Virtu Financial, Inc. Q4 FY2024 earnings call

• Doug highlighted the firm's strong fourth quarter performance in market-making and Execution Services. Market-making had good results relative to the opportunity set, with quoted spread and executed shares up. Execution Services had its best quarter since Q1 2022, with algo product revenue increasing for five quarters. - VES leveraged investments to achieve growth milestones, like winning remits in fixed income and equity execution. - Organic growth initiatives in crypto, ETF block, and fixed income performed well. Crypto had a strong fourth quarter despite market volume challenges. - The firm has made significant investments in people and technology, with a focus on internalization and being agnostic to markets. - Cindy discussed adjusted net trading income, operating expenses, financing interest expense, share repurchases, and dividend commitment.

For the fourth quarter of 2024, market-making segment earned an average of $5.5 million per day of adjusted net trading income, while Execution Services delivered $1.7 million per day. In 2024, market-making results were up almost 23% in the fourth quarter. Execution Services' $1.7 million of adjusted net trading income per day in the fourth quarter was its best quarter since the first quarter of 2022, with the algo product achieving increased revenue for the fifth consecutive quarter. VES leveraged investments to achieve growth milestones, such as winning remits in fixed income and equity execution. Market-making saw quoted spread and executed shares increase versus the third quarter. Organic growth initiatives, including crypto, ETF block, and fixed income, contributed $787,000 per day in 2024, representing 12% of firm-wide adjusted net trading income.

• Expect continued growth in VES and Virtu Technology Solutions both within and outside the US. - Anticipate regulatory tailwinds from changing SEC leadership to benefit crypto and other business areas. - Continue share repurchase program and maintain dividend commitment. - See opportunities in new products and asset classes due to regulatory clarity.

• Regulatory uncertainties, including past issues with Gensler's SEC and potential changes still needing clarity. - Market volatility affecting market-making results. - Operational challenges in new segments like crypto, including non-traditional venues and regulatory complexities.

Q: Congrats on the quarter. Talk about regulatory environment, new SEC head.

A: Doug was excited about changing guard in Washington, positive on Paul Atkins and new SEC leadership,看好crypto regulatory clarity, expects bipartisan solution on digital assets and review of equity market structure.

Q: Last several years earnings stable, what drove stability and can it be maintained?

A: Doug cited scale-diverse organization, internalization, growth initiatives like options, ETF block, crypto, and Virtu value proposition of scale, agnostic to markets, good market-making and Execution Services.

Q: Strong market-making performance, delineate internalization vs environment?

A: Doug said market volumes and bid-offer spread are key, internalization helps in providing better product set and wider product set, Execution Services business has grown with scaled, efficient products.

Q: Crypto investments, early days of 24/7 framework.

A: Doug said crypto is traditional Virtu style but has non-traditional venues, capital inefficiencies, and operational hassles, working on distribution to provide attractive pricing to institutions for 24/7 execution.

Q: Potential in listed betting markets?

A: Doug said look for credible venues and significant volume, would consider if there are broad indices with enough volume for two-sided pricing.

Q: Magnitude of election impact on results?

A: Doug said October quoted spread smaller than November, but interest in markets and new products positive for market-making.

Q: Other business aspects suppressed by reg regime aside from crypto?

A: Doug said new SEC will stop disruptive role rules, help IPOs and capital formation, clarity around M&A and competition, not having Lina Khan at FTC is a godsend.

Q: Capital management priorities, buybacks vs debt reduction?

A: Joseph said buybacks still main priority, capital structure has opportunities to get debt cheaper but buyback program tailor-made for firm's earnings and cash flow volatility.

Q: Execution Services growth, acquisition integration?

A: Doug said multi-asset class offering, integrated products, culture shift from acquired firms, hiring relationship managers and tech-savvy people for growth.

Q: Market share in cash equities, fixed income ramp?

A: Doug said focus on optimizing P&L vs market share, maintained relative share, fixed income ramp has made progress, profitable in rates and credit, working on moving upstream in larger trades.

Q: Single name options buildout, private credit market-making?

A: Doug said single name options have made progress, in process of additional investment, private credit is a growing area with indexy products likely developing first, working with big issuers and private credit houses.