Virtu Financial Q4 2024 Earnings Report

Virtu Financial EPS Results

• Actual EPS: $1.09
• Consensus EPS: $0.77
• Beat/Miss: Beat by +$0.32
• One Year Ago EPS: N/A

Virtu Financial Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $367.25 million
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Virtu Financial Announcement Details

• Quarter: Q4 2024
• Date: 1/29/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, January 29, 2025
• Conference Call Time: 8:30AM ET

Virtu Financial (NASDAQ:VIRT) operates as a financial services company in the United States, Asia Pacific, Canada, EMEA, Ireland, and internationally. The company operates through two segments, Market Making and Execution Services. Its product includes offerings in execution, liquidity sourcing, analytics and broker-neutral, capital markets, and multi-dealer platforms in workflow technology. The company's product allow its clients to trade on various venues across 50 countries and in various asset classes, including global equities, ETFs, options, foreign exchange, futures, fixed income, cryptocurrencies, and myriad other commodities. Its multi-asset analytics platform provides a range of pre- and post-trade services, data products, and compliance tools for clients to invest, trade, and manage risk across global markets. The company was founded in 2008 and is headquartered in New York, New York.

Virtu Financial Q4 2024 Earnings Call Transcript

Presentation

[Operator]

Good day and thank you for standing by. Welcome to the Virtu Financial 20 24 4th Quarter Results Conference Call. At this time, all participants are in a listen only mode. After the presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.

[Operator]

I would now like to hand the call over to Andrew. Please go ahead. You may begin.

[Andrew Smith, Senior Vice President of Global Business Development & Corporate Strategy at Virtu Financial]

Thank you. Our 4th quarter results were released this morning and are available on our website. With us today on this morning's call, we have Mr. Douglas Cifu, our Chief Executive Officer Ms. Cindy Lee, our Chief Financial Officer and Mr.

[Andrew Smith, Senior Vice President of Global Business Development & Corporate Strategy at Virtu Financial]

Joseph Meluso, our Co President and Co Chief Operating Officer. We will begin with prepared remarks and then take your questions. First, a few reminders. Today's call may include forward looking statements, which 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.

[Andrew Smith, Senior Vice President of Global Business Development & Corporate Strategy at Virtu Financial]

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 and 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 margin. 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 a reconciliation of non GAAP measures to the equivalent terms in the earnings material with an explanation of why we deem this information to be meaningful as well as how management uses these measures.

[Andrew Smith, Senior Vice President of Global Business Development & Corporate Strategy at Virtu Financial]

And with that, I'd like to turn the call over to Doug.

[Douglas Cifu, CEO at Virtu Financial]

Thank you, Andrew. Good morning, everyone. Apologies for the delay. We will check-in with the service. I'm not sure what happened.

[Douglas Cifu, CEO at Virtu Financial]

Thank you for joining us this morning. In my remarks today, we'll focus on Virtu's Q4 2024 financial and business performance and strategic initiatives. Following my remarks, Cindy and Joe will provide additional details on our results. Looking at our full year and Q4 2024 results, which are summarized on Slide 2 of the supplemental material, we generated $6,380,000 $7,270,000 of adjusted net trading income per day for the full year 2024 and the Q4, respectively. We reported normalized adjusted EPS of $1.14 for the Q4 and $3.55 for the full year 2024.

[Douglas Cifu, CEO at Virtu Financial]

In the 4th quarter, we delivered another strong performance in both our customer and non customer Market Making businesses and our Virtu Execution Service business against the mixed opportunity in the quarter. We remain committed to making further technology enhancements and investments in our capabilities to improve our performance in every environment and there are still significant improvements to make and we'll touch on these further in a moment. Slide 3 highlights that our Market Making segment earned an average of $5,500,000 per day of adjusted net trading income in the quarter, while Execution Services delivered $1,700,000 per day, increases of 23% 12% per day, respectively, over the quarter. In 2024, we saw firsthand the unique benefits of our scaled operations that allow us to continually invest in our global multi asset platform to further increase our operating leverage and meet clients' needs with new and innovative offerings. On the Execution Services side, this past quarter's $1,700,000 of ANTI per day represents VES best quarter since the Q1 of 2022 with our algo product achieving increased revenue for the 5th consecutive quarter.

[Douglas Cifu, CEO at Virtu Financial]

This was VES' best quarter since the Q1 of 2022. We continue to see institutions adopt VES' broad product set, leading to deep integration with our clients' trading workflows. This has resulted in the improved consistency of results you've seen despite a very competitive market segment. We have incremental growth plans for VES and Virtu Technology Solutions both within and outside the United States, which we discussed at length on our last earnings call. These efforts are beginning to materialize as our teams expands our footprint with existing clients and generates new long term business from new clients.

[Douglas Cifu, CEO at Virtu Financial]

To this end, in 2024, VES leveraged our investments and enhancements to accomplish key growth milestones. Winning remits include adoption of our Triton Valor Execution Management System for fixed income by a world class asset manager in Europe, successfully deployed our Triton Valor EMS, trading analytics, POSIT Alert and global equity execution algorithms for 1 of the largest asset managers in Asia. Most importantly, overall productivity and profitability within our VES business segment has grown significantly since we began the technology rebuild and modernization and streamlining of that business. Needless to say, we remain very excited about the growth opportunities, increasing operating leverage and compounding benefits of our VES expansion in 2025. Now on to Market Making.

[Douglas Cifu, CEO at Virtu Financial]

Both our customer and non customer Market Making businesses performed well in the quarter relative to the opportunity set, but even in a strong quarter like this, we know that there is room to improve. Our Market Making results were up almost 23% in the 4th quarter, an impressive result considering realized volatility was down across the board. The opportunity was markedly lower in October, but conditions improved in November and the opportunity so far has been the same or better every month since. Further, quoted spread and executed shares per our 605 reports for the 4th quarter show an increase of 12% and 11%, respectively, versus the Q3. Our ability to outperform market metrics is a function of many factors, including the success and development of our growth initiatives as well as internalization enhancements and continuous strategy iteration.

[Douglas Cifu, CEO at Virtu Financial]

For example, in 2024, we saw meaningful contributions to our results from new and redesigned market making models that did not exist in 2023. We are confident that our growth initiatives combined with our efforts to enhance spread capture rates through smarter internalization will yield increased benefits in any environment. Touching on our organic growth initiatives, including our expansion into crypto, ETF block options and fixed income market making continue to expand and perform well and have made meaningful progress throughout the year. We generated $787,000 per day from organic growth in 2024, the highest ANTI per day for any year since we began reporting this 4 to 5 years ago. In the Q4 and for the full year 2024, ANTI from organic growth initiatives represented 12% or firm wide ANTI.

[Douglas Cifu, CEO at Virtu Financial]

Our crypto growth initiative performed very well in the Q4, delivering strong results despite market volumes in spot crypto ETFs being down almost 20% compared to the Q1 of 2024 when they were first launched. Our strong results were driven by investments we made in the 2nd and third quarters this year. After the excitement around crypto ETFs tapered off and the market became more efficient, we enhanced our crypto capabilities by expanding our market access and liquidity distribution and improving our operational efficiency. Our decision to invest in building our scaled crypto capabilities paid dividends by enabling us to generate sizable returns in the relatively muted second and third quarters and really set us up to capture significant opportunity that was presented in the Q4. We aren't done expanding in our global crypto footprint to meet growing institutional demand.

[Douglas Cifu, CEO at Virtu Financial]

We are in the early days of building our 20 fourseven crypto native offering and continue to build out our connectivity to reputable markets and capital efficient framework to enhance our market making and risk management capabilities. Importantly, despite growing our crypto footprint, we remain committed to risk management and capital efficiency. We are excited for the growing opportunity in crypto and digital assets more broadly. We believe that the new regulatory tailwinds will kick off a wave of new products in 2025, which will further expand the addressable market of our market making and execution services, which plays to our core strengths. In addition, we continue to grow our ETF block offering by onboarding more clients and broadening our liquidity distribution.

[Douglas Cifu, CEO at Virtu Financial]

This disciplined work delivered sizable results in the Q4 as we saw greater client activity across both new and existing clients. Taking a step back, I look at our full year 2024 results and despite the recent strong performance, I believe there is so much more to come. Our strategic focus and areas of growth align us for even greater long term success as we expand our addressable market by adding more asset classes and offerings to our suite of market making capabilities and execution service solutions. Our focus on enhancing our core businesses and the continued success of our growth initiatives positions us well for any macro environment, whether it be reduced volatility or significant spikes in volatility and volumes that typically accompany increasing global tensions and the economic uncertainty, changes in monetary policy or elections. We continue to hire and make investments in our business.

[Douglas Cifu, CEO at Virtu Financial]

For example, it is worth noting that of our current employees, only 34% of them were at Virtu prior to 2019. This means that we continue to make significant multi year investments in new traders, developers, quants and other great employees. Notably, about 20% of our new hires since 2023 were to support our organic growth initiatives. And as you've come to expect from Virtu, we remain disciplined as ever around costs throughout the year, which enabled us to realize a 58% adjusted EBITDA margin in 2024. Now I will turn the call over to Ms.

[Douglas Cifu, CEO at Virtu Financial]

Cindy Li, our CFO. Cindy?

[Cindy Lee, Chief Financial Officer at Virtu Financial]

Thank you, Doug. Good morning, everyone. On Slide 3 of our supplemental materials, we provided a summary of our quarterly performance. For the Q4 of 2024, our adjusted net trading income or ANT, which represents our trading gains net of direct trading expenses, totaled $458,000,000 or $7,300,000 per day. Market Making adjusted net trading income was $348,000,000 or $5,500,000 per day.

[Cindy Lee, Chief Financial Officer at Virtu Financial]

Execution Services adjusted net trading income was $110,000,000 or $1,700,000 per day. Our Q4 2024 normalized adjusted EPS was $1.14 Adjusted EBITDA was $284,000,000 for the Q4 2024 and our adjusted EBITDA margin was 61.9%. On Slide 9, we provided a summary of our operating expense results. For the Q4 of 2024, we recorded $191,000,000 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 the inflationary environment.

[Cindy Lee, Chief Financial Officer at Virtu Financial]

Financing interest expense was $27,000,000 for the Q4 of 2024. With the benefit of our recent refinance and interest rate swap contracts that we entered in the prior years, our blended interest rate was approximately 7.2% for our long term debt in aggregate. In Q4, we used a portion of our free cash flow to repurchase 1,700,000 shares at an average price of $34.18 per share for a total of $57,100,000 To date, we have repurchased almost 51,000,000 shares at an average price of $25.56 per share for a total of $1,300,000,000 Quarter end share count was 159,200,000 shares outstanding, bringing our buybacks on target to fit within the ranges we have set forth publicly. Since we initiated our share repurchase program, we have repurchased over 19.4 percent of the fully diluted shares of Virtu, net after new issuance. Our share repurchase program year to date is within the guidelines we have published.

[Cindy Lee, Chief Financial Officer at Virtu Financial]

We remain committed to our $0.24 per quarter dividend and combined with our share repurchase program demonstrates our continued commitment to return capital to our shareholders. Now I would like to turn the call over to the operator for the Q and A.

[Operator]

Certainly. And our first question will come from Patrick Mollie of Piper Sandler. Your line is open, Patrick.

[Patrick Moley, Vice President at Piper Sandler Companies]

Yes. Good morning. How are you guys doing?

[Douglas Cifu, CEO at Virtu Financial]

Good. How are you?

[Patrick Moley, Vice President at Piper Sandler Companies]

Good.

[Patrick Moley, Vice President at Piper Sandler Companies]

So congrats on the quarter. My question is on just the regulatory environment. Obviously, Doug, I don't know if you heard, but we have a new Head of the SEC coming in. So can you just maybe talk about like what that means for your business and what that means for the areas that you're in, the opportunities that are presented there and then what it could mean for just the overall total addressable market of those opportunities? Thanks.

[Douglas Cifu, CEO at Virtu Financial]

One of my New Year's resolutions was not to mention Gary Gensler's name again. So thank you, Patrick for having me violate that right away. And that may be the last time I will say anything about him. Look, I mean, obviously, we're thrilled with the changing of the guard in Washington. I mean, it really was a I'll be polite and say, it was a burden that the entire industry had to bear for the last 4 years.

[Douglas Cifu, CEO at Virtu Financial]

You had a politically motivated chair and a Head of Trading and Markets that was effectively a puppet. And so they were promulgating proposals that were not intended to make the markets better. And so for better or worse, we took a leading role in beating a lot of that back, I think very successfully and I give a lot of credit to a lot of people within the industry that rallied behind this and recognize the harm they were going to do. The good news is that Paul Atkins is an unbelievably experienced thoughtful person. Obviously, I think he has views that are contrary to Genther and his band of Merry Men around market structure and wholesaling and payment for order flow.

[Douglas Cifu, CEO at Virtu Financial]

So all of those items will be off the table. I think the most exciting thing in terms of and I mentioned it in the script around tailwinds is what's going to happen on digital assets. I mean, it's difficult to predict exactly where it will come out and whether the CFTC will have more authority than the SEC. But you know that there's going to be a bipartisan solution already. The Interim Chair of the SEC overturned Staff Accounting Bulletin 121, which was this absurdity that Gensler had pushed through around banks, costing digital assets.

[Douglas Cifu, CEO at Virtu Financial]

And Hester Peirce has been appointed the Head of Crypto Subcommittee, the SEC and she's obviously a very smart person that's very favorable around having sensible regulations rather than regulation by enforcement. So we're very, very excited about that. And Atkins has a history of wanting to look at Reg NMS, in particular the order protection rule. So I think there'll be a in 2021, he suggested that there'd be like a real comprehensive review of equity market structure. And I think that'll be that will involve the industry and obviously we've made sensible proposals around sub dollar stocks and things like that.

[Douglas Cifu, CEO at Virtu Financial]

We don't think that make a lot of sense in the marketplace. And so we're just excited that we're going to have folks in Washington that are willing to engage the industry, that are sensible and that will look at data driven solutions. That's all we ever asked for were data driven solutions and when presented with the data the prior regime, frankly ignored it because of their political motivations. So it's a new day in Washington. We're very, very excited about it.

[Douglas Cifu, CEO at Virtu Financial]

I think we'll get clarity bipartisan clarity around crypto. I know Congressman French Hill is a proponent of clarity around and he's the new Chair of the House Financial Services Committee. I think Senator Tim Scott as well and Senator Loomis are all very excited about a bipartisan solution around digital assets, so that the United States can again be the leader of innovation in a very, very important and growing asset class.

[Patrick Moley, Vice President at Piper Sandler Companies]

Great. That's great color. And then just a follow-up. If we look back over the last several years, 2024, your earnings were surprisingly stable. Could you just talk maybe you've addressed this in your comments, we had some overlapping calls, but could you talk about what drove that stability and whether you think you can maintain that level of stability as we head into 2025?

[Patrick Moley, Vice President at Piper Sandler Companies]

I understand that a lot of it's going to be driven by volumes and volatility, but what are those things that could maybe help it remain as stable as it's been?

[Douglas Cifu, CEO at Virtu Financial]

Yes, that's a great question.

[Douglas Cifu, CEO at Virtu Financial]

I think, look, we've prided ourselves in being a very scaled diverse organization. We've made significant investments in people and I can't say the word internalization enough. I mean, we really act as a single cohesive firm, so internalizing both obviously retail order flow, but also within the firm, our non customer Market Making and customer Market Making businesses. And indeed, our Execution Services business, that's an added value that we can provide to our clients. So I think that really helps.

[Douglas Cifu, CEO at Virtu Financial]

We've added obviously the growth initiatives have brought more to use your word stability and more consistency around what we're doing, in options and ETF block and as I mentioned crypto had a really nice Q4. So again, it's the Virtu value proposition, which was be scaled, be agnostic to markets, try to be in as many asset classes and geographies as you possibly can, try to be the best bid and the best offer in the market making. And on the Execution Services side, provide really scaled, efficient, multi asset products and multiple products to great clients that understand the value proposition. And so we're going to have our ebbs, we're going to have our flows. Hopefully, we have more flowing than ebbing.

[Douglas Cifu, CEO at Virtu Financial]

And obviously, with this change in administration in Washington and regulatory tailwind, we're more confident. And obviously, part of that was this buyback program, which we started 4 years ago and we bought back about 19.4 percent of our company and obviously that helps grow EPS. Joe, you wanted to add something?

[Joe Molluso, Co-President and Chief Operating Officer at Virtu Financial]

No, I was just going to say,

[Joe Molluso, Co-President and Chief Operating Officer at Virtu Financial]

I think you touched on it, but Execution Services having a consistent year and having an outstanding Q4, I think the bar is has been raised there. I hesitate to say permanently, but I think the original thesis of us getting into Execution Services was that while volatile, it was going to be slightly less volatile than the Market Making segment. And I think that's here we are several years later. I think that's proving to be the case and hopefully will prove to be the case even more going forward.

[Patrick Moley, Vice President at Piper Sandler Companies]

Awesome. Thanks guys.

[Operator]

One moment for our next question. Our next question will be coming from Chris Allen of Citi. Your line is open, Chris.

[Christopher Allen, Managing Director at Citi]

Yes, morning, everyone. Nice quarter. Wanted to just dig in a little bit on the Q4, and maybe if you could help us think about the strong performance in the Market Making segment. What was driven by internalization versus the environment? I think you noted early on in the call a mixed opportunity set, but there was an improving environment over the course of the quarter.

[Christopher Allen, Managing Director at Citi]

So trying to delineate between the 2 and then as we start 2025, all the signals in terms of realized volatility, retail trading activity all seem to be pointing in a kind of positive direction. I wonder if you would agree with that assessment?

[Douglas Cifu, CEO at Virtu Financial]

Yes, I think look, it's a great question. I think when you think of Virtu, we've always said this like market volumes and then like what's the bid offer spread, those are always the best measurement of opportunity for the market maker. Some of that you can look in and I mentioned it in the script, Chris, in the 605 reports around quoted spread and certainly we've seen a positive trend there. So we had a very nice quarter in our retail business. We highlighted crypto, where we had a really just a terrific quarter in crypto.

[Douglas Cifu, CEO at Virtu Financial]

Our block ETF business did quite well and that's an area that really benefits from internalization. Think about your standard desk that's taking down large positions whether it's through the RFQ regime or it's a transition from a big RIA or pension plan, right. The ability to provide attractive pricing in a competitive in a highly competitive marketplace really hinges on being able to hedge your exposure effectively without broadcasting that to the greater world. And that's what internalization really is. So I'm very proud of a lot of people around the firm that have worked very, very hard in that area to enable us frankly to offer a much better product set and a wider product set both in the United States and in Europe.

[Douglas Cifu, CEO at Virtu Financial]

We're really functionally able to provide liquidity in equities, commodities and now fixed income. And then the last thing I'll highlight is, don't sleep on our Execution Services business. Really proud of what Steve Cavoli and the crew have done there. We bought a couple of Buicks, let's put it that way, and we changed the tires as they were driving down the highway. And whatever your car of choice is, BMW, Rolls Royce or Mercedes, we have one of those now.

[Douglas Cifu, CEO at Virtu Financial]

We have got a great scaled global business that's a heck of a lot more efficient and the proof is in the pudding. As I tell people, the only competitive advantage we have because we don't have research, we don't have prime, we don't have IPO calendar is performance. And it's very clear that our products perform at or better than industry standard and that's why we've been able to grow market share particularly in our algo suite, but also Triton and analytics. So if you add up all of those things Chris and that's kind of been the business plan It led to a nice quarter in 2024. And I try very hard not to talk about the current quarter because every time I do it has come back to bite me.

[Douglas Cifu, CEO at Virtu Financial]

But it's hard to argue with your thesis, right, that a lot of those trends are continuing in the 15 or so trading days we've seen in 2025.

[Christopher Allen, Managing Director at Citi]

Cool. And just a follow-up on crypto, you noted that you've made some investments in the middle of the year, 24, but you're still in early days in building out your 20 fourseven crypto framework. So maybe if you could give us some color, maybe any incremental color on the investments you made and what you need to do to kind of build that framework to be fully prepared for what could be a good environment for crypto moving forward?

[Douglas Cifu, CEO at Virtu Financial]

Yes. I mean, it's a great question. I mean, in some ways, it's a traditional Virtu style business, right? You got spot, you got ETF and you got futures, right? And that's kind of right now wheelhouse.

[Douglas Cifu, CEO at Virtu Financial]

Think of FX, think of commodities. But in many ways, it's different. You have non traditional venues, I'll be nice and say that. Some of them are regulatorily questionable, so you got to avoid those. The capital efficiencies are not there.

[Douglas Cifu, CEO at Virtu Financial]

You don't have centralized clearing. You don't have traditional prime brokerage, largely because of reputational issues and staff accounting to Bulletin 121 didn't help, right. So and then also in the ETF world, So we spent a lot of time and a lot of money investing in that. And in addition, for the first time, the marketplace demands 20 fourseven pricing, right? So typically, Saturdays Sundays up to whenever the CME would open at 6 pm Eastern, our machines and our staff was off and that's changed, right.

[Douglas Cifu, CEO at Virtu Financial]

So now we're a 24x7 provider and that's what the industry demands. Obviously, we're a big market maker on EDX, the best solution out there because we own a piece of it. We started with our friends at Citadel and Schwab and Fidelity and Sequoia and Pantera and it's a great venue for us, right, but they demand 20 fourseven execution. And so to build all that took a lot of time. What do we continue to work on?

[Douglas Cifu, CEO at Virtu Financial]

It's distribution. We firmly believe that these products, they've migrated to the wealth divisions of meaningful institutions and they're going to continue to go up the ladder, if you will, and there'll be institutional adoption on a significant scale of these products, we believe. So like our other distribution capabilities, whether it's block ETF or FX, we need

[Douglas Cifu, CEO at Virtu Financial]

to be able

[Douglas Cifu, CEO at Virtu Financial]

to provide attractive two sided pricing in size in a multitude of coins to institutions. And so you'll see a VF crypto just like we have VF fixed income, we've got VFX, etcetera. So it will be an institutional offering where we stream prices directly to end users. So again, classic Virtu, but with a lot of operational complexities managed and run by legacy long term Virtu institutional traders and operations people, but just a lot more of a lot more complexity and a lot more hassle frankly because of some of the regulatory uncertainties.

[Christopher Allen, Managing Director at Citi]

Great color. Thanks guys.

[Douglas Cifu, CEO at Virtu Financial]

Thank you.

[Operator]

And one moment for our next question. Our next question will be coming from Ken Worthington of JPMorgan. Ken, your line is open.

[Ken Worthington, Financial Analyst at JP Morgan]

Hi, good morning. Thanks for taking the questions. First, one of the takeaways from the election was that betting via listed contracts, sorry, is a viable market. And I know betting is a bit different than the financial markets that Virtu is currently in today. But do you see potential for Virtu to participate in listed betting markets?

[Ken Worthington, Financial Analyst at JP Morgan]

And how big or established would they need to be for Virtu to really be interested here?

[Douglas Cifu, CEO at Virtu Financial]

Yes. I have to be a little careful what I say because of our involvement with the NHL obviously. But putting the NHL aside, Ken, look, we look at every opportunity. We know that some of our competitors, great competitors are already involved in this. I think here's what I would say.

[Douglas Cifu, CEO at Virtu Financial]

Obviously, we look for credible venues and to your point there are. Then we look at like are there index products where there's enough volume that it makes sense in terms of our involvement. I mean, it's a little difficult to make a market and whether the Rangers are going to win or lose against the Carolina Hurricanes. They lost last night, for example, right? Like that's not something that a market maker get involved in.

[Douglas Cifu, CEO at Virtu Financial]

If you had broader indices, it definitely is something we would look at. We're always excited about new markets. If you had asked me 4 years ago about Bitcoin, I wouldn't have noted from a BLT, right? Like it's just not what we do. I don't know or focus on the underlying products.

[Douglas Cifu, CEO at Virtu Financial]

But if it is a widget that people like to trade in a viable market with significant volume where somebody needs 2 sided pricing, we'll be there. And so we like what people are doing in terms of coming up with like DCMs and having futures products and things like that. That's kind of right in our wheelhouse. So I think Ken, the market will evolve in that manner because to your point, it's something that has meaningful retail to put it mildly interest. I like very, very much that these entities, I forgot some of the names, it's like I don't even how to pronounce it, Kalshi and Nadex and some of these other venues are trying to launch DCM products and that's certainly something that's attractive to us.

[Ken Worthington, Financial Analyst at JP Morgan]

Perfect. Thank you. And then, clearly you had a great quarter. Historically, Virtu has generated sort of disproportional opportunity to profit around events. Can you help us gauge the magnitude of the election and how big the impact the days around the election were on the results you had this quarter?

[Douglas Cifu, CEO at Virtu Financial]

Yes, it's a great question. And I'll answer it this way. I mean, obviously, and I said it in the script, the October quoted spread was meaningfully smaller than quoted spread in the 605 reports in November and I think December is going to be released or has been released. And so it wasn't like on whatever Election Day was November, whatever, we had this crazy outside like 8, 9 figure day. But it's been a buildup since then, right?

[Douglas Cifu, CEO at Virtu Financial]

And it hasn't really dissipated. So question is how sustainable is that? I think it's pretty sustainable. I think there's a keen interest again in markets. I think I'm not going to quote the new President and say it's the golden age of this, that or the other thing, but I do think that there's more exuberance and confidence in the market.

[Douglas Cifu, CEO at Virtu Financial]

I think the having the Republicans control both houses of Congress means that maybe things are going to get done. And there's just a growing participation and enthusiasm in markets that we see here in the United States and in Asia and in frankly in Europe. I mean, Europe had a couple of $40,000,000,000 notional days again, which was something that I we hadn't seen in a while. And I do think that there's going to be more innovation, a lot new products. You can't swing a dead cat these days without hitting a new crypto product, a new crypto ETF.

[Douglas Cifu, CEO at Virtu Financial]

I frankly lost track of how many issuers are putting out new products around coins and leverage products and things like that. So all of that, if you that cornucopia of interest and new products is just a positive for a market making firm.

[Ken Worthington, Financial Analyst at JP Morgan]

Great. Thanks for your comments.

[Douglas Cifu, CEO at Virtu Financial]

Thank you.

[Operator]

And one moment for our next question. Our next question will be coming from Alex Blostein of Goldman Sachs. Your line is open, Alex.

[Alex Blostein, Managing Director at Goldman Sachs]

Hey, good morning. Hey, Doug, everybody. I was hoping to go back to the regulatory discussion for a second. So pretty clear the benefits that your business and many others would see from a different approach and a different framework when it comes to crypto and digital assets. But are there any other aspects of your business that you felt were particularly sort of suppressed by the regulatory regime over the last several years that could also see a bit more of a bounce back aside from crypto?

[Douglas Cifu, CEO at Virtu Financial]

Yes, it's a great question. I think the new SEC is really good for us in two ways. I think it's going to stop new rules that were disrupting competition and harming capital formation. So if you think of initial public offerings in this country. Again, I don't have the statistics, but I know folks at all of the big investment banks and when I talk to Adena and Lynn about like listings, they're all excited about companies coming public in 2025, less concern around enhanced disclosures around things like ESG and expenses around that and all that kind of stuff.

[Douglas Cifu, CEO at Virtu Financial]

So I think that clarity, actually by not proposing new rules and making it easier to be a public company, will mean that there'll be more listed companies, I hope, in the United States in 2025 and beyond. That's all new product for us. And obviously, the bigger the better and the more the merrier. I think secondly and I said this before, I think really just clarity. I mean what Gensler and his crew did to the crypto industry in the last 2 or 3 years, I'm going to say it was just patently un American.

[Douglas Cifu, CEO at Virtu Financial]

It really was. It was disgusting to watch how they were on this jihad of regulation by enforcement, intimidating small companies, going after large companies with no basis in fact or law. It was really an awful, awful thing to be involved with and to see. So having that clarity, I think is a good thing. And the last thing I'll say just to shit on the administrative state and yes, I used the word shit is not having Lina Khan at the FTC is a godsend.

[Douglas Cifu, CEO at Virtu Financial]

I mean in the realm of horrible administrative officials, she and Gensler tied for the gold medal. So I think there'll be a lot more clarity around M and A and not this again, I'll use the word jihad, I'll use that lightly around competition and combination and just people being more confident about investing in growth. And that's really what this country needs, not overbearing political enforcement.

[Alex Blostein, Managing Director at Goldman Sachs]

Loud and clear.

[Alex Blostein, Managing Director at Goldman Sachs]

Second question for you guys is around capital management priorities. If the firm, which what it feels like is setting up to be in a more robust kind of trading backdrop again, I don't want to extrapolate Q4, which obviously was very strong, but it feels like given everything we just talked about, you guys are on a stronger footing from a revenue perspective. You have a framework on kind of how that translates into buybacks. That's pretty straightforward. Any room within that to reduce debt as well?

[Alex Blostein, Managing Director at Goldman Sachs]

Or should we be thinking about the buybacks still being the main priority when it comes to capital return?

[Joe Molluso, Co-President and Chief Operating Officer at Virtu Financial]

Yes. I mean, Alex, it's Joe. I think you should still think about the buybacks as being the main source of capital return. I think our capital structure right now, we took advantage of some opportunities. There's always seems like there's always opportunities to get the debt stack cheaper, which we'll continue to do.

[Joe Molluso, Co-President and Chief Operating Officer at Virtu Financial]

But I think we're excited about the future and we're really happy with how the buyback program has worked. It's tailor made for a company like us within in terms of the volatility of our earnings and the volatility of our cash flows. So it's worked out extremely well. We look at it all the time, right? So we don't just set it and forget it.

[Joe Molluso, Co-President and Chief Operating Officer at Virtu Financial]

We look at it on a rolling basis. And then we also look at how much capital we need to run the firm and invest in the areas we've been talking about today. And so taking all those things into account, I'd say that the buyback is still the front priority in terms of capital management.

[Alex Blostein, Managing Director at Goldman Sachs]

Great. All right. Thank you, guys.

[Douglas Cifu, CEO at Virtu Financial]

Thank you.

[Operator]

And one moment for our next question. Our next question will be coming from Dan Fannon of Jefferies. Your line is open, Dan.

[Dan Fannon, Managing Director - Research Analyst at Jefferies & Company Inc]

Great. Thanks. Good morning. I wanted to follow-up on Execution Services, another good quarter, good year. I guess, and you've talked a bit about this, but is there is it just time in terms of since the ITG stuff that acquisition integration that this is now gaining momentum?

[Dan Fannon, Managing Director - Research Analyst at Jefferies & Company Inc]

Are there things that you're doing externally, sales force investment, like kind of more front footed in terms of that to think about the prospect of kind of continued solid growth in that business?

[Douglas Cifu, CEO at Virtu Financial]

Yes. Thank you. It's a great question. I would say a couple of things. One is, our mantra from day 1 of acquiring ITG and then the part of KCG that was institutional services was multi asset.

[Douglas Cifu, CEO at Virtu Financial]

Those firms, particularly ITG talked it, but in reality, they didn't really have the offerings. And so making our Triton EMS product truly multi asset, making our analytics offering truly multi asset, having algos and expertise that is truly multi asset is a huge advantage because what we are seeing, particularly in the global, the large global asset managers and pension funds is they want a single holistic multi asset class solution that works really well. It helps that Execution Services is tied to a firm that is a multi asset class market maker, so that they know these clients and users know that they're getting the same functionality and understanding of markets that the market maker has. So it's a really attractive scale to offer. That's the first thing I'll say.

[Douglas Cifu, CEO at Virtu Financial]

The second thing is, the products the equities products we had, our algo products, we made those truly global products for the first time. And if you're running a trading firm and you've got a trading office in Hong Kong, 1 in London and 1 in New York, let's say, you know that the algo product you're using obviously with regulatory and marketplace differences is essentially the same product. So that's very interesting. We also for the first time integrated all those products together. So analytics and EMS really are truly integrated into a single holistic solution.

[Douglas Cifu, CEO at Virtu Financial]

So the mantra around here has been be multi asset class, sell clients multiple products, right, because you get a better return, a better yield, in both broker neutral and our broker products. And then the last thing, and you nailed it, which is, it really was a culture shift, Changing the firms that we acquired, particularly ITG from a balkanized regional me, me, me culture to a single unitary firm was not the easiest thing to do as we were upgrading the technology. So I give Steve Cavoli a lot of credit. We've added some very talented senior hires in the last year, year and a half that have really buttressed the group there. There's a lot of great people that hung in there from ITG that as we say we're Virtuized and really get it.

[Douglas Cifu, CEO at Virtu Financial]

And so I'm really excited about the team that we have. We're going to continue to hire there more relationship managers, more people that are technologically savvy and can speak to clients about their needs very, very effectively. So I think it's just all of that, Dan, has really led to our ability to generate revenue. Last thing I should say is our Virtu Capital Markets Group, the at the money offering folks are a terrific group. They had a really nice quarter and continue to grow.

[Douglas Cifu, CEO at Virtu Financial]

That's like the little engine that could that delivers really good outsized results. Again, as I said in response to an earlier question, the only competitive advantage we have is execution quality and superior customer service. We don't have like your bank, we don't have Prime, we don't have Research, great guys like you, we don't have IPO calendar, we don't have any of that. We have a bunch of really talented people. We can offer scale, we can offer efficiency, we can offer demonstrable performance and we can give very, very attentive customer service and that's what we're all about.

[Dan Fannon, Managing Director - Research Analyst at Jefferies & Company Inc]

Great, thanks. And just as a follow-up, Joe, just as you look at 2025, 2024 actually was another good year of expenses and margin expansion. As you think about Ares investment and also expense growth, is there much difference in terms of the growth rates we've seen historically as we look to 2025?

[Joe Molluso, Co-President and Chief Operating Officer at Virtu Financial]

No. I would say the operating expenses, I think we've always guided some low single digit low to mid single digit growth. I think over time that's proven that out. It's a daily battle. I think in the chart we put in the supplement that looks at different levels of net trading income and different levels of EPS and buyback.

[Joe Molluso, Co-President and Chief Operating Officer at Virtu Financial]

I think we've incorporated some slightly higher comp expenses, nothing too dramatic, but just taking into account that we're going to that we continue to hire and then we continue to hire very high quality individuals. We modeled in slightly higher interest expense, just given we had some old swaps roll off. But there's continued opportunity to always reprice. So we're being a little conservative there. But no, nothing dramatic.

[Joe Molluso, Co-President and Chief Operating Officer at Virtu Financial]

I think on the capital side, as I mentioned, buybacks continue. And then the investments required, there will be some incremental capital investments needed in crypto, perhaps in Europe as we build out our European ETF block business to compete over there. So I think we've got a couple of priorities, but it's all captured in that slide, the guidance.

[Dan Fannon, Managing Director - Research Analyst at Jefferies & Company Inc]

Got it. Thank you.

[Operator]

One moment for our next question. And our next question will be coming from Craig Siegenthaler of Bank of America. Your line is open.

[Craig Siegenthaler, Managing Director at Bank of America]

Good morning, Doug. Hope everyone's doing well. We wanted to circle back on your market share comments to Chris' earlier question and we can definitely keep the discussion more long term. But how has market share been trending in cash equities relative to your larger established competitors and also several newer entrants that look to be taking share?

[Douglas Cifu, CEO at Virtu Financial]

Yes. Look, it's a great question. These obviously, the statistics are public in some lag time. I mean, again, I've said this for the last 10 years since we've been public. We look at market share, but we try to optimize P and L against market share.

[Douglas Cifu, CEO at Virtu Financial]

We very easily could ratchet up a couple of 100 basis points market share, particularly from some of the larger retail participants, but that would cost us money. And so, doesn't seem to be a great reason to do that. I mean, look, it's no secret that like Jane Street and Hudson River, 2 fantastic firms, great competitors have joined the fray of wholesaling. I think you'll see from the chart, we've maintained our relative share there, share within the group and they've taken it from other competitors and Citadel has given up a little bit. So there's going to be ebbs and flows there.

[Douglas Cifu, CEO at Virtu Financial]

Again, we had a terrific quarter in retail, so I'm very, very confident with what we're doing. The other thing I'll just note is that the volumes, particularly in the Q4 in U. S. Equities have been I'll use a strong word, a little distorted by some of the gigantic volumes you'll see in low price names. And so the sub dollar stocks.

[Douglas Cifu, CEO at Virtu Financial]

And I'm not suggesting that every company that trades under a dollar is a company that shouldn't be a public company, but indeed many of them are. I mean, there's been some obvious fraud from Chinese companies, companies that do 1, 2, 3, 5, 7 reverse splits. And we submitted a rule making request to effectively force New York and NASDAQ to delist a lot of those companies. In the meantime, those are pretty unattractive companies for us. Spreads are a lot narrower because they trade sub dollar.

[Douglas Cifu, CEO at Virtu Financial]

It's a huge burden because the volume is significant. We have to take the flow from our clients. And so that will distort market share to some regard. So frankly, if we could just ignore all of that direct and not have to take any of it and just allow it to go to an exchange, we would, but that's not the deal that we have with our retail parties. So again, I'm not suggesting market share is completely unimportant.

[Douglas Cifu, CEO at Virtu Financial]

I recognize that there's competition out there. We continue to do quite well, and continue to be the number 2 provider, as we have been since we acquired Knight in marketable orders, which is kind of where we focus our time and energy.

[Craig Siegenthaler, Managing Director at Bank of America]

Thanks, Doug. Just for my follow-up, I wanted to get a state of the union on the fixed income ramp. I think it's roughly 12 months now since you broke into MarketAxess' leaderboard for the first time, although you weren't a 1st mover in this business. So where are you in the build out and also ability to move up into larger trades?

[Douglas Cifu, CEO at Virtu Financial]

Yes, it's a great question. I'm very happy with the progress we've made, particularly in rates as much credit. I mean rates is an exciting opportunity for us. Fewer CUSIPs kind of feels more like a legacy Virtu business. A lot of it is electronic.

[Douglas Cifu, CEO at Virtu Financial]

It continues to be a significant opportunity for us. We're now profitable in both of those businesses after fees and expenses, which is a huge thing. I mean, it's not a cheap business to be in. We've ramped up hiring. We've got significant distribution.

[Douglas Cifu, CEO at Virtu Financial]

You do make the right point though, which is to we have an opportunity to kind of move upstream and take more risk and take on bigger positions, which we're doing slowly. I mean, we're an aggressive firm, but we're an incrementalizing firm in the same way. It's kind of how we built the firm. So I'm not going to go crazy and ramp up beyond our capabilities. Don't forget also that those businesses tie into our ETF capabilities and leverage ETF capabilities, which are significant.

[Douglas Cifu, CEO at Virtu Financial]

So I would highlight a lot of the progress that we made in Europe in fixed income. A lot of that's driven by our ETF business over there. But I'm very, very happy with the progress we have made. It's been overshadowed in a very, very great way by crypto and ETF block in terms of our growth initiatives. But I wouldn't sleep on it.

[Douglas Cifu, CEO at Virtu Financial]

It's something that we continue to be excited about and I see a lot of runway for it. And there's been a lot of interest in private credit and the growth of this and you look at these gigantic asset managers that effectively have turned into global credit houses, we're excited about partnering with those folks going forward. Thank you. Yes. Thank you.

[Operator]

And one moment for our next question. Our next question will be coming from Michael Cyprys of Morgan Stanley. Your line is open.

[Michael Cyprys, Analyst at Morgan Stanley]

Hey, good morning. Thanks for taking the question. I just wanted to ask about single name options. Just hoping you can maybe update us on the build out there. How many symbols you guys are active in making markets today across single names?

[Michael Cyprys, Analyst at Morgan Stanley]

And how do you think about that expanding as you look out over the next year or 2?

[Douglas Cifu, CEO at Virtu Financial]

Yes, it's a great question. I don't know exactly how many names we're in. I'm looking at Andrew. I mean it's in the dozens. And again, some of it's opportunistic like when NVIDIA is going crazy, obviously you're going to focus on that.

[Douglas Cifu, CEO at Virtu Financial]

It's a little bit of a challenge, right, because every time you add more single names, you need more cores and more gear because there's a lot of throughput and a lot of names. So we continue to grow that again. In the same way, I answered the last question that Craig made around credit and rates, which is we're in the business, we've invested, we need to make meaningful additional investments in hires in terms of technology. We're in the process of doing that. We make money from single names.

[Douglas Cifu, CEO at Virtu Financial]

Are we at the end state? Not even close. We've made a lot of progress in India this year I'm sorry, in 2024 and we continue to

[Douglas Cifu, CEO at Virtu Financial]

do that in

[Douglas Cifu, CEO at Virtu Financial]

2025. So I'm happy where we are today. Could we have gone faster and done more? I don't know. And we're balancing all these different and juggling all these different priorities we have.

[Douglas Cifu, CEO at Virtu Financial]

So again, we're the little engine that could and we continue to perform well.

[Michael Cyprys, Analyst at Morgan Stanley]

Great. And then just a follow-up question on private credit. Just curious how you're thinking about the opportunity set across potentially market making in that asset class over time as the end market continues to grow money managers looking to bring some liquidity into the private market space to help expand and broaden investor access to the asset class. Just curious how you're thinking about that? What steps are you taking may or may not take?

[Michael Cyprys, Analyst at Morgan Stanley]

How are you sort of assessing some of the hurdles? How might that be overcome? Just curious your thoughts there.

[Douglas Cifu, CEO at Virtu Financial]

Yes. Look, I mean, it's obviously gotten a lot of press and a lot of people are interested and we're talking with the big issuers and the BlackRocks, the State Street, we'll talk to anybody about it. I mean, look, it's a growing exciting area where you have non traditional lenders, the KKRs, the Apollos, the Blackstones, all these firms that have massive private credit businesses, Ares, etcetera, all these firms that we know reasonably well. At some point, that all of those assets need to be velocitized or tradable. I saw that they're going to start getting CUSIPs.

[Douglas Cifu, CEO at Virtu Financial]

Obviously, there's operational issues when you have private credit and how they can be transferred and things like that. So again, you'll probably see more indexy kind of products first as opposed to kind of single names, which again is right in our wheelhouse. So I think that probably develops first. No surprise we're working with the big issuers who are working with the aforementioned large private credit houses. So is it something that we're going to see in the first, second, Q3 of this year?

[Douglas Cifu, CEO at Virtu Financial]

Probably not, but there's a lot of really smart people that are looking at that asset class. I don't know how many 1,000,000,000,000 of dollars it is, but I know it's meaningful and they're looking at ways to how can they velocitize that and we're going to be in that discussion. So again, growth area for us, can't put a pin on exactly when that's going to happen. Great. Thank you.

[Douglas Cifu, CEO at Virtu Financial]

Thank you.

[Operator]

And I'm showing no further questions. I would now like to turn the call back to management for closing remarks.

[Douglas Cifu, CEO at Virtu Financial]

Thank you everybody for joining today. We apologize for the delayed start and we look forward to speaking with you in April. Thank you.

[Operator]

And this concludes today's conference call.

[Operator]

Thank you for participating. You may now disconnect.

Participants

Executives

• Andrew Smith, Senior Vice President of Global Business Development & Corporate Strategy
• Douglas Cifu, CEO
• Cindy Lee, Chief Financial Officer
• Joe Molluso, Co-President and Chief Operating Officer

Analysts

• Patrick Moley, Vice President at Piper Sandler Companies
• Christopher Allen, Managing Director at Citi
• Ken Worthington, Financial Analyst at JP Morgan
• Alex Blostein, Managing Director at Goldman Sachs
• Dan Fannon, Managing Director - Research Analyst at Jefferies & Company Inc
• Craig Siegenthaler, Managing Director at Bank of America
• Michael Cyprys, Analyst at Morgan Stanley