Virtu Financial, Inc., a leading provider of financial services and products that leverages cutting edge technology to deliver innovative, transparent trading solutions to its clients and liquidity to the global markets, today reported results for the third quarter ended September 30, 2020.
Third Quarter 2020 Selected Highlights
• Net income of $199.7 million; Normalized Adjusted Net Income1 of $160.9 million
• Basic and diluted earnings per share of $0.92; Normalized Adjusted EPS1 of $0.81
• Total revenues of $656.1 million; Trading income, net of $441.3 million; Adjusted Net Trading Income1 of $362.3 million • Adjusted EBITDA1 of $248.7 million; Adjusted EBITDA Margin1 of 68.7%
• Results include $56.2 million net gain on sale of MATCHNow transaction closed on August 4, 2020
The Virtu Financial, Inc. Board of Directors declared a quarterly cash dividend of $0.24 per share. This dividend is payable on December 15, 2020 to shareholders of record as of December 1, 2020.
“Client partnership, providing liquidity to the global capital markets and implementing our strategic initiatives will help Virtu deliver our strongest year on record. Our third quarter results confirm the resilience and scalability of Virtu’s business model; generating meaningful profits consistently.” said Douglas Cifu, Chief Executive Officer. “Virtu enters the final quarter of an eventful 2020 and looks forward to 2021 well positioned to continue to generate shareholder value. With our revised expense guidance for 2021 and the material reduction in total debt as a result of the strong performance in 2020, we are poised to meaningfully enhance shareholder returns, beginning with up to a $100 million buyback of shares, which our Board of Directors has approved.”
Third Quarter 2020:
Total revenues increased 71.6% to $656.1 million for this quarter, driven by the gain on the sale of MATCHNow as well as heightened levels of volatility, bid-ask spreads and trading volumes across global markets and asset classes due to the COVID-19 pandemic, compared to $382.3 million for the same period in 2019.
Trading income, net, increased 100.5% to $441.3 million for this quarter, compared to $220.1 million for the same period in 2019. Net income totaled $199.7 million for this quarter, compared to a net loss of $5.2 million in the prior year quarter, which included costs related to the ITG acquisition.
Basic and diluted earnings per share for this quarter was $0.92, compared to a basic and diluted loss per share of $0.04 for the same period in 2019.
Adjusted Net Trading Income increased 45.0% to $362.3 million for this quarter, compared to $249.8 million for the same period in 2019. Adjusted EBITDA increased 139.5% to $248.7 million for this quarter, compared to $103.9 million for the same period in 2019.
Normalized Adjusted Net Income, removing one-time integration costs and non-cash items, increased 306.5% to $160.9 million for this quarter, compared to $39.6 million for the same period in 2019.
Assuming all non-controlling interests had been exchanged for common stock, and the Company’s Normalized Adjusted Net Income before income taxes was subject to corporation taxes, Normalized Adjusted EPS was $0.81 for this quarter, compared to $0.21 for the same period in 2019.
Operating Segment Information
The Company has two operating segments: Market Making and Execution Services; and one non-operating segment: Corporate.
Market Making principally consists of market making in the cash, futures and options markets across global equities, options, fixed income, currencies and commodities. As a market maker, the Company commits capital on a principal basis by offering to buy securities from, or sell securities to, broker dealers, banks and institutions.
Execution Services comprises agency-based trading and trading venues, offering execution services in global equities, options, futures and fixed income on behalf of institutions, banks and broker dealers.
The Company also provides proprietary technology and infrastructure, workflow technology, and trading analytics services to select third parties. Legacy ITG’s operations are included within the Execution Services segment.
Corporate contains the Company’s investments, principally in strategic trading-related opportunities, and maintains corporate overhead expenses.
Sale of MATCHNow
On August 4, 2020, the Company completed the sale of MATCHNow to Cboe Global Markets, Inc. for total gross proceeds of $60.6 million in cash. The Company recorded a gain on the sale of $58.6 million, which is recorded in Other, net on the Condensed Consolidated Statements of Comprehensive Income for the three months ended September 30, 2020.
The net gain on the sale of MATCHNow was $56.2 million including one-time transaction related professional fees of $2.5 million directly related to the sale.
As of September 30, 2020, Virtu had $666.0 million in cash, cash equivalents and restricted cash, and total long-term debt outstanding in an aggregate principal amount of $1,669.7 million.