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VF

Virtu Financial, Inc. (VIRT)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 delivered a step-up in profitability and operating leverage: total revenues $834.3M (+55.7% YoY), Adjusted Net Trading Income (ANTI) $457.7M (+75% YoY), Adjusted EBITDA $283.5M with a 61.9% margin (vs. 37.9% in 4Q23) .
  • Market Making ANTI rose to $347.9M (up ~21% vs. Q3), while Execution Services posted its best quarter since 1Q22 at $109.8M ANTI; management highlighted stronger internalization, crypto, ETF block, and algo adoption as drivers .
  • Capital return remained active: $57.1M buybacks (1.7M shares at $34.18 avg) and a $0.24 dividend; buyback capacity stood at ~$423.8M as of Jan 27, 2025 .
  • Estimate comparisons: S&P Global consensus (EPS/Revenue/EBITDA) could not be retrieved at this time due to data access limits; therefore “vs. estimates” is not shown. If needed, we can refresh once access resumes (see Estimates Context) (Values would be retrieved from S&P Global).

What Went Well and What Went Wrong

What Went Well

  • Execution Services momentum and product breadth: “this past quarter's $1.7 million of NT per day represents VES best quarter since the first quarter of '22…algo product achieving increased revenue for the fifth consecutive quarter” .
  • Market Making execution upgrades and internalization: “quoted spread and executed shares…show an increase of 12% and 11%, respectively, versus the third quarter…our growth initiatives, combined with…smarter internalization will yield increased benefits” .
  • Crypto and ETF block traction: “our crypto growth initiatives performed very well in the fourth quarter…ETF block offering…delivered sizable results in the fourth quarter” .

What Went Wrong

  • Lower realized volatility backdrop (headwind to opportunity) even as Virtu outperformed: “an impressive result considering realized volatility was down across the board…opportunity was markedly lower in October” .
  • Elevated regulatory/transaction cost headwinds: Section 31 fee dynamics remain a burden and can widen spreads and pass through to investors, though managed within results .
  • Non-core costs persisted: Q4 incurred $16.2M termination of office leases, and interest/dividends expense totaled $143.4M, though the blended borrowing rate is ~7.2% after refinancing .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Total Revenues ($M)$693.0 $706.8 $834.3
Trading Income, net ($M)$426.4 $444.0 $544.0
Adjusted Net Trading Income (ANTI) ($M)$385.1 $388.0 $457.7
Adjusted EBITDA ($M)$217.5 $214.8 $283.5
Adjusted EBITDA Margin (%)56.5% 55.4% 61.9%
Net Income ($M)$128.1 $119.0 $176.1
Net Income Margin (%)18.5% 16.8% 21.1%
Diluted EPS (GAAP)$0.71 $0.64 $1.03
Normalized Adjusted EPS (Non-GAAP)$0.83 $0.82 $1.14

Segment ANTI (Adjusted Net Trading Income)

Segment ANTI ($M)Q2 2024Q3 2024Q4 2024
Market Making$285.6 $288.0 $347.9
Execution Services$99.5 $100.0 $109.8
Total$385.1 $388.0 $457.7

KPIs and Capital

KPIQ2 2024Q3 2024Q4 2024
Firmwide ANTI per day ($M)$6.1 $6.1 $7.27
Market Making ANTI/day ($M)$4.5 $4.5 $5.5
Execution Services ANTI/day ($M)$1.6 $1.6 $1.7
Share Repurchases ($M; shares)$31.0; 1.4M $48.4; 1.7M $57.1; 1.7M
Dividend per Share$0.24 $0.24 $0.24
Cash, Cash Eq. & Restricted Cash ($M)$716.7 $738.2 $914.0
Long-term Debt, principal ($M)$1,766.8 $1,769.4 $1,767.3
Buyback Capacity ($M)$538.6 (as of 7/12/24) $479.3 (as of 10/22/24) $423.8 (as of 1/27/25)

Notes on non-GAAP: Normalized Adjusted Net Income/EPS exclude amortization, debt issuance costs, severance, lease terminations, share-based comp and other items; tax-normalized at ~24% .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividend per shareOngoing$0.24 (Q3 declared) $0.24 (Q4 declared) Maintained
Cash Operating Expenses (growth)2025 frameworkLow single-digit increases (historical guidance) Low to mid single-digit growth modeled; non-comp low single-digit increases Maintained/refined
Blended borrowing rateNear term~7.3% blended rate (Q3) ~7.2% blended rate (Q4) Slight improvement
Share repurchase programOngoingCapacity ~$479.3M (10/22/24) Capacity ~$423.8M (1/27/25) Capacity reduced by buybacks
Formal revenue/margin guidanceN/ANone providedNone providedNo change

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3 2024)Current Period (Q4 2024)Trend
Execution Services modernization (algos, Triton EMS, analytics, VTS)Q2: VES ANTI/day $1.6M; “broker-in-a-box”/VTS scaling; client wins; multi-asset push . Q3: VES stable in muted environment .Best quarter since 1Q22; algos up five consecutive quarters; deeper workflow integration and regional wins .Improving adoption, consistent growth
Internalization and spread captureQ2: cross-desk internalization; model enhancements . Q3: mixed market; elevated 605 through Aug then lower in Sep .Quoted spread +12% and executed shares +11% vs Q3; improved internalization driving results .Positive execution efficiency
Crypto strategyQ2: expanding venues; early institutionalization; prepare for ETH ETFs/options . Q3: crypto ETFs softness QoQ, but ongoing build .Strong Q4 crypto; 24/7 framework; risk-managed expansion; regulatory tailwinds expected in 2025 .Re-accelerating with tailwinds
Options (single-name/global)Q2: global options growth (Asia, India/Japan) .In dozens of single names; scaling tech/core capacity; profitable, not end-state yet .Gradual build-out
Fixed Income (rates/credit, ETF block)Q2: early footprint, distribution via Tradeweb/MarketAxess; ETF block synergy . Q3: profitable in rates/credit after fees; moving upstream .Ongoing ramp; synergies with ETF block; Europe progress; runway for expansion .Gradual expansion
Regulatory/macro market structureQ3: Section 31 fee headwinds; Reg NMS critique .New SEC leadership seen as positive; crypto clarity expected; broader equity market structure review anticipated .Turning constructive

Management Commentary

  • “This past quarter's $1.7 million of NT per day represents VES best quarter since the first quarter of '22…algo product achieving increased revenue for the fifth consecutive quarter.” – CEO Doug Cifu .
  • “Quoted spread and executed shares…show an increase of 12% and 11%…our growth initiatives, combined with…smarter internalization will yield increased benefits in any environment.” – CEO Doug Cifu .
  • “Our crypto growth initiatives performed very well in the fourth quarter…We aren't done expanding our global crypto footprint…building our 24/7 crypto-native offering.” – CEO Doug Cifu .
  • “We remain committed to our $0.24 per quarter dividend…combined with our share repurchase program demonstrates our continued commitment to return capital.” – CFO Cindy Lee .

Q&A Highlights

  • Regulatory outlook: Management expects a more constructive SEC regime, potential bipartisan crypto clarity, and thoughtful review of Reg NMS; sees tailwinds for digital assets and capital formation .
  • Stability drivers: Scale, internalization, diversified asset classes/geographies, Execution Services consistency; buybacks amplified EPS .
  • Market Making vs environment: Q4 gains driven by retail, crypto, block ETFs, internalization; improving retail activity and spreads; positive early-2025 signals .
  • Crypto build-out specifics: 24/7 operations, selective venues, distribution to institutions; ETFs and futures integration; risk-managed capital framework .
  • Capital management: Buybacks remain priority; continue opportunistic debt repricing; dividend commitment reiterated .
  • Fixed income ramp: Now profitable after fees; broadening distribution; gradual move up in trade size/risk; synergies with ETF block .
  • Options expansion: Dozens of single names, incremental investments needed, profitable but early in scale-up .
  • Costs/fees: Section 31 fee increases are an ongoing headwind that can widen spreads and get passed through where possible .

Estimates Context

  • S&P Global (Capital IQ) consensus for Q4 2024 EPS/Revenue/EBITDA was not retrievable at this time due to API request-limit constraints. As a result, we cannot present “vs. estimates” comparisons in this recap. Values would be retrieved from S&P Global once access is restored.

Key Takeaways for Investors

  • Mix and execution, not just volatility: Despite lower realized volatility, Virtu grew ANTI and margins via internalization, strategy enhancements, and VES momentum—supporting earnings durability into varying regimes .
  • Rising operating leverage: Adjusted EBITDA margin expanded to 61.9% in Q4, with structural efficiency gains and technology leverage across Market Making and VES .
  • Diversification paying off: Crypto (24/7), ETF block, options, and fixed income expansion are contributing meaningfully and spreading revenue drivers across products and regions .
  • Capital returns remain a core pillar: Ongoing $0.24 dividend and steady buybacks with ~$423.8M remaining capacity provide support to per-share compounding .
  • Regulatory backdrop turning constructive: Potential crypto clarity and sensible market structure review could expand TAM for Virtu’s liquidity and technology offerings .
  • 1H comparisons show a clean trajectory: From Q2 to Q4, revenues and profitability stepped higher, with Q4 ANTI/day of $7.27M vs. $6.1M in Q2/Q3, underscoring execution improvements and product expansion .
  • Watch near-term catalysts: Continued crypto product proliferation, options build-out, fixed income penetration, and sustained VES share gains can extend margin strength into 2025 .

Appendix: Additional Context and YoY Highlights

  • Q4 YoY: Revenues +55.7% to $834.3M; net income $176.1M (vs. $6.7M in 4Q23); Adjusted EBITDA $283.5M (vs. $99.0M) .
  • Full-year 2024: Revenues $2,876.9M (+25.4% YoY); ANTI $1,597.7M (+32.0% YoY); Adjusted EBITDA $918.7M (+61.7% YoY); Normalized Adjusted EPS $3.55 .