Virtu Announces Second Quarter 2017 Results

NEW YORK, Aug. 08, 2017 (GLOBE NEWSWIRE) -- 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, 2017.

Average Realized Intraday Volatility and Average Realized Volatility of SPX Index


Second Quarter Selected Results

  • Net income of $4.4 million; Normalized Adjusted Net Income* of $17.8 million
  • Basic and Diluted EPS of $0.01; Normalized Adjusted EPS* of $0.13
  • Total revenues of $144.9 million; Adjusted Net Trading Income* of $74.0 million
  • Adjusted EBITDA* of $40.9 million; Adjusted EBITDA Margin* of 53.1%
  • Quarterly cash dividend of $0.24 per share payable on September 15, 2017

* 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, 2017 to shareholders of record as of September 1, 2017.

“With volatility measures globally at historic lows, challenging conditions for market makers persisted in the second quarter. We continue to be disciplined in our approach to market making and vigilant around costs to support our results. On July 20, we closed the acquisition of KCG. Based on what has been accomplished to date and the positive feedback from our clients, we remain more confident than ever in the value creation potential of the acquisition. KCG has long-standing and deep client relationships in market making and global agency execution services. We believe the combination of this client franchise and Virtu’s technology and market structure acumen will benefit the combined company in any environment and will enhance our business and financial results. We have already made material progress toward integration and synergy realization. Of the $250 million in gross synergies projected at the time of the transaction announcement, we have already taken actions to realize at least $125 million of annual run rate savings by the end of the third quarter for 2017 as we make the combined firm more efficient and focused. We are well on our way to meeting or exceeding our synergy goals and are optimistic about the trading efficiencies,” said Douglas Cifu, Chief Executive Officer of Virtu Financial.

Second Quarter Financial Results

Total revenues decreased 16.8% to $144.9 million for this quarter, compared to $174.2 million for the same period in 2016. Trading income, net, decreased 18.2% to $136.2 million for this quarter, compared to $166.5 million for the same period in 2016. Net income decreased 88.8% to $4.4 million for this quarter, compared to $39.3 million for the same period in 2016.

Basic and Diluted EPS for this quarter were $0.01 and $0.01, compared to $0.21 and $0.21 for the same period in 2016, respectively.

Adjusted Net Trading Income decreased 27.7% to $74.0 million for this quarter, compared to $102.3 million for the same period in 2016. Adjusted EBITDA decreased 37.8% to $40.9 million for this quarter, compared to $65.8 million for the same period in 2016. Normalized Adjusted Net Income decreased 45.9% to $17.8 million for this quarter, compared to $32.9 million for the same period in 2016. 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 $0.13 for this quarter and $0.24 for the same period in 2016.

Historical quarterly results from first quarter 2014 to date are available at http://ir.virtu.com.

Business Performance

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, 2017, we achieved a diverse mix of Adjusted Net Trading Income results, with no one category constituting more than 33.4% of our total Adjusted Net Trading Income. Average daily Adjusted Net Trading Income was approximately $1.175 million for this quarter compared to $1.599 million for the same period in the previous year.

As of June 30, 2017, Virtu was connected to more than 235 unique market venues in 36 countries and made markets in over 12,000 financial instruments.

The following tables show our trading income, net; average daily trading income, net; and percentage of trading income, net by category for the three and six months ended June 30, 2017 and 2016, respectively.

Three Months Ended June 30,
Trading income, net: 2017 % of
Total
2016 % of
Total
% Change
Category(in thousands, except percentages)
Americas Equities$ 45,411 33.4% $ 56,635 34.0% -19.8%
EMEA Equities 25,474 18.7% 25,627 15.4% -0.6%
APAC Equities 18,757 13.8% 19,750 11.9% -5.0%
Global Commodities 21,468 15.8% 30,632 18.4% -29.9%
Global Currencies 15,879 11.7% 22,733 13.6% -30.2%
Options, Fixed Income and Other 10,567 7.8% 12,122 7.3% -12.8%
Unallocated1 (1,393) -1.2% (952) -0.6% NM
Total Trading income, net$ 136,163 100.0% $ 166,547 100.0% -18.2%
Three Months Ended June 30,
Average Daily Trading income, net: 2017 % of
Total
2016 % of
Total
% Change
Category(in thousands, except percentages)
Americas Equities$ 721 33.4% $ 885 34.0% -18.5%
EMEA Equities 404 18.7% 400 15.4% 1.0%
APAC Equities 298 13.8% 309 11.9% -3.6%
Global Commodities 341 15.8% 479 18.4% -28.8%
Global Currencies 252 11.7% 355 13.6% -29.0%
Options, Fixed Income and Other 168 7.8% 189 7.3% -11.1%
Unallocated1 (22) -1.2% (15) -0.6% NM
Total Average Daily Trading income, net$ 2,162 100.0% $ 2,602 100.0% -16.9%
Six Months Ended June 30,
Trading income, net: 2017 % of
Total
2016 % of
Total
% Change
Category(in thousands, except percentages)
Americas Equities$ 95,242 34.5% $ 123,198 34.9% -22.7%
EMEA Equities 46,015 16.7% 52,993 15.0% -13.2%
APAC Equities 36,965 13.4% 37,986 10.8% -2.7%
Global Commodities 47,863 17.4% 69,728 19.8% -31.4%
Global Currencies 34,742 12.6% 49,434 14.0% -29.7%
Options, Fixed Income and Other 16,881 6.1% 25,467 7.2% -33.7%
Unallocated1 (1,971) -0.7% (5,970) -1.7% NM
Total Trading income, net$ 275,737 100.0% $ 352,836 100.0% -21.9%
Six Months Ended June 30,
Average Daily Trading income, net: 2017 % of
Total
2016 % of
Total
% Change
Category(in thousands, except percentages)
Americas Equities$ 762 34.5% $ 986 34.9% -22.7%
EMEA Equities 368 16.7% 424 15.0% -13.2%
APAC Equities 296 13.4% 304 10.8% -2.6%
Global Commodities 383 17.4% 558 19.8% -31.4%
Global Currencies 278 12.6% 395 14.0% -29.6%
Options, Fixed Income and Other 135 6.1% 204 7.2% -33.8%
Unallocated1 (16) -0.7% (48) -1.7% NM
Total Average Daily Trading income, net$ 2,206 100.0% $ 2,823 100.0% -21.9%

The following tables show our Adjusted Net Trading Income, average daily Adjusted Net Trading Income and percentage of Adjusted Net Trading Income by category for the three and six months ended June 30, 2017 and 2016, respectively.

Three Months Ended June 30,
Adjusted Net Trading Income: 2017 % of
Total
2016 % of
Total
% Change
Category(in thousands, except percentages)
Americas Equities$ 23,950 32.4% $ 30,821 30.1% -22.3%
EMEA Equities 9,187 12.4% 12,913 12.6% -28.9%
APAC Equities 12,527 16.9% 13,944 13.6% -10.2%
Global Commodities 12,821 17.3% 21,276 20.8% -39.7%
Global Currencies 10,709 14.5% 16,898 16.5% -36.6%
Options, Fixed Income and Other 7,281 9.8% 8,257 8.1% -11.8%
Unallocated1 (2,516) -3.3% (1,810) -1.7% NM
Total Adjusted Net Trading Income$ 73,959 100.0% $ 102,299 100.0% -27.7%
Three Months Ended June 30,
Average Daily Adjusted Net Trading Income: 2017 % of
Total
2016 % of
Total
% Change
Category(in thousands, except percentages)
Americas Equities$ 380 32.4% $ 482 30.1% -21.2%
EMEA Equities 146 12.4% 202 12.6% -27.7%
APAC Equities 199 16.9% 218 13.6% -8.7%
Global Commodities 204 17.3% 332 20.8% -38.6%
Global Currencies 170 14.5% 264 16.5% -35.6%
Options, Fixed Income and Other 116 9.8% 129 8.1% -10.1%
Unallocated1 (40) -3.3% (28) -1.7% NM
Total Average Daily Adjusted Net Trading Income$ 1,175 100.0% $ 1,599 100.0% -26.5%
Six Months Ended June 30,
Adjusted Net Trading Income: 2017 % of
Total
2016 % of
Total
% Change
Category(in thousands, except percentages)
Americas Equities$ 52,002 33.9% $ 68,099 31.0% -23.6%
EMEA Equities 16,405 10.7% 26,623 12.1% -38.4%
APAC Equities 24,043 15.7% 26,124 11.9% -8.0%
Global Commodities 30,368 19.8% 51,623 23.5% -41.2%
Global Currencies 23,866 15.6% 37,399 17.0% -36.2%
Options, Fixed Income and Other 10,707 7.0% 16,970 7.7% -36.9%
Unallocated1 (4,034) -2.7% (7,244) -3.2% NM
Total Adjusted Net Trading Income$ 153,357 100.0% $ 219,594 100.0% -30.2%
Six Months Ended June 30,
Average Daily Adjusted Net Trading Income: 2017 % of
Total
2016 % of
Total
% Change
Category(in thousands, except percentages)
Americas Equities$ 416 33.9% $ 545 31.0% -23.7%
EMEA Equities 131 10.7% 213 12.1% -38.5%
APAC Equities 192 15.7% 209 11.9% -8.1%
Global Commodities 243 19.8% 413 23.5% -41.2%
Global Currencies 191 15.6% 299 17.0% -36.1%
Options, Fixed Income and Other 86 7.0% 136 7.7% -36.8%
Unallocated1 (32) -2.7% (58) -3.2% NM
Total Average Daily Adjusted Net Trading Income$ 1,227 100.0% $ 1,757 100.0% -30.2%
1 Under our methodology for recording ‘‘trading income, net’’ in our condensed consolidated statements of comprehensive income, we recognize revenues based on the exit price of assets in accordance with applicable U.S. GAAP rules, and when we calculate Adjusted Net Trading Income for corresponding reporting periods, we start with trading income, net. By contrast, when we calculate Adjusted Net Trading Income by category, we recognize revenues on a daily basis, and as a result prices used in recognizing revenues may differ. Because we provide liquidity on a global basis, across asset classes and time zones, the timing of any particular Adjusted Net Trading Income calculation can defer or accelerate the amount in a particular asset class from one day to another, and, at the end of a reporting period, from one reporting period to another. The purpose of the Unallocated category is to ensure that ANTI by category sums to total Adjusted Net Trading Income, which can be reconciled to Trading Income, Net, calculated in accordance with GAAP. We do not allocate any resulting differences based on the timing of revenue recognition.

Global Market Volume and Volatility in the Quarter

In US Equities, realized intraday volatility of the S&P 500 Index averaged just 55 basis points, a 41% drop year over year and 2% decline, compared to the prior quarter. Average daily consolidated U.S. equity share volume declined 6% year over year.

A photo accompanying this release is available at http://www.globenewswire.com/NewsRoom/AttachmentNg/5f6ccfb2-b90b-4aef-82e8-96bb9528c168

In EMEA Equities, realized intraday volatility of the EURO STOXX 50 Index averaged just 90 basis points, a drop of over 50% year over year. Realized volatility declined 57% year over year. Average daily pan-EU share volume declined 13% and increased 7%, year over year and compared to the prior quarter, respectively.

In APAC Equities, realized intraday volatility of the Nikkei 225 Index averaged just 69 basis points, a drop of over 62% year over year and 15% versus the prior quarter, respectively. Realized volatility declined 65% and 27%, year over year and versus the prior quarter, respectively. Average daily TSE share volume declined 9% and 1%, year over year and compared to the prior quarter, respectively. Average daily OSE Nikkei 225 Futures volume declined 10% and 5%, year over year and compared to the prior quarter, respectively.

In Commodities, average daily realized volatility of the JPM Commodity Volatility Index declined over 18% and 8%, year over year and versus the prior quarter. The average daily CBOE Energy Sector Volatility Index declined 26% but increased 1%, year over year and compared to the prior quarter, respectively. The average daily CBOE / COMEX Gold Volatility Index declined 32% and 15%, year over year and compared to the prior quarter, respectively. Average daily CME Energy and ICE Energy contract volume increased 5.4% and 1.6%, respectively, versus the prior quarter.

In Currencies, the average Deutsche Bank FX Volatility Index (CVIX) declined 29% and 21%, year over year and versus the prior quarter, respectively. The JPM FX G7 Volatility Index declined 28% and 21%, year over year and versus the prior quarter, respectively. Average daily volumes on Spot venues were down compared to the prior quarter, with EBS and Hotspot posting the largest drops of 8% and 5%, respectively. Average Daily CME FX contract volumes increased 5% and declined 2%, compared to year over year and the prior quarter, respectively.

KCG Acquisition Update

On July 20, 2017 (the “Closing Date”), the Company completed the acquisition (the “Acquisition”) of KCG Holdings, Inc. (“KCG”). Pursuant to the terms of the Agreement and Plan of Merger, dated as of April 20, 2017 (the “Merger Agreement”), by and among the Company, Orchestra Merger Sub, Inc., a Delaware corporation and an indirect wholly-owned subsidiary of the Company (“Merger Sub”), and KCG, Merger Sub merged with and into KCG (the “Merger”), with KCG surviving the Merger as a wholly-owned subsidiary of the Company, in a cash transaction valued at $20.00 per KCG share, or a total of approximately $1.4 billion.

Financial Condition

As of June 30, 2017, Virtu had $165.0 million in cash and cash equivalents, $1,119 million in restricted cash held in escrow to fund the KCG Acquisition, and total long-term debt outstanding in an aggregate principal amount of $1,681.1 million.

Non-GAAP Financial Measures and Other Items

To supplement our unaudited condensed consolidated financial statements presented in accordance with generally accepted accounting principles ("GAAP"), we use the following non-GAAP measures of financial performance:

  • "Adjusted Net Trading Income", which is the amount of revenue we generate from our market making activities, or trading income, net, plus interest and dividends income and expense, net, less direct costs associated with those revenues, including brokerage, exchange and clearance fees, net. Management believes that this measurement is useful for comparing general operating performance from period to period. Although we use Adjusted Net Trading Income as a financial measure to assess the performance of our business, the use of Adjusted Net Trading Income is limited because it does not include certain material costs that are necessary to operate our business. Our presentation of Adjusted Net Trading Income should not be construed as an indication that our future results will be unaffected by revenues or expenses that are not directly associated with our market making activities.
  • "EBITDA", which measures our operating performance by adjusting Net Income to exclude financing interest expense on our senior secured credit facility, debt issue cost related to debt refinancing, depreciation and amortization, amortization of purchased intangibles and acquired capitalized software, and income tax expense, and "Adjusted EBITDA", which measures our operating performance by further adjusting EBITDA to exclude severance, reserve for legal matter, transaction advisory fees and expenses, termination of office leases, other losses (revenues) net, equipment write-off, share based compensation, charges related to share based compensation at IPO, 2015 Management Incentive Plan, and charges related to share based compensation at IPO.
  • “Normalized Adjusted Net Income”, “Normalized Adjusted Net Income before income taxes”, “Normalized provision for income taxes”, and “Normalized Adjusted EPS”, which we calculate by adjusting Net Income to exclude certain items including IPO-related adjustments and other non-cash items, assuming that all vested and unvested Virtu Financial LLC units have been exchanged for Class A Common Stock, and applying a corporate tax rate of 35.5%.

Total Adjusted Net Trading Income, EBITDA, Adjusted EBITDA, Normalized Adjusted Net Income, Normalized Adjusted Net Income before income taxes, Normalized provision for income taxes and Normalized Adjusted EPS are non-GAAP financial measures used by management in evaluating operating performance and in making strategic decisions. Additional information provided regarding the breakdown of Total Adjusted Net Trading Income by category is also a non-GAAP financial measure but is not used by the Company in evaluating operating performance and in making strategic decisions. In addition, these non-GAAP financial measures or similar non-GAAP measures are used by research analysts, investment bankers and lenders to assess our operating performance. Management believes that the presentation of Adjusted Net Trading Income, EBITDA, Adjusted EBITDA, Normalized Adjusted Net Income, Normalized Adjusted Net Income before income taxes, Normalized provision for income taxes and Normalized Adjusted EPS provide useful information to investors regarding our results of operations because they assist both investors and management in analyzing and benchmarking the performance and value of our business. Adjusted Net Trading Income, EBITDA, Adjusted EBITDA, Normalized Adjusted Net Income, Normalized Adjusted Net Income before income taxes, Normalized provision for income taxes and Normalized Adjusted EPS provide indicators of general economic performance that are not affected by fluctuations in certain costs or other items. Accordingly, management believes that these measurements are useful for comparing general operating performance from period to period. Furthermore, our credit agreement contains covenants and other tests based on metrics similar to Adjusted EBITDA. Other companies may define Adjusted Net Trading Income, Adjusted EBITDA, Normalized Adjusted Net Income, Normalized Adjusted Net Income before income taxes, Normalized provision for income taxes and Normalized Adjusted EPS differently, and as a result our measures of Adjusted Net Trading Income, Adjusted EBITDA, Normalized Adjusted Net Income, Normalized Adjusted Net Income before income taxes, Normalized provision for income taxes and Normalized Adjusted EPS may not be directly comparable to those of other companies. Although we use these non-GAAP financial measures as financial measures to assess the performance of our business, such use is limited because they do not include certain material costs necessary to operate our business.

Adjusted Net Trading Income, EBITDA, Adjusted EBITDA and Normalized Adjusted Net Income should be considered in addition to, and not as a substitute for, Net Income in accordance with U.S. GAAP as a measure of performance. Our presentation of Adjusted Net Trading Income, EBITDA, Adjusted EBITDA, Normalized Adjusted Net Income, Normalized Adjusted Net Income before income taxes, Normalized provision for income taxes and Normalized Adjusted EPS should not be construed as an indication that our future results will be unaffected by unusual or nonrecurring items. Adjusted Net Trading Income, Normalized Adjusted Net Income, Normalized Adjusted Net Income before income taxes, Normalized provision for income taxes, Normalized Adjusted EPS and our EBITDA-based measures have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results as reported under U.S. GAAP. Some of these limitations are:

  • they do not reflect every cash expenditure, future requirements for capital expenditures or contractual commitments;
  • our EBITDA-based measures do not reflect the significant interest expense or the cash requirements necessary to service interest or principal payment on our debt;
  • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced or require improvements in the future, and our EBITDA-based measures do not reflect any cash requirement for such replacements or improvements;
  • they are not adjusted for all non-cash income or expense items that are reflected in our statements of cash flows;
  • they do not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations; and
  • they do not reflect limitations on our costs related to transferring earnings from our subsidiaries to us.

Because of these limitations, Adjusted Net Trading Income, EBITDA, Adjusted EBITDA and Normalized Adjusted Net Income are not intended as alternatives to Net Income as indicators of our operating performance and should not be considered as measures of discretionary cash available to us to invest in the growth of our business or as measures of cash that will be available to us to meet our obligations. We compensate for these limitations by using Adjusted Net Trading Income, EBITDA, Adjusted EBITDA and Normalized Adjusted Net Income along with other comparative tools, together with U.S. GAAP measurements, to assist in the evaluation of operating performance. These U.S. GAAP measurements include Net Income (loss), cash flows from operations and cash flow data. See below a reconciliation of each non-GAAP measure to the most directly comparable GAAP measure.

Virtu Financial, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2017 2016 2017 2016
(in thousands, except share and per share data)
Revenues:
Trading income, net$ 136,163 $ 166,547 $ 275,737 $ 352,836
Interest and dividends income 5,629 5,422 10,503 9,690
Technology services 3,107 2,212 5,886 4,293
Other, net (11) - 49 -
Total revenues 144,888 174,181 292,175 366,819
Operating Expenses:
Brokerage, exchange and clearance fees, net 52,899 55,573 105,669 115,298
Communication and data processing 18,985 17,953 37,192 35,675
Employee compensation and payroll taxes 17,365 20,809 38,712 43,366
Interest and dividends expense 14,934 14,097 27,214 27,634
Operations and administrative 8,946 5,736 13,792 10,655
Depreciation and amortization 6,798 7,800 13,555 15,527
Amortization of purchased intangibles and
acquired capitalized software 53 53 106 106
Debt issue cost related to debt refinancing 4,482 - 4,482 -
Transaction advisory fees and expenses 8,511 155 8,643 155
Reserve for legal matter (2,176) - (2,176) -
Charges related to share based compensation at IPO 179 516 364 1,111
Financing interest expense on senior secured credit facility 8,720 7,075 15,548 14,176
Total operating expenses 139,696 129,767 263,101 263,703
Income before income taxes and noncontrolling interest 5,192 44,414 29,074 103,116
Provision for income taxes 779 5,128 3,587 12,474
Net income$ 4,413 $ 39,286 $ 25,487 $ 90,642
Noncontrolling interest (3,512) (30,908) (20,006) (71,916)
Net income available for common stockholders$ 901 $ 8,378 $ 5,481 $ 18,726
Earnings per share:
Basic$ 0.01 $ 0.21 $ 0.11 $ 0.48
Diluted$ 0.01 $ 0.21 $ 0.11 $ 0.48
Weighted average common shares outstanding
Basic 40,814,214 38,230,684 40,607,791 38,220,390
Diluted 40,814,214 38,230,684 40,607,791 38,220,390
Comprehensive income:
Net income$ 4,413 $ 39,286 $ 25,487 $ 90,642
Other comprehensive income (loss)
Foreign exchange translation adjustment, net of taxes 4,852 (1,230) 5,637 1,264
Comprehensive income$ 9,265 $ 38,056 $ 31,124 $ 91,906
Less: Comprehensive income attributable to noncontrolling interest (6,901) (30,024) (23,945) (72,825)
Comprehensive income available for common stockholders$ 2,364 $ 8,032 $ 7,179 $ 19,081

Virtu Financial, Inc. and Subsidiaries
Reconciliation to Non-GAAP Operating Data (Unaudited)

The following tables reconcile Condensed Consolidated Statements of Comprehensive Income to arrive at Adjusted Net Trading Income, EBITDA, Adjusted EBITDA, and selected Operating Margins.

Three Months Ended June 30,Six Months Ended June 30,
2017 2016 2017 2016
(in thousands, except percentages)
Reconciliation of Trading income, net to Adjusted Net Trading Income
Trading income, net$136,163 $166,547 $275,737 $352,836
Interest and dividends income 5,629 5,422 10,503 9,690
Brokerage, exchange and clearance fees, net (52,899) (55,573) (105,669) (115,298)
Interest and dividends expense (14,934) (14,097) (27,214) (27,634)
Adjusted Net Trading Income$73,959 $102,299 $153,357 $219,594
Reconciliation of Net Income to EBITDA and Adjusted EBITDA
Net income$4,413 $39,286 $25,487 $90,642
Financing interest expense on senior secured credit facility 8,720 7,075 15,548 14,176
Debt issue cost related to debt refinancing 4,482 - 4,482 -
Depreciation and amortization 6,798 7,800 13,555 15,527
Amortization of purchased intangibles and acquired capitalized software 53 53 106 106
Provision for income taxes 779 5,128 3,587 12,474
EBITDA$25,245 $59,342 $62,765 $132,925
Severance - - 877 193
Reserve for legal matter (2,176) - (2,176) -
Transaction advisory fees and expenses 8,511 155 8,643 155
Termination of office leases - - - (319)
Other, net 11 - (49) -
Equipment write-off 544 - 544 428
Share based compensation 7,253 4,301 14,833 9,696
Charges related to share based compensation at IPO, 2015 Management Incentive Plan 1,373 1,505 2,798 2,701
Charges related to share based compensation awards at IPO 179 516 364 1,111
Adjusted EBITDA$40,940 $65,819 $88,599 $146,890
Selected Operating Margins
Net Income Margin1 5.7% 37.6% 16.0% 40.5%
EBITDA Margin2 32.8% 56.8% 39.4% 59.4%
Adjusted EBITDA Margin3 53.1% 63.0% 55.6% 65.6%
1 Calculated by dividing net income by the sum of Adjusted Net Trading Income and technology services revenue.
2 Calculated by dividing EBITDA by the sum of Adjusted Net Trading Income and technology services revenue.
3 Calculated by dividing Adjusted EBITDA by the sum of Adjusted Net Trading Income and technology services revenue.

Virtu Financial, Inc. and Subsidiaries
Reconciliation to Non-GAAP Operating Data (Unaudited)
(Continued)

The following tables reconcile Condensed Consolidated Statements of Comprehensive Income to arrive at Normalized Adjusted Net Income before income taxes, Normalized provision for income taxes, Normalized Adjusted Net Income and Normalized Adjusted EPS.

Three Months Ended June 30, Six Months Ended June 30,
2017 2016 2017 2016
(in thousands, except share and per share data)
Reconciliation of Net Income to Normalized Adjusted Net Income
Net income$4,413 $39,286 $25,487 $90,642
Provision for income taxes 779 5,128 3,587 12,474
Income before income taxes$5,192 $44,414 $29,074 $103,116
Amortization of purchased intangibles and acquired capitalized software 53 53 106 106
Financing interest expense related to KCG transaction 1,616 - 1,616 -
Debt issue cost related to debt refinancing 4,482 - 4,482 -
Severance - - 877 193
Reserve for legal matter (2,176) - (2,176) -
Transaction advisory fees and expenses 8,511 155 8,643 155
Termination of office leases - - - (319)
Equipment write-off 1,102 - 1,102 428
Other losses (revenues) 11 - (49) -
Share based compensation 7,253 4,301 14,833 9,696
Charges related to share based compensation at IPO, 2015 Management Incentive Plan 1,373 1,505 2,798 2,701
Charges related to share based compensation awards at IPO 179 516 364 1,111
Normalized Adjusted Net Income before income taxes$ 27,596 $ 50,944 $ 61,670 $ 117,187
Normalized provision for income taxes1 9,797 18,085 21,893 41,601
Normalized Adjusted Net Income$ 17,799 $ 32,859 $ 39,777 $ 75,586
Weighted Average Adjusted shares outstanding2 140,764,500 139,652,286 140,764,500 139,687,755
Normalized Adjusted EPS$ 0.13 $ 0.24 $ 0.28 $ 0.54
1 Reflects U.S. federal, state, and local income tax rate applicable to corporations of approximately 35.5%.
2 Assumes that (1) holders of all vested and unvested Virtu Financial LLC Units (together with corresponding shares of Class C common stock), have exercised their right to exchange such Virtu Financial LLC Units for shares of Class A common stock on a one-for-one basis, (2) holders of all Virtu Financial LLC Units (together with corresponding shares of Class D common stock), have exercised their right to exchange such Virtu Financial LLC Units for shares of Class B common stock on a one-for-one basis, and subsequently exercised their right to convert the shares of Class B common stock into shares of Class A common stock on a one-for-one basis. Includes additional shares from dilutive impact of options and restricted stock units outstanding under the 2015 Management Incentive Plan during the three and six months ended June 30, 2017 and 2016.


Virtu Financial, Inc. and Subsidiaries
Condensed Consolidated Statements of Financial Condition (Unaudited)
June 30, December 31,
2017 2016
(in thousands, except share data)
Assets
Cash and cash equivalents$ 164,934 $ 181,415
Restricted cash1 1,119,360 -
Securities borrowed 285,219 220,005
Receivables from broker-dealers and clearing organizations 385,368 448,728
Trading assets, at fair value 1,390,587 1,827,882
Property, equipment and capitalized software, net 33,000 29,660
Goodwill 718,521 715,379
Intangibles (net of accumulated amortization) 886 992
Deferred taxes 198,289 193,859
Other assets 77,681 74,470
Total assets$ 4,373,845 $ 3,692,390
Liabilities and equity
Liabilities
Short-term borrowings$ 13,000 $ 25,000
Securities loaned 345,184 222,203
Payables to broker-dealers and clearing organizations 397,904 695,978
Trading liabilities, at fair value 1,109,010 1,349,155
Tax receivable agreement obligations 231,639 231,404
Accounts payable and accrued expenses and other liabilities 131,304 69,281
Long-term borrowings, net 1,628,323 564,957
Total liabilities$ 3,856,364 $ 3,157,978
Total equity 517,481 534,412
Total liabilities and equity$ 4,373,845 $ 3,692,390
As of June 30, 2017
Ownership of Virtu Financial LLC Interests:Interests %
Virtu Financial, Inc. - Class A Common Stock 42,380,119 30.1%
Non-controlling Interests (Virtu Financial LLC) 98,384,381 69.9%
Total Virtu Financial LLC Interests 140,764,500 100.0%
1 Represents proceeds from capital raise held in escrow to fund KCG Acquisition.

About Virtu Financial, Inc.

Virtu is a leading financial firm that leverages cutting edge technology to deliver liquidity to the global markets and innovative, transparent trading solutions to our clients. As a market maker, Virtu provides deep liquidity that helps to create more efficient markets around the world. Our market structure expertise, broad diversification, and execution technology enables us to provide competitive bids and offers in over 12,000 securities, at over 235 venues, in 36 countries worldwide.

Cautionary Note Regarding Forward-Looking Statements

The foregoing information and certain oral statements made from time to time by representatives of the Company contain certain forward-looking statements that reflect the company's current views with respect to certain current and future events and financial performance, including with respect to integration of KCG and synergy realization. These forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and factors relating to the Company's operations and business environment which may cause the company's actual results to be materially different from any future results, expressed or implied, in these forward-looking statements. Any forward-looking statements in this release are based upon information available to the company on the date of this release. The Company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any statements expressed or implied therein will not be realized. Additional information on risk factors that could potentially affect the Company's financial results may be found in the Company's filings with the Securities and Exchange Commission.

CONTACT

Investor Relations
Andrew Smith
Virtu Financial, Inc.
(212) 418-0195
investor_relations@virtu.com

Media Relations
media@virtu.com

Source:Virtu Financial, LLC