorrect and is not supported by the data.

Daniel Fannon
Daniel Fannon
Managing Director - Research Analyst at Jefferies

Great. Thank you.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

Thank you.

Operator

And the next question will come from Ken Worthington with JPMorgan. Your line is open.

Ken Worthington
Ken Worthington
Financial Analyst at JP Morgan

Hi, good morning. Thanks for taking the question. I wanted to maybe start on, I guess, what I'll call the core noncustomer Market Making business. I was hoping to get more color in terms of to what extent that that business is sort of building and growing. So if it's if possible, you know, are you adding new symbols, new exchanges?

Ken Worthington
Ken Worthington
Financial Analyst at JP Morgan

Is it more headcount? Is it additional capital? Are there other things that are getting the baseline in that business to grow, Or should we really just kind of go back to the other businesses that you talked about and focus on the growth in VES and the customer business, etcetera?

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

Yes. Yes. It's a great question. And obviously, look, we struggle to provide as much information as we possibly can to you all to validate that. And every time in my prepared remarks, I comment on whether we've we're very self critical, if you will, in terms of what should our performance be in terms of capture per unit, whether it's an FX pay or can a future or an equity or in digital assets and whatnot.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

And we score ourselves every day. And I was very clear in our remarks that we outperformed in just about every non customer market making segment that I can think of. And that is really the culmination of a couple of things. One, obviously, is investing heavily in technology to make sure that in terms of not only latency, in terms of execution, but throughput of market data and connectivity that we are there. In equities, there's not only now 15 in The United States, there's 15 national securities exchanges.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

There's 40 odd ATSs that we're connected to that we do quite well on. And we run a very significant single dealer platform. And streaming directly to customers and making sure that you manage toxicity and provide good execution quality to those customers, that's something that we strive for and continue to improve on. And then lastly, and I've mentioned it now three or four times, it's enhancing internalization within the firm. So it's hard to understate how important it is and how vibrant, I'll call, our legacy businesses are.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

And over the last four or five years, we have seen a continual shift to the right of those businesses in the aggregate. Sure, some will have better days, weeks, months, quarters and years than others. But the notion that somehow those businesses are diminishing or not growing is not correct. So we're very, very focused on continuing to diversify our revenue streams. And to add on to that, obviously, some of the new initiatives around options and ETF block, which has grown pretty dramatically in digital assets.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

Joe, I don't know if you wanted to add.

Joseph Molluso
Co-President & Co-COO at Virtu Financial

No, that's right. I mean, your question, Ken, what have we with new products, new markets, pretty much everything that we describe or have described in the past as an organic growth initiative is in this non retail category, ETF block, digital assets options.

Ken Worthington
Ken Worthington
Financial Analyst at JP Morgan

Great. Thank you very much.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

Thanks, Ken.

Operator

And the next question comes from Craig Siegenthaler with Bank of America. Your line is open.

Analyst

Good morning. Thanks for taking the question. This is Eli on for Craig. You update us on the product roadmap for your crypto business? Specifically, what exchanges are you providing liquidity on today?

Analyst

For what coins? And then how is that going to build out and expand over time?

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

Yeah, sure. I'm going to try to be as specific as I can. I'm not the youngest guy in the world, so I can't keep track of all of these coin dealers. You're a young guy, so you probably have a better handle on them. I mean, a lot of it really has been driven by our partners.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

So as you know, we're an investor in EDX. EDX has asked us to expand our coverage both in terms of coins and in terms of ours. So we are now a 20 fourseven firm. We're doing a lot more than the big three. So it's more than Bitcoin, Ethereum, and Solana.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

We're doing about a dozen or so coins moving to close to two dozen. We won't go far out on the queue and do some of these, I'll call them, off meme coins because those don't seem appropriate. But anything that EDX and other partner firms like Coinbase bullish I'm trying to think the other venues were connected to Binance. I'm sorry?

Andrew Smith
Andrew Smith
Senior VP of Global Business Development & Corporate Strategy at Virtu Financial

OKX.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

OKX. OKX. Andrew is updating me here. What other venues are we connected to?

Andrew Smith
Andrew Smith
Senior VP of Global Business Development & Corporate Strategy at Virtu Financial

OKX, Bybit, Kraken.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

Right. There you go, Eli. In addition, we have now started a VEEG, like our VFX and VFI, where we stream directly to counterparties. We have a VFCrypto offering. We've made a couple of strategic hires in that area to build out more of what I will call institutional business.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

So streaming directly to buy side firms, either through our own API or using the auspices of one of the aforementioned exchanges. And then the last thing is that this business is a multi asset class business, if you will, a multi product business. Because every day you turn around, there's a new ETF that's about to be launched here in The United States, thankfully. You'll have levered and inverse products, and then you'll have options on those products. We see the same thing in Europe and in Canada, a little bit in Brazil and in Asia as well.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

And then there is perpetual futures as well that like EDX has launched, for example, on these products. So think of this as a multitude of coins, ETF products globally, futures products both listed and perpetual futures on other platforms. And then on top of that, we will offer a single deal institutional streaming as well. So we are, I would say, in the second inning, if you will, of a nine inning game of building that out. We're happy to be a wholesale crypto liquidity provider.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

And this is going to be no different, if you will, from our FX or other businesses that we've built out over the years. And the last thing is, to the extent there's institutional support for this business, there's no reason we couldn't support digital asset products. And we already have a roadmap for this to the extent there's an investor demand on our Triton product. So traders could access markets through our execution management system. And we're more than happy and prepared to have execution service algos to support us.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

So this is truly a product or an asset class, if you will, that spans the firm.

Analyst

Got it. Thank you. And for our follow-up, there's been some news flow about you guys getting new competition in Virtu Technology Services with Sizzle Securities and Jane Street both also looking to do more of that sort of outsourced trading business with sell side firms. Can you talk a little bit about how your offering stacks up against these competing solutions being rolled out by your competitors?

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

Yeah, it's a really good question. Look, mean, Citadel and Jane are both terrific firms run by great people. And we're frenemies, I guess, right? Because we collaborate on exchanges and regulatory matters. Right.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

So I have nothing but respect for both of those firms and their leadership. I've said that many, many, many times. I think it's a very different product offering. Their offering is more of a white label RFQ product that connects to a bank partner. And we'll provide them with liquidity that their partner then could kind of repackage, markup and share with their clients.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

That's a great business. It can be focused on maybe one or two larger dealers. And it's a holistic partnership. We've done that before. We did that historically with the Bank of New York and in FX, for example.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

It doesn't scale particularly well. It's very intensive. It obviously can be very profitable. Our business is completely different. It's an offering that is more of an agency aggregation tool for smaller regional broker dealers and asset managers.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

And it's more commoditized and it scales exceptionally well. And the benefit of that, obviously, is you have a larger addressable marketplace. It's more of a commoditized product that's easier to get out there and it's easier to support. And it provides us the benefit of being able to, if we choose and obviously, we generally choose to be a liquidity provider with respect to that broker dealer. But again, we're going to be Switzerland.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

So we're going to allow them to access if they want to access Citadel Jane Street, Hudson River, and all these other great firms, that's their prerogative. We'll be a liquidity provider on a wheel. But it's really empowering firms that don't have the resources that we do in order to execute, to provide that capability to their end users, as opposed to a single large partnership. So I think it's a very, very different approach and a very different philosophy. And that's how I would distinguish them.

Analyst

Got it. Thank you.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

Thank you.

Operator

I am showing no further questions at this time. I would now like to turn the call back over to Doug for closing remarks.

Douglas Cifu
Douglas Cifu
CEO at Virtu Financial

Thank you, everybody, for joining us today, and we very much look forward to addressing the second quarter in July of this year. Thank you, everybody.

Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.

Executives
    • Andrew Smith
      Andrew Smith
      Senior VP of Global Business Development & Corporate Strategy
    • Douglas Cifu
      Douglas Cifu
      CEO
    • Cindy Lee
      Cindy Lee
      Chief Financial Officer
Analysts
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Key Takeaways

  • Virtu reported strong Q1 2025 results with normalized EPS of $1.30, adjusted net trading income per day of $8.3 million (its highest since 2021), quarterly EBITDA of $320 million and a 64% EBITDA margin.
  • Market Making achieved its best quarter since Q1 2021, driven by robust performance in both the retail wholesale segment and noncustomer global equities, digital assets and ETF block franchises across multiple geographies and asset classes.
  • Virtu Execution Services (VES) delivered its seventh consecutive quarter of rising net trading income and is on track for a $2 million per day run rate, fueled by product enhancements, cross-selling of algos, analytics and the rollout of Virtu Technology Services (VTS) and agency RFQ platforms.
  • The firm’s infrastructure and risk management proved resilient amid April’s tariff-driven volatility, with no significant outages or counterparty issues and sufficient liquidity to meet elevated margin requirements.
  • Virtu continued its capital return strategy, repurchasing 1.3 million shares for $48 million in Q1 and over 52 million shares for $1.4 billion since inception, while maintaining a $0.24 quarterly dividend to drive long-term EPS growth.
AI Generated. May Contain Errors.
Earnings Conference Call
Virtu Financial Q1 2025
00:00 / 00:00

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