Virtu Financial strikes US Treasury tech trading deal with JPMorgan

Source: Virtu Financial

Virtu Financial, Inc. (NASDAQ: VIRT) a leading technology-enabled market maker and liquidity provider to the global financial markets, today reported results for the second quarter ended June 30, 2016.

Second Quarter Selected Results
 Net income of $39.3 million; Adjusted Net Income* of $45.8 million
 Basic and Diluted EPS of $0.21; Normalized Adjusted EPS* of $0.24
 Total revenues of $174.2 million; Adjusted Net Trading Income* of $102.3 million  Adjusted EBITDA* of $65.8 million; Adjusted EBITDA Margin* of 63.0%
 Quarterly cash dividend of $0.24 per share payable on September 15, 2016
* Non-GAAP financial measures. Please see "Non-GAAP Financial Measures and Other Items" for more information.

The Virtu Financial, Inc. Board of Directors declared a quarterly cash dividend of $0.24 per share. This dividend is payable on September 15, 2016 to shareholders of record as of September 1, 2016.

“Overall, I am pleased with our operating performance in Q2. Our business responded well to the challenge of low volumes and volatility, which characterized most of the quarter as well as the positive impact of Brexit at the tail end of the period. We also made significant progress in the quarter on a number of key strategic initiatives that will grow our business over time. I am very pleased to announce that we have partnered with J.P. Morgan on an initiative to marry our proprietary systems and order routing with J.P. Morgan trading experience through a technology and trading partnership in the dealer to dealer U.S. Treasuries market. In addition, as previously announced, we made a key strategic investment in a thriving Japanese Proprietary Trading System venue to advance our market making opportunities in Japan; and we continue to make progress providing execution services to select blue-chip buy-side firms, leveraging Virtu’s superior order routing and analytical technology,” said Douglas Cifu, Chief Executive Officer of Virtu Financial.

Strategic Initiatives Update

Technology Products and Services
We have entered into a strategic partnership with J.P. Morgan Chase whereby Virtu will provide technology and market access to J.P. Morgan. J.P. Morgan will use Virtu’s technological capabilities to access and trade dealer to dealer markets in U.S. Treasuries. The agreement is for a three year minimum term.

Douglas Cifu commented on the agreement with J.P. Morgan: “We have a longstanding relationship with J.P. Morgan on many fronts. J.P. Morgan has been a key business partner of Virtu since our founding and has supported our business in many areas. Our collaboration in trading and technology is a natural progression of this very important relationship. We believe this agreement will be a win-win for both parties where J.P. Morgan can benefit from applying Virtu’s technology to certain markets and Virtu can benefit from leveraging its existing technological footprint to serve banks like J.P. Morgan.”

Agency Execution Services
During the second quarter, we have begun to provide order routing capabilities and post-trade analysis to institutional investors and the initial feedback has been very positive. We are onboarding additional buy-side firms in the US and efforts are underway to expand this offering to EU Equities, highlighting the scalability of the Virtu model.
Strategic Minority Investment in SBI Japannext
As announced on July 5, 2016, Virtu is making a strategic minority investment in SBI Japannext, Co., Ltd., a leading Proprietary Trading System (“PTS”) based in Tokyo. The investment is part of Virtu’s strategic long-term commitment to the Japanese marketplace. Japannext operates a round-the-clock venue with 29 active members (local and global brokerage houses) and is the oldest thriving PTS venue in Japan. We expect this investment to enhance our overall APAC Equities franchise by offering Virtu unique market making opportunities and be beneficial in the long term from an investment standpoint. This transaction closed on July 27, 2016.

GAAP Financial Results
Total revenues decreased 4.3% to $174.2 million for this quarter, compared to $182.0 million for the same period in 2015. Trading income, net, decreased 1.9% to $166.5 million for this quarter, compared to $169.8 million for the same period in 2015. Net income increased 419.3% to $39.3 million for this quarter, compared to $7.6 million for the same period in 2015, mainly as a result of a one-time charge in connection with the Company’s Initial Public Offering in April 2015.
Basic and Diluted EPS for this quarter were $0.21, compared to $0.01 for the same period in 2015.

Business Performance
For the second quarter of 2016, Adjusted Net Trading Income decreased 3.4% to $102.3 million for this quarter, compared to $105.9 million for the same period in 2015. Adjusted Net Income decreased 18.1% to $45.8 million for this quarter, compared to $55.9 million for the same period in 2015. Adjusted EBITDA decreased 10.3% to $65.8 million for this quarter, compared to $73.3 million for the same period in 2015. 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 taxation, Normalized Adjusted EPS was $0.24 for this quarter.

Since our inception, we have sought to broadly diversify our market making across securities, asset classes and geographies, and as a result, for the quarter ended June 30, 2016, we achieved a diverse mix of Adjusted Net Trading Income results, with no one category constituting more than 30.1% of our total Adjusted Net Trading Income. Average daily Adjusted Net Trading Income was approximately $1.599 million for this quarter compared to $1.680 million for the same period in the previous year.

As of June 30, 2016, Virtu was connected to more than 235 unique market venues in 36 countries and made markets in over 12,000 financial instruments.

Comments: (0)