Virtu Financial(US:VIRT)2023-07-26 17:48Financial 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]