Virtu Financial(US:VIRT)2023-04-20 16:58Financial 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]