Financial Data and Key Metrics Changes - For Q3 2023, the company generated $4.7 million of adjusted net trading income per day, a 5% increase from the prior quarter, and a normalized adjusted EPS of $0.45 per share, up 22% from the prior quarter [7] - Adjusted net trading income totaled $298 million for Q3 2023, with Market Making adjusted net trading income at $208 million and Execution Services adjusted net trading income at $90 million [19] Business Line Data and Key Metrics Changes - The Market Making segment earned an average of $3.3 million per day of adjusted net trading income, rising 6% compared to the prior quarter, while Execution Services delivered $1.4 million per day, an increase of 4% [8] - Organic growth initiatives contributed $488,000 per day, accounting for 10% of adjusted net trading income in the quarter [9] Market Data and Key Metrics Changes - The overall market environment was characterized by reduced opportunity, but the company's market share in the wholesale Market Making business remained solidly within historic ranges [8][9] - Institutional activity remained slow due to a higher rate environment, impacting overall market opportunities [10] Company Strategy and Development Direction - The company remains focused on growth initiatives, including expansion into Options Market Making and enhancing spread capture rates [8][11] - The Options business has performed well despite a declining opportunity set, with continued expansion across venues and geographies [12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about growth opportunities across all initiatives, despite challenges in the current market environment [11][12] - The company is well-positioned to capitalize on volatile markets and increasing global tensions [11] Other Important Information - The company is facing civil litigation from the SEC regarding historical internal information barriers, but management rejects the allegations and has not observed any impact on client engagement [13][14] - The company maintained a $0.96 annual dividend and repurchased 2.7 million shares for approximately $49 million in Q3 [17][18] Q&A Session Summary Question: Product expansion in ETF Block, Options Market Making, and crypto - Management discussed the significant interest in crypto ETFs and the potential for increased trading volumes as regulatory clarity improves [23][24] - The company has focused on expanding its ETF Block business in Europe and has made progress in pricing and distribution [26] Question: Update on rate side build-out and options environment - Management noted that index volumes were strong, but realized volatility declined, impacting opportunities [31] - The company is building connectivity and distribution for treasury products, supporting the SEC's proposal for centralized clearing [33] Question: Thoughts on expenses and future guidance - Management expects non-comp expenses to grow at a low-single digit rate, with compensation ratios remaining stable [36] Question: Leverage ratio and share repurchase ability - Management is comfortable with the current leverage ratio and plans to continue share repurchases as excess cash allows [38] Question: Evolution of index options marketplace - Management highlighted the growing use of index options as a flexible tool for managing volatility and expressed excitement about the product's development [42]

Presenter Name Event name xx Month 201x © 201X Virtu Financial. All rights reserved. Not to be reproduced or retransmitted without permission. Compliance #XXXX-XXXX © 2023 Virtu Financial. All rights reserved. VIRTU FINANCIAL Presentation Title in Title Case Presentation subtitle in sentence case Third Quarter 2023 Earnings Supplement Performance Highlights | --- | --- | --- | --- | --- | |------------------------|-------|-------------------------------|-------|--------------------------------| | Adj. NTI 1 ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Virtu Financial, Inc. (Exact name of registrant as specified in its charter) Delaware 32-0420206 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 1633 Broadway New York, New York (Address of principal executive offices) (Zip Code) FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 o ...

Financial Performance - Adjusted Net Trading Income (NTI) was $279 million in 2Q 2023[5] - Adjusted NTI per day was $4.5 million in 2Q 2023[5] - Normalized Adjusted EPS was $0.37 in 2Q 2023[5] - Adjusted EBITDA was $122 million with a margin of 44% in 2Q 2023[5] - Growth initiatives generated $397 thousand per day of Adjusted NTI, representing 9% of firmwide Adjusted NTI in 2Q 2023[6] Capital Management - The company repurchased 2.3 million shares for $42 million in 2Q 2023[6] - Cumulative repurchases reached 38.5 million shares for over $1 billion, representing 15% of shares outstanding, net of issuances[6] - Quarterly dividend of $0.24 per share was maintained[17] Market Metrics - US Equity Consolidated Volume averaged 11,270 million shares daily YTD 2023[12] - US Equity Consolidated Notional Volume averaged $510 billion daily YTD 2023[12] - S&P 500 Average Implied Volatility (VIX) averaged 18.6 YTD 2023[12] Operating Expenses and Debt - Adjusted Cash Operating Expenses were $157 million in 2Q 2023[23] - Total Adjusted Operating Expenses were $173 million in 2Q 2023[23] - Long-Term Debt was $1,806 million with a Debt to LTM Adjusted EBITDA ratio of 2.8x[24]

Financial Data and Key Metrics Changes - In Q2 2023, the company generated $4.5 million of adjusted trading net income per day, with a normalized adjusted EPS of $0.37 [9][30] - Adjusted EBITDA was $122 million for Q2 2023, resulting in an adjusted EBITDA margin of 44% [31][20] - Cash operating expenses for the first half of the year were $322 million, approximately 3% higher than the previous year [23] Business Line Data and Key Metrics Changes - The Market Making segment earned an average of $3.1 million per day of adjusted net trading income, while Execution Services delivered $1.4 million per day [9][30] - Customer Market Making experienced decreased opportunities due to a decline in overall bid-offer spreads and retail participation levels [10] - The non-customer Market Making business performed well despite a muted volumes and volatility environment [11] Market Data and Key Metrics Changes - Pan-European volumes were down 16% in Q2, with institutionally sized large volumes down over 20% [14] - Market-wide customer index options volumes in the US were down 11% in Q2, impacting results [21] Company Strategy and Development Direction - The company is focusing on organic growth initiatives, including expansion into options Market Making and enhancing capabilities in fixed income [12][21] - There is a commitment to investing in talent and technology to improve efficiency and client engagement [17][20] - The company aims to maintain a disciplined expense management approach while pursuing growth opportunities [31] Management's Comments on Operating Environment and Future Outlook - The management noted a slow start in April but observed improving performance in the latter part of Q2 and into July [16][36] - The company remains optimistic about opportunities in US equities and fixed income markets, despite challenges in Europe [38][40] - Management emphasized the importance of adapting to market conditions and continuing to seek new opportunities [17] Other Important Information - The company maintained a $0.96 annual dividend and repurchased 2.3 million shares for approximately $42 million in Q2 [27][28] - Since the inception of the share repurchase program, the company has repurchased a total of 38.5 million shares for over $1 billion [29] Q&A Session Summary Question: Can you expand on the improvement seen in July and the asset classes involved? - Management noted that April was particularly slow due to macro issues, but performance improved through Q2, especially in US equities [36][39] Question: What is the company's presence in the corporate fixed income market? - Management confirmed ongoing efforts in market-making for credit and rates, highlighting improved win rates and credibility [40][42] Question: Update on single stock option Market Making rollout? - Management stated that while single stock options remain a goal, the focus has shifted to index options due to larger market opportunities [46][48] Question: Outlook on rates business and market structure improvements? - Management expressed optimism about centralized clearing and real-time reporting enhancing competition in the rates market [51][52] Question: Commentary on index options volumes and customer types? - Management indicated that the daily exploration product is driving volumes, with a significant portion of flow coming from smaller trading firms and options aggregators [62][66] Question: Internalization opportunities comparison between Q1 and Q2? - Management reported that internalization rates were in line with expectations, emphasizing the competitive advantage in this area [71][75] Question: Balance sheet strategy and capital return framework? - Management confirmed no changes in capital needs and expressed comfort with current debt levels, allowing for share buybacks and dividend maintenance [78][80]

[PART I - FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents Virtu Financial, Inc.'s unaudited condensed consolidated financial statements as of March 31, 2023, and for the three months then ended, including detailed notes on accounting policies and financial specifics [Condensed Consolidated Statements of Financial Condition (Unaudited)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Financial%20Condition%20(Unaudited)) As of March 31, 2023, total assets increased to **$11.86 billion** from **$10.58 billion**, while total liabilities rose to **$10.23 billion** from **$8.93 billion**, and total equity slightly decreased to **$1.64 billion** Condensed Consolidated Statements of Financial Condition (in millions) | | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Total assets** | **$11,861.3** | **$10,583.2** | | Cash and cash equivalents | $769.0 | $981.6 | | Trading assets, at fair value | $5,438.3 | $4,630.6 | | **Total liabilities** | **$10,225.9** | **$8,931.8** | | Trading liabilities, at fair value | $5,114.8 | $4,197.0 | | Long-term borrowings | $1,779.1 | $1,796.0 | | **Total equity** | **$1,635.4** | **$1,651.4** | [Condensed Consolidated Statements of Comprehensive Income (Unaudited)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Unaudited)) For Q1 2023, total revenue decreased to **$620.4 million** from **$701.3 million**, with net income falling to **$110.1 million** from **$199.9 million**, and diluted EPS dropping to **$0.56** from **$0.98** Condensed Consolidated Statements of Comprehensive Income (in millions, except per share data) | | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | **Total revenue** | **$620.4** | **$701.3** | | Trading income, net | $412.5 | $522.3 | | Commissions, net and technology services | $121.4 | $154.7 | | **Total operating expenses** | **$485.6** | **$459.6** | | **Net income** | **$110.1** | **$199.9** | | Net income available for common stockholders | $57.9 | $112.3 | | **Diluted EPS** | **$0.56** | **$0.98** | [Condensed Consolidated Statements of Changes in Equity (Unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Equity%20(Unaudited)) Total equity decreased from **$1.65 billion** to **$1.64 billion** in Q1 2023, primarily due to **$93.2 million** in treasury stock purchases and **$52.0 million** in dividends, partially offset by **$110.1 million** in net income - Key changes in equity for Q1 2023 include net income of **$110.1 million**, offset by treasury stock purchases of **$93.2 million** and dividends/distributions of **$52.0 million**[18](index=18&type=chunk) [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) Net cash used in operating activities improved to **$148.4 million** in Q1 2023 from **$255.2 million** in the prior year, with overall cash and cash equivalents decreasing by **$229.1 million** Condensed Consolidated Statements of Cash Flows (in millions) | | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(148.4) | $(255.2) | | Net cash used in investing activities | $(35.8) | $(35.0) | | Net cash used in financing activities | $(46.5) | $(212.9) | | **Net decrease in cash and cash equivalents** | **$(229.1)** | **$(508.3)** | [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) These notes detail accounting policies and financial data, covering business segments, goodwill, intangible assets, borrowings, fair value measurements, revenue recognition, income taxes, legal proceedings, and capital structure - The company operates through two main segments: Market Making and Execution Services, significantly shaped by the **KCG acquisition in 2017** and **ITG acquisition in 2019**[27](index=27&type=chunk)[29](index=29&type=chunk) - As of March 31, 2023, Goodwill was **$1.15 billion**, and net intangible assets were **$305.5 million**, primarily customer relationships[45](index=45&type=chunk)[46](index=46&type=chunk) - The company is cooperating with an SEC investigation regarding information access barriers from January 2018 to April 2019 and has engaged in settlement discussions[132](index=132&type=chunk) - The share repurchase program, authorized up to **$1.22 billion**, had approximately **$244.8 million** remaining capacity as of March 31, 2023[153](index=153&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=43&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2023 financial results, attributing revenue and net income decreases to lower market volumes and volatility, covering segment performance, non-GAAP measures, liquidity, and capital resources - Total revenues for Q1 2023 decreased by **11.5%** year-over-year to **$620.4 million**, primarily due to lower market volumes and volatility[248](index=248&type=chunk) - Adjusted Net Trading Income decreased **26.1%** to **$373.1 million** in Q1 2023 from **$505.1 million** in Q1 2022[256](index=256&type=chunk) - Operating expenses increased by **5.7%** to **$485.6 million**, largely driven by a **129.4%** increase in Interest and dividends expense due to higher interest rates[257](index=257&type=chunk)[261](index=261&type=chunk) - The company repurchased **4.86 million shares** for approximately **$93.6 million** in Q1 2023 under its share repurchase program[363](index=363&type=chunk) [Results of Operations](index=48&type=section&id=Results%20of%20Operations) Q1 2023 total revenues fell **11.5%** to **$620.4 million**, and net income dropped **44.9%** to **$110.1 million**, driven by declines in Trading income and Commissions, offset by a **291.4%** surge in Interest and dividends income Revenue and Pre-Tax Income by Segment (in millions) | Segment | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | :--- | | **Market Making** | Total revenue | $498.9 | $546.6 | | | Pre-tax income | $124.1 | $224.2 | | **Execution Services** | Total revenue | $118.5 | $151.7 | | | Pre-tax income | $9.0 | $15.1 | Key Revenue and Expense Changes (YoY Q1 2023 vs Q1 2022) | Item | Q1 2023 ($M) | Q1 2022 ($M) | % Change | | :--- | :--- | :--- | :--- | | Trading income, net | $412.5 | $522.3 | (21.0)% | | Commissions, net & tech services | $121.4 | $154.7 | (21.5)% | | Interest and dividends income | $82.2 | $21.0 | 291.4% | | Interest and dividends expense | $97.6 | $42.5 | 129.4% | [Non-GAAP Financial Measures](index=53&type=section&id=Non-GAAP%20Financial%20Measures) The company uses non-GAAP measures, with Q1 2023 Adjusted Net Trading Income at **$373.1 million** (down from **$505.1 million**), Adjusted EBITDA at **$207.5 million** (down from **$343.8 million**), and Normalized Adjusted EPS at **$0.74** (down from **$1.27**) Reconciliation of Net Income to Adjusted EBITDA (in millions) | | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | **Adjusted Net Trading Income** | **$373.1** | **$505.1** | | Net income | $110.1 | $199.9 | | EBITDA | $192.6 | $322.7 | | **Adjusted EBITDA** | **$207.5** | **$343.8** | | Adjusted EBITDA Margin | 55.6% | 68.1% | Normalized Adjusted EPS (in millions, except per share data) | | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Normalized Adjusted Net Income ($ thousands) | $127.6 | $231.8 | | **Normalized Adjusted EPS** | **$0.74** | **$1.27** | [Liquidity and Capital Resources](index=59&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2023, the company held **$769.0 million** in cash and **$1.81 billion** in long-term debt, with liquidity needs including margin, operating expenses, debt service, dividends, and share repurchases - As of March 31, 2023, the company held **$769.0 million** in cash and cash equivalents and had long-term debt of approximately **$1.81 billion**[270](index=270&type=chunk) - The company has various credit facilities, including broker-dealer facilities with **$125.0 million** outstanding and prime brokerage facilities with **$285.1 million** outstanding as of March 31, 2023[283](index=283&type=chunk) - The share repurchase program was expanded to **$1.22 billion**, with **$975.2 million** used and **$244.8 million** remaining capacity as of March 31, 2023, authorized through November 3, 2023[302](index=302&type=chunk)[304](index=304&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=69&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages market, interest rate, and foreign currency risks through strategies like minimizing net positions, using interest rate swaps, and monitoring international revenue exposure, with **15.8%** of Q1 2023 revenues in non-U.S. dollar currencies - Market making activities minimize capital at risk by limiting notional positions and hedging with correlated instruments[337](index=337&type=chunk) - The company uses floating-to-fixed interest rate swap agreements to manage interest rate risk on its long-term debt[345](index=345&type=chunk) - Approximately **15.8%** of total revenues for Q1 2023 were non-U.S. dollar denominated, where a hypothetical **10%** adverse USD change would decrease revenues by **$9.8 million**[349](index=349&type=chunk) [Controls and Procedures](index=71&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that as of March 31, 2023, the company's disclosure controls and procedures were effective[354](index=354&type=chunk) - No material changes occurred in internal control over financial reporting during Q1 2023[357](index=357&type=chunk) [PART II - OTHER INFORMATION](index=72&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Legal Proceedings](index=72&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal and regulatory matters, including an ongoing SEC investigation into information access barriers and several lawsuits related to trading and market manipulation - The company is responding to an SEC investigation regarding information barriers from January 2018 to April 2019 and has engaged in settlement discussions[132](index=132&type=chunk) - The company is a defendant in several lawsuits, including claims related to trading in a crude oil ETF, a stockholder demand for books and records, and alleged market manipulation, all believed to be without merit[134](index=134&type=chunk)[135](index=135&type=chunk)[138](index=138&type=chunk) [Risk Factors](index=72&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors previously disclosed in the company's 2022 Annual Report on Form 10-K were reported - No material changes to the Risk Factors described in the 2022 Form 10-K were reported[361](index=361&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=72&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details Q1 2023 share repurchase activity, where the company repurchased **4.86 million shares** for approximately **$93.6 million**, with **$244.8 million** remaining capacity as of March 31, 2023 Share Repurchases for Q1 2023 (in millions) | Period | Total Shares Purchased | Average Price Paid per Share | Value of Shares Purchased Under Program ($M) | | :--- | :--- | :--- | :--- | | Jan 2023 | 1,126,656 | $20.11 | $22.7 | | Feb 2023 | 2,448,127 | $19.60 | $48.0 | | Mar 2023 | 1,282,161 | $17.94 | $23.0 | | **Total Q1 2023** | **4,856,944** | **$19.28** | **$93.7** | - As of March 31, 2023, the company had approximately **$244.8 million** remaining capacity for future purchases under its share repurchase program, authorized through November 3, 2023[365](index=365&type=chunk) [Defaults Upon Senior Securities](index=73&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - The company reported no defaults upon senior securities[366](index=366&type=chunk) [Mine Safety Disclosures](index=73&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company reported no mine safety disclosures - The company reported no mine safety disclosures[367](index=367&type=chunk) [Other Information](index=73&type=section&id=Item%205.%20Other%20Information) The company reported no other information required under this item - The company reported no other information required under this item[368](index=368&type=chunk) [Exhibits](index=74&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including management incentive plan award agreements, CEO and CFO certifications, and XBRL interactive data files - Exhibits filed include various employee restricted stock unit award agreements and certifications from the CEO and CFO[370](index=370&type=chunk)

Financial Data and Key Metrics Changes - For Q1 2023, the company reported adjusted EPS of $0.74 and adjusted net trading income of $6 million per day, representing a 38% increase from the prior quarter [25][26] - Adjusted EBITDA was $207 million, a 65% increase from Q4 2022, with an adjusted EBITDA margin of 56%, up from 46% in the previous quarter [26][27] - Adjusted operating expenses were $181 million, essentially flat year-over-year, demonstrating effective cost management [27] Business Line Data and Key Metrics Changes - Market Making adjusted net trading income was $278 million, or $4.5 million per day, a 53% increase from the prior quarter [26] - Execution Services adjusted net trading income was $95 million, or $1.5 million per day, which is an 8% increase from the prior quarter [26] - Growth initiatives contributed 11% of adjusted net trading income, generating over $650,000 per day, a 13% increase compared to the prior quarter [16][20] Market Data and Key Metrics Changes - Realized volatility decreased by 32%, while U.S. equity lines increased by 5% [8] - FX volumes were up 7% and FX volatility increased by 16% [60] - Energy volumes in commodities were up 18%, although volatility decreased by 10% [61] Company Strategy and Development Direction - The company is focused on expense discipline and has seen success in its growth initiatives, particularly in options market making and ETF Block initiatives [10][18] - The company is pursuing several initiatives in fixed income and data analytics to enhance its offerings and client retention [12][52] - The management emphasized the importance of internalization to enhance efficiency and reduce costs across various trading desks [34][46] Management's Comments on Operating Environment and Future Outlook - Management noted that the current regulatory environment poses challenges, particularly regarding proposed changes by the SEC, which they believe could harm investors [21][22] - The company is well-positioned to capitalize on market opportunities despite mixed market conditions, with a focus on long-term growth [64][81] - Management expressed confidence in the company's ability to provide liquidity and navigate macroeconomic uncertainties [81] Other Important Information - The company has repurchased 4.6 million shares in 2023, continuing its share buyback program, which has repurchased 14% of fully diluted shares since its inception [23][29] - The company maintains a $0.96 annual dividend, demonstrating its commitment to returning capital to shareholders [24][29] Q&A Session Summary Question: Insights on normalized earnings potential - Management highlighted the broad business model and ability to capitalize on opportunities, emphasizing the importance of internalization and efficiency [32][34] Question: Summary of regulatory proposals and next steps - Management discussed the overwhelming opposition to SEC proposals and the need for a thoughtful review process [39][42] Question: Opportunities for internalization and net trading growth - Management noted the highest adjusted net trading day from internalization since the KCG merger, indicating ongoing growth potential [46] Question: Impact of recent banking crisis on earnings - The banking crisis had a more significant impact on Execution Services due to increased institutional activity, rather than on Market Making [55][57] Question: Growth in zero-day options and market making - Management confirmed active participation in zero-day options, viewing it as a positive driver for the options business [58] Question: Performance in FX, commodities, and European equities - Management noted improvements in FX and commodities, attributing growth to internal changes and market conditions [60][61] Question: Future growth initiatives and benchmarks - Management set a medium-term goal of achieving $1 million in daily contribution from growth initiatives [71][72]

Presenter Name Event name xx Month 201x © 201X Virtu Financial. All rights reserved. Not to be reproduced or retransmitted without permission. Compliance #XXXX-XXXX © 2022 Virtu Financial. All rights reserved. Presentation Title in Title Case Presentation subtitle in sentence case First Quarter 2023 Earnings Supplement Performance Highlights Commentary & Highlights | --- | --- | --- | --- | --- | |-------------------------------------------|-------|-------------------------------|-------|------------------- ...

PART I [Business](index=6&type=section&id=ITEM%201.%20BUSINESS) Virtu Financial is a technology-driven financial firm providing liquidity and trading solutions across global markets through its Market Making and Execution Services segments - The company operates through two primary segments: Market Making and Execution Services, supplemented by a non-operating Corporate segment - Virtu's business model leverages a proprietary, multi-asset technology platform to provide liquidity and trading solutions across over **50 countries** and multiple asset classes, including equities, ETFs, options, foreign exchange, futures, fixed income, and cryptocurrencies - The Market Making segment generates revenue by earning small bid/ask spreads on large volumes of securities, with performance heavily influenced by market volumes and volatility - The Execution Services segment earns commissions by providing agency-based trading, workflow technology (like Triton EMS and RFQ-hub), and analytics tools to institutional clients - The company is heavily regulated by numerous domestic and international bodies, including the SEC, FINRA, CBI, and FCA. It faces risks from potential market structure reforms, particularly recent SEC proposals that could impact off-exchange trading and payment for order flow [Market Making](index=7&type=section&id=Market%20Making) The Market Making segment is Virtu's core business, providing liquidity across global asset classes by profiting from bid-ask spreads on high-volume trades - The segment provides liquidity in cash, futures, and options markets across global equities, fixed income, currencies, cryptocurrencies, and commodities[22](index=22&type=chunk) - Revenue is generated by buying and selling large volumes of financial instruments and earning small bid/ask spreads, with profitability influenced by market volumes, volatility, and retail participation[25](index=25&type=chunk)[26](index=26&type=chunk) - The company makes markets in over **25,000 securities** on numerous exchanges and venues worldwide, including NYSE, Nasdaq, Cboe, and international exchanges[35](index=35&type=chunk) - Asset classes covered include U.S. Treasuries, corporate bonds, over **80 currencies** (including digital), energy products, precious metals, and options on all U.S. options exchanges[38](index=38&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk) [Execution Services](index=9&type=section&id=Execution%20Services) The Execution Services segment offers agency execution, workflow technology, and analytics to institutional clients, earning commissions on transactions - This segment offers agency-based execution, workflow technology, and trading analytics to institutional clients, earning commissions on transactions[42](index=42&type=chunk)[44](index=44&type=chunk) - Key products include algorithmic trading, order routing, and access to non-displayed liquidity through ATSs like Virtu MatchIt and POSIT[45](index=45&type=chunk)[46](index=46&type=chunk) - Workflow technology offerings include the Triton EMS, a multi-asset and broker-neutral platform, and RFQ-hub for negotiated trades in various instruments[47](index=47&type=chunk)[49](index=49&type=chunk) - The Analytics suite provides tools for transaction cost analysis (TCA) to help clients manage trading costs and improve execution performance across multiple asset classes[52](index=52&type=chunk) [Human Capital and Corporate History](index=13&type=section&id=Human%20Capital%20and%20Corporate%20History) Virtu had 993 employees as of February 2023, emphasizing DE&I, with key milestones including its 2015 IPO and acquisitions of KCG and ITG - As of February 3, 2023, the company had approximately **993 full-time employees**, with **71% in the Americas**, **19% in EMEA**, and **10% in APAC**[65](index=65&type=chunk) - The company has a Diversity, Equity, and Inclusion (DE&I) Committee and hosts an annual Women's Winternship program to promote diversity in financial services[67](index=67&type=chunk) - Key corporate milestones include the April 2015 IPO, the acquisition of KCG Holdings in July 2017, and the acquisition of Investment Technology Group (ITG) in March 2019[85](index=85&type=chunk)[88](index=88&type=chunk)[89](index=89&type=chunk) [Risk Factors](index=18&type=section&id=ITEM%201A.%20RISK%20FACTORS) The company faces significant risks from market volatility, intense competition, regulatory changes, its holding company structure, and substantial indebtedness [Risks Related to Our Business and Operations](index=20&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Operations) Virtu's revenues are highly dependent on market volume and volatility, facing risks from competition, platform failures, and substantial indebtedness of **$1.83 billion** - Revenues and profitability are highly dependent on trading volume, volatility, and retail participation, which are subject to factors beyond the company's control and prone to significant fluctuations[100](index=100&type=chunk) - The company faces substantial competition from other market makers and trading firms, some of which have greater financial resources, potentially compressing bid/ask spreads and reducing profitability[109](index=109&type=chunk)[111](index=111&type=chunk) - As of December 31, 2022, the company had **$1.827 billion** in outstanding long-term borrowings, which imposes significant operating and financial restrictions and exposes it to interest rate risk[120](index=120&type=chunk)[127](index=127&type=chunk) - The business relies heavily on its proprietary technology and computer systems, making it vulnerable to system disruptions, software failures, and significant cyber-attacks that could result in material financial and reputational harm[129](index=129&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk) [Legal and Regulatory Risks](index=30&type=section&id=Legal%20and%20Regulatory%20Risks) The company faces significant legal and regulatory risks from ongoing scrutiny, potential SEC market structure reforms, and non-compliance penalties - The business is subject to extensive regulatory scrutiny, with ongoing attention on practices like payment for order flow, wholesale market making, and off-exchange trading[162](index=162&type=chunk)[163](index=163&type=chunk) - Recent SEC proposals focused on equity market structure reform, including Proposed Rule 615 (order competition rule), Regulation Best Execution, and changes to tick sizes and access fees, could dramatically alter the market and adversely affect the company's operations and profitability[168](index=168&type=chunk) - Failure to comply with regulations from numerous authorities (SEC, FINRA, CFTC, ESMA, CBI, FCA, etc.) could result in fines, penalties, suspension, or revocation of licenses[170](index=170&type=chunk)[171](index=171&type=chunk) - Proposed financial transaction taxes in the European Union, the U.S., and other jurisdictions could materially increase the cost of doing business and reduce trading volumes[177](index=177&type=chunk)[179](index=179&type=chunk)[180](index=180&type=chunk) [Risks Related to Our Organization and Structure](index=35&type=section&id=Risks%20Related%20to%20Our%20Organization%20and%20Structure) Virtu Financial, Inc. is a holding company dependent on subsidiary distributions, controlled by the Founder Post-IPO Member, and obligated to substantial tax receivable agreement payments - As a holding company, Virtu Financial, Inc. is dependent on distributions from its subsidiary, Virtu Financial LLC, to pay dividends, taxes, and other expenses. As of December 31, 2022, it held a **59.7% interest** in the subsidiary[186](index=186&type=chunk) - The Founder Post-IPO Member controls approximately **85.2%** of the combined voting power, allowing substantial control over corporate actions, which may create interests that differ from those of other stockholders[189](index=189&type=chunk)[190](index=190&type=chunk) - The company is required to pay pre-IPO members **85%** of the cash tax savings it realizes from certain tax benefits. These payments under the tax receivable agreements could be substantial and negatively impact liquidity[198](index=198&type=chunk)[200](index=200&type=chunk) - Future payments under the tax receivable agreements are estimated to range from approximately **$36.4 thousand** to **$22.0 million** per year over the next **15 years**, excluding payments related to subsequent exchanges[202](index=202&type=chunk) [Properties](index=43&type=section&id=ITEM%202.%20PROPERTIES) Virtu's headquarters are in leased office space in New York, with additional leased facilities globally, deemed adequate for current needs - Virtu's headquarters are in leased office space in New York, NY, with additional leased facilities in the U.S., Canada, Europe, Asia, and Australia[222](index=222&type=chunk) [Legal Proceedings](index=43&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) Information on legal proceedings is incorporated by reference from Note 15 in the Consolidated Financial Statements - Details on legal proceedings are located in Note 15 of the Consolidated Financial Statements[223](index=223&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=46&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT%27S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) Virtu's Class A Common Stock trades on Nasdaq, with a policy of returning cash to stockholders through dividends and a **$1.22 billion** share repurchase program - The company paid quarterly cash dividends of **$0.24 per share** during the years ended December 31, 2022, 2021, and 2020[228](index=228&type=chunk) - The Board of Directors has authorized a share repurchase program totaling **$1.22 billion**, extending through November 3, 2023[234](index=234&type=chunk) - From the program's inception through December 31, 2022, the company has repurchased approximately **32.3 million shares** of Class A Common Stock and Virtu Financial Units for about **$899.6 million**, with **$320.4 million** remaining capacity[235](index=235&type=chunk) Share Repurchases in Q4 2022 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Oct 1 - Oct 31, 2022 | 833,650 | $21.66 | | Nov 1 - Nov 30, 2022 | 637,671 | $22.41 | | Dec 1 - Dec 31, 2022 | 649,873 | $21.12 | | **Total Q4 2022** | **2,121,194** | **$21.72** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=50&type=section&id=ITEM%207.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) In 2022, total revenues decreased by **15.9%** to **$2.36 billion**, and net income fell to **$468.3 million**, primarily due to lower trading income Consolidated Results of Operations (2022 vs 2021) | Metric (in millions) | 2022 | 2021 | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $2,364.8 | $2,811.5 | (15.9)% | | Total Operating Expenses | $1,808.0 | $1,814.6 | (0.4)% | | Net Income | $468.3 | $827.2 | (43.4)% | | Adjusted Net Trading Income | $1,467.6 | $1,909.9 | (23.2)% | | Adjusted EBITDA | $859.1 | $1,301.2 | (33.9)% | - The decrease in total revenues was primarily driven by a **$476.3 million (22.6%)** decline in Trading income, net, resulting from lower spread opportunities and decreased quality of order flow[298](index=298&type=chunk)[300](index=300&type=chunk) - Operating expenses decreased slightly, mainly due to a **$126.3 million** reduction in brokerage, exchange, and clearance fees, which was partially offset by a **$91.4 million** increase in interest and dividends expense and a **$14.7 million** increase in employee compensation[306](index=306&type=chunk)[307](index=307&type=chunk)[309](index=309&type=chunk) - In January 2022, the company refinanced its long-term debt, entering into a new credit agreement for a **$1.8 billion** term loan maturing in 2029 and a **$250 million** revolving facility[257](index=257&type=chunk)[336](index=336&type=chunk) [Results of Operations](index=62&type=section&id=Results%20of%20Operations) In 2022, total revenues decreased by **15.9%** to **$2.36 billion**, driven by a **22.6%** drop in Trading income, net, despite increased interest income Revenue Breakdown (2022 vs 2021) | Revenue Component (in millions) | 2022 | 2021 | % Change | | :--- | :--- | :--- | :--- | | Trading income, net | $1,628.9 | $2,105.2 | (22.6)% | | Interest and dividends income | $159.1 | $75.4 | 111.1% | | Commissions, net and technology services | $529.8 | $614.5 | (13.8)% | | Other, net | $46.9 | $16.4 | 186.0% | | **Total revenues** | **$2,364.8** | **$2,811.5** | **(15.9)%** | Key Operating Expenses (2022 vs 2021) | Expense Component (in millions) | 2022 | 2021 | % Change | | :--- | :--- | :--- | :--- | | Brokerage, exchange, clearance fees, net | $619.2 | $745.4 | (16.9)% | | Employee compensation and payroll taxes | $390.9 | $376.3 | 3.9% | | Interest and dividends expense | $231.1 | $139.7 | 65.4% | | Financing interest expense on long-term borrowings | $92.0 | $80.0 | 15.1% | - The provision for income taxes was **$88.5 million**, resulting in an effective tax rate of **15.9%** for 2022, compared to a provision of **$169.7 million** and a rate of **17.0%** for 2021[319](index=319&type=chunk) [Liquidity and Capital Resources](index=65&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2022, Virtu had **$981.6 million** in cash, with liquidity supported by operations and a **$1.8 billion** term loan refinanced in January 2022 - As of December 31, 2022, the company held **$981.6 million** in cash and cash equivalents and had **$1.827 billion** in outstanding long-term debt[320](index=320&type=chunk) - In January 2022, the company refinanced its debt with a new Credit Agreement that includes a **$1.8 billion** term loan maturing in 2029 and a **$250 million** revolving facility[336](index=336&type=chunk) - The company's principal U.S. subsidiary, Virtu Americas LLC (VAL), and its foreign subsidiaries are subject to stringent regulatory capital requirements from bodies like the SEC, FINRA, and CBI[327](index=327&type=chunk)[330](index=330&type=chunk) - Future payments under the Tax Receivable Agreements are expected to range from approximately **$36.4 thousand** to **$22.0 million** per year over the next **15 years**[325](index=325&type=chunk) [Critical Accounting Policies and Estimates](index=70&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Virtu's critical accounting policies involve significant judgment in valuing financial instruments, recognizing revenue, and assessing goodwill and intangible assets for impairment - Valuation of Financial Instruments: Substantially all financial instruments are carried at fair value, classified into a three-level hierarchy. Most instruments are classified as **Level 1** (quoted prices) or **Level 2** (observable inputs)[358](index=358&type=chunk)[359](index=359&type=chunk) - Revenue Recognition: Trading income is recorded on a trade-date basis. Commissions and technology services revenues are recognized as performance obligations are satisfied, which can be at a point in time (e.g., trade execution) or over time (e.g., connectivity services)[360](index=360&type=chunk)[362](index=362&type=chunk)[363](index=363&type=chunk) - Goodwill and Intangible Assets: Goodwill (**$1.15 billion**) is not amortized but is tested for impairment annually as of July 1st. No impairment was identified in the 2022 assessment. Finite-lived intangible assets are amortized over their useful lives[375](index=375&type=chunk)[380](index=380&type=chunk)[381](index=381&type=chunk) - Tax Receivable Agreements: The company estimates and records obligations under TRAs, which requires complex judgments regarding the computation of tax basis and the timing and realizability of future tax savings[374](index=374&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=75&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) Virtu manages market risk from price, interest rate, and currency fluctuations through market-neutral strategies, hedging, and proprietary risk management tools - The company's primary market risks relate to changes in market prices, interest rates, and currency rates[384](index=384&type=chunk) - Market making activities are designed to minimize directional risk by capturing spreads and hedging positions. Risk is managed through proprietary tools, preset limits, and stress testing[385](index=385&type=chunk)[387](index=387&type=chunk)[390](index=390&type=chunk) - Interest rate risk on long-term borrowings is managed using floating-to-fixed interest rate swap agreements, which are designated as cash flow hedges[393](index=393&type=chunk) - Approximately **19.1%** of total revenues for 2022 were denominated in non-U.S. dollar currencies. The company estimates a hypothetical **10%** adverse change in the U.S. dollar would have decreased total revenues by **$45.1 million**[397](index=397&type=chunk) [Financial Statements and Supplementary Data](index=77&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) This section presents the audited consolidated financial statements for 2022, including the independent auditor's report and detailed financial notes - The independent auditor, PricewaterhouseCoopers LLP, issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting as of December 31, 2022[406](index=406&type=chunk) Consolidated Statement of Financial Condition Highlights (as of Dec 31, 2022) | Account (in millions) | Amount | | :--- | :--- | | **Assets** | | | Cash and cash equivalents | $981.6 | | Trading assets, at fair value | $4,630.6 | | Goodwill | $1,148.9 | | **Total Assets** | **$10,583.2** | | **Liabilities & Equity** | | | Trading liabilities, at fair value | $4,197.0 | | Long-term borrowings | $1,796.0 | | **Total Liabilities** | **$8,931.8** | | **Total Equity** | **$1,651.4** | Consolidated Statement of Comprehensive Income Highlights (Year Ended Dec 31, 2022) | Account (in millions) | Amount | | :--- | :--- | | Total Revenue | $2,364.8 | | Total Operating Expenses | $1,808.0 | | Income before income taxes | $556.8 | | Net Income | $468.3 | | Net Income available for common stockholders | $265.0 | | **Diluted Earnings Per Share** | **$2.44** | [Controls and Procedures](index=137&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES) Management and the independent auditor concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2022 - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of December 31, 2022[686](index=686&type=chunk) - Management assessed internal control over financial reporting based on the COSO framework and determined it was effective as of December 31, 2022[692](index=692&type=chunk)[693](index=693&type=chunk) - No changes in internal control over financial reporting occurred during the fourth quarter of 2022 that materially affected, or are reasonably likely to materially affect, these controls[694](index=694&type=chunk) PART III [Directors, Executive Officers, Corporate Governance, Executive Compensation, and Other Matters](index=142&type=section&id=ITEM%2010%2C%2011%2C%2012%2C%2013%2C%2014) Information for Items 10-14, including directors, executive compensation, and corporate governance, is incorporated by reference from the 2023 proxy statement - Information regarding Directors, Executive Officers, and Corporate Governance (Item 10) will be provided in the 2023 Proxy Statement[698](index=698&type=chunk) - Details on Executive Compensation (Item 11) are incorporated by reference from the 2023 Proxy Statement[700](index=700&type=chunk) - Information on Security Ownership (Item 12), Certain Relationships and Related Transactions (Item 13), and Principal Accountant Fees (Item 14) will also be set forth in the 2023 Proxy Statement[702](index=702&type=chunk)[704](index=704&type=chunk)[706](index=706&type=chunk) PART IV [Exhibits and Financial Statement Schedules](index=147&type=section&id=ITEM%2015.%20EXHIBITS%20AND%20FINANCIAL%20STATEMENT%20SCHEDULES) This section lists exhibits filed with the Form 10-K, including corporate documents, agreements, and required Sarbanes-Oxley certifications - Lists key corporate documents filed as exhibits, including the Amended and Restated Certificate of Incorporation (Exhibit 3.1) and By-laws (3.2)[708](index=708&type=chunk) - Includes the Credit Agreement dated January 13, 2022 (Exhibit 10.9) and various Tax Receivable Agreements (Exhibits 10.12, 10.13, 10.14)[709](index=709&type=chunk) - Contains required CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act (Exhibits 31.1, 31.2, 32.1, 32.2)[711](index=711&type=chunk)

Presenter Name Event name xx Month 201x © 201X Virtu Financial. All rights reserved. Not to be reproduced or retransmitted without permission. Compliance #XXXX-XXXX © 2022 Virtu Financial. All rights reserved. Presentation Title in Title Case Presentation subtitle in sentence case Fourth Quarter 2022 Earnings Supplement Fourth Quarter & Full Year Highlights FY 2022 4Q 2022 Adj. NTI1 Adj. NTI1 $1,468M $274M firmwide Adj. NTI) $5.8 $4.4 $3.00 $0.37 $859M $125M Adj. NTI/day1,2 Adj. NTI/day1,2 Normalized Adj. E ...