Virtu Financial(US:VIRT)2023-01-26 16:34Financial Data and Key Metrics Changes - In 2022, the company generated an average of $5.8 million of adjusted trading net income per day, with $4.4 million per day in Q4 2022. Total adjusted EPS was $3 for the full year, including $0.37 in Q4 [7][41] - Adjusted net trading income for Q4 2022 totaled $274 million, a 43% decrease year-over-year. Market making adjusted net trading income was $185 million, while Execution Services adjusted net trading income was $89 million [41] - Adjusted EBITDA for Q4 2022 was $125 million, a 62% decrease year-over-year, with a full year adjusted EBITDA of $859 million, down 34% compared to the prior year [42] Business Line Data and Key Metrics Changes - The Market Making segment earned an average of $4.2 million per day in adjusted net trading income for 2022, with a decline in the customer market-making business in Q4 due to decreased opportunity and lower quality flow from retail customers [8][9] - The Execution Services segment reported adjusted net trading income of $1.4 million per day in Q4, flat from Q3, contributing 28% to total adjusted net trading income for the year [13][41] - The noncustomer market-making business was flat year-over-year from 2021 to 2022 but increased by 11% from Q3 to Q4 2022, with notable growth in energy and natural gas [12][10] Market Data and Key Metrics Changes - In the U.S., market-wide options volumes increased by 5.5% in 2022, while adjusted net trading income from the options business grew over 100% for the second consecutive year [19] - The company noted a significant increase in options trading activity, particularly in index options, which were up approximately 40% in 2022 [104] Company Strategy and Development Direction - The company remains focused on long-term growth initiatives, particularly in options and fixed income, while continuing to invest in technology and talent to enhance market-making capabilities [17][20] - The management expressed optimism about the future of the crypto market despite recent industry turmoil, viewing it as a long-term growth opportunity [21] Management's Comments on Operating Environment and Future Outlook - Management indicated that the early days of 2023 have shown modest improvements in the customer market-making business, with efforts to enhance capture rates beginning to yield results [16][70] - The company is cautiously optimistic about the revenue environment for 2023, expecting expenses to remain flat or increase slightly, depending on market conditions [37][84] Other Important Information - The company repurchased $45 million in stock during Q4 2022 and $460 million for the full year, representing a significant portion of its shares [38][45] - The company maintained a $0.96 annual dividend, consistent with its commitment to return capital to shareholders [37][45] Q&A Session Summary Question: Insights on retail flow and profitability - Management noted that the correlation between volatility and retail flow opportunity has broken down, impacting profitability. They continue to invest in technology to improve flow monetization [49][51] Question: Factors affecting retail flow opportunity - Management speculated that increased sophistication of retail investors and a mix of institutional flow could be contributing to diminished opportunities in retail flow [55][58] Question: Current state of the options and crypto business - Management indicated that the options business has significant growth potential, while the crypto market remains a focus despite recent challenges [90][99] Question: Debt and covenants - Management confirmed that the company is covenant-light with no maintenance covenants in its long-term debt, allowing flexibility in capital management [72][73] Question: Future of options and crypto initiatives - Management expressed enthusiasm for the options business, indicating potential for significant growth, while also highlighting the complexities and risks associated with expanding into single-name options [106][108]