Virtu Financial, Inc. Q2 FY2022 Earnings Call

Hello. And welcome to the Virtu Financial 2022 Second Quarter Results Call. My name is Laura, and I will be operating your call today. There will be an opportunity for questions at the end of the presentation. I will now hand you over to your host, Andrew Smith, Head of Investor Relations for Virtu Financial to begin. Andrew, please go ahead.

Thank you, Laura, and good morning, everyone. Thanks for joining us. Our second quarter results were released this morning and are available on our website. On this morning’s call, we have Mr. Douglas Cifu, our Chief Executive Officer; Ms. Cindy Lee, our Deputy CFO, speaking with you and they will begin with prepared remarks and take your questions. First, a few reminders, today’s call may include forward-looking statements, which represent Virtu’s current belief regarding future events and are therefore subject to risks, assumptions, and uncertainties, which may be outside the company’s control. Please note that our actual results and financial conditions may differ materially from what is indicated in these forward-looking statements. It is important to note that any forward-looking statements made on this call are based on information presently available to the company and we do not undertake to update or revise any forward-looking statements as new information becomes available. We refer you to disclaimers in our press release and encourage you to review the description of risk factors contained in our annual report, Form 10-K and other public filings. During today’s call, in addition to GAAP measures, we may refer to certain non-GAAP measures, including adjusted net trading income, adjusted net income, adjusted EBITDA and adjusted EBITDA margin. These non-GAAP measures should be considered as supplemental to and not as superior to financial measures as reported in accordance with GAAP. We direct listeners to consult the Investor portion of our website where you will find supplemental information referred to on this call, as well as the reconciliation of non-GAAP measures to the equivalent GAAP term in the earnings materials with an explanation of why we deem this information to be meaningful, as well as how management uses these measures. And with that, I’d like to turn the call over to Doug.

Good morning, and thank you, Andrew. This morning we reported our second quarter results. For the quarter ended June 30th, we generated $0.73 of adjusted earnings per share on $5.8 million per day of adjusted net trading income, bringing our results for the first half of 2022 to $2 per share and an average adjusted net trading income of $7 million per day. Our business performed well and exceeded our internal benchmarks. Both our global customer and non-customer Market Making, as well as our Execution Services franchises delivered solid results. Our firm is resilient and built to deliver what we consider excellent returns in all environments. We continue to see important success in our growth initiatives, which contribute significantly to our performance, again generating over $575,000 per day of adjusted net trading income from these initiatives, representing 10% of our adjusted net trading income in the quarter. Our options business, launched just a few years ago, is thriving and will continue to grow along with our ETF block crypto Virtu Capital Markets and other initiatives. These initiatives are working well, contributing to our adjusted net trading income from new revenue sources previously unknown, achieved by leveraging our scaled infrastructure and distribution channels, supplemented with a handful of new hires. In options Market Making, for example, we continue to improve our models, expand our simple universe, and have begun to interact with options routers in a limited way. Our triple-digit growth year-to-date is especially impressive, given the relative flatness of option volumes for the same period. We see our investments in options as a key long-term growth engine, complementing our core capabilities and expanding our addressable market through new revenue opportunities that utilize our existing Market Making business across products, asset classes, and regions. Our expansions into crypto are also progressing; our adjusted net trading income from crypto Market Making set a record for Virtu in the second quarter, despite a market-wide downturn in crypto. Our crypto desk remains focused on Market Making for major cryptocurrencies, including spot, ETFs, and futures. Additionally, we have created a new venture with Citadel Securities, Fidelity, and Charles Schwab to develop a crypto ecosystem for global investors. Together with investments from Sequoia and Paradigm, we believe this initiative will provide a stable and resilient ecosystem for crypto investing across established global brokerage platforms. Our global ETF block initiative is also contributing significantly to our results. Year-to-date, adjusted net trading income from ETF block has grown almost 20% versus the full year of 2021 as we expanded the symbols and markets we cover and onboarded new clients globally that require our liquidity. Collectively, our growth initiatives are making significant progress, raising our baseline performance in any market environment throughout the cycle. We continue to return capital to our shareholders through our ongoing share repurchase program. To date, we have repurchased a total of 27.4 million shares, totaling almost $800 million, and we remain aggressive in repurchasing shares daily with over $425 million of remaining capacity. Based on our current adjusted net trading income levels, we expect to repurchase this amount over the next 12 to 18 months. According to our guidance, we are on track to exceed our targeted buybacks for the year, especially following the opportunistic refinancing we completed in the first quarter. We anticipate share repurchases that align with the public buyback ranges for the foreseeable future. Year-to-date through June 30, we generated an average of $7 million per day in adjusted net trading income, totaling $2 in earnings per share and $553 million in adjusted EBITDA, both in line with our targets. We believe the range of outcomes we provided is sustainable through the cycle, reflecting the significant growth we have achieved to elevate our baseline performance through organic means and acquisitions. In line with our approach to disciplined expense management, we have successfully kept costs under control despite high inflation, resulting in a 58.6% EBITDA margin this quarter and 64.1% year-to-date. Looking at our segment performance, Market Making performed as expected given the volatility and mix of volumes during the period. Our diversified Market Making businesses performed well against their respective opportunities, particularly in customer Market Making, where we benefitted from our enhanced internalization capabilities. Our Execution Services business also met market opportunities this quarter, achieving $104 million in adjusted net trading income. Three years post the acquisition of ITG, we have improved and refined our platform technology to provide a comprehensive suite, reduced equity costs, and maintained our extensive blue-chip client base. Virtu Execution Services offers a fully complementary suite of products, streamlining costs, enhancing productivity, and managing operational risks. Increased adoption of our products provides a better client experience, strengthens our relationships, and improves client retention, ultimately helping us increase our share of wallet and expand our scale. We are confident that our global organization is well-equipped to make it easier for clients to integrate more of our products into their operations, presenting a promising growth opportunity. Before I turn it over to Cindy for our financial review, I’d like to address the recent statements and press reports regarding proposed changes to the U.S. equity market structure discussed by the SEC Chair. There are three key points I’d like to make regarding these discussions and comments on potential market structures. First, Virtu has publicly supported numerous ideas discussed in Gensler’s June 8th speech at the Piper Sandler Conference. We agree that exchanges should display quotes and that court must be included in the National Best Bid and Offer, and that disclosures and retail execution quality reports need significant enhancement and modernization. Second, there is currently no formal proposal tied to the ideas mentioned by the Chair in his speech. The SEC's rule-making process can take years from the time any formal rule-making process is introduced to the adoption phase and requires extensive data and thorough economic analysis to assess the impact on the U.S. capital markets, along with an adequate notice and comment period. This process is meant to ensure that market structure reforms are based on data rather than political motivations. Over the last 20 years, the SEC has examined the retail trading ecosystem multiple times, including payment order flow and wholesaling, and concluded that this system provides substantial advantages to retail investors. The law is clear: the burden is on Gensler to convincingly demonstrate that his proposals improve the ecosystem significantly. We believe that the suggestions made by the Chair will require significant adjustments and must be backed by adequate data and economic analysis before approval to withstand potential challenges. Third, if the current SEC Chair's ideas were to move forward as described, they would likely harm retail investors, retail brokers, institutional investors, public companies, and ETF providers. Virtu, with its extensive experience in providing Market Making services to retail investors, would remain competitive and opportunistically offer liquidity in this so-called retail auction scenario. The outcome could potentially save Virtu substantial amounts in exchange and ETF costs, as well as significantly improve prices and sizes for our clients. However, retail brokers and their customers would likely encounter uncertainty in execution and services currently offered, with liquidity potentially widening and thinning, similar to trends observed in other markets where competition has been restricted. These changes would likely reduce liquidity and increase spreads in thinly traded mid and small-cap securities, making it more expensive for investors to trade these assets and for issuers to raise capital. The proposed market structure changes could be detrimental in the long term, introducing more friction through increased intermediation and costs for investors—costs that previously limited younger and lower-income investors’ access to markets before the rise of zero-commission trading. As we and others, including retail brokers and independent analysts, have reiterated, there is considerable, relevant, and persuasive data showing that retail investors in the U.S. can choose from many reputable brokers offering competitive access to the largest capital markets with minimal to no fees. These contracts seem politically motivated and are based on incorrect narratives, misconceptions, and unfounded conclusions mislabeled as reforms for the benefit of investors. For these reasons and many others, we believe that if the SEC advances proposals aligned with the Chair’s public remarks, it will face significant resistance across the industry, potentially resulting in litigation. A substantial amount of credible evidence from diverse sources indicates that the current market structure and infrastructure, enhanced with sensible reforms, serves retail investors well. We will remain engaged in dialogue and advocate for policies promoting transparency, competition, investor choice, and superior execution quality. I will now turn the call over to Cindy Lee, our Deputy Chief Financial Officer, to take a closer look at our financials. Cindy?

Thank you, Doug. In the second quarter, as presented on slide three of our supplemental materials, our adjusted net trading income, which represents our trading gains, net of direct trading expenses totaled $357 million or $5.8 million per day, which is 6% higher than Q2 2021 and 29% lower than the first quarter. Market Making adjusted net trading income was $254 million or $4.1 million per day, 11% higher than the year-ago quarter and 34% lower than the first quarter. Execution Services adjusted net trading income was $104 million or $1.7 million per day, which is a 4% decrease year-over-year. Our adjusted EPS was $0.73 for the second quarter. For the second quarter, our overall compensation expense was $99 million or 5% less than Q1. Our cash and overall compensation ratios were 22% and 27% of adjusted net trading income, respectively, and were 19% and 23% year-to-date. Adjusted EBITDA was $209 million for Q2, 5% higher than the prior year quarter and 39% below the first quarter. Our adjusted EBITDA margin was 58.6% for the second quarter, which is down 9 points from the first quarter, but continues to be reflective of our efficient cost structure and disciplined expense management. Our capitalization remains adequate. Our long-term debt was $1.8 billion at quarter end, reflecting a debt-to-trailing EBITDA ratio of 1.7. Finance interest expense was $22 million for the second quarter of 2022, compared to $20 million in the prior year second quarter. We remain committed to our 20% quarterly dividend, which we have consistently paid over 26 quarters in every environment since our IPO. And our approximately $334 million share repurchase year-to-date demonstrates our continued commitment to return capital to our shareholders. I will now turn it back over to the Operator for Q&A.

Thank you. Our first question comes from Rich Repetto from Piper Sandler. Rich, please go ahead.

Good morning, Doug, Joe, and Cindy. Doug, my first question is about the volatility you experienced during the quarter. While the published metrics indicate that volatility was flat or slightly increased, I feel that doesn’t capture the entire situation. Could you discuss the trading environment in Q2?

Yes. Thank you. Very good question. I mean I think you do make the observation and the facts there that this is a very unique quarter and the volatility we saw this quarter was much more concentrated than we have seen in the past. In fact, the mean volatility in the quarter was 34% as you see, which is from quarter-over-quarter. But the median volatility from Q1 to Q2 was only up 2%. So that means that we had a very sharp period of extreme volatility driven by macro events and a few trading days, few opportunities for outsized returns and risk, etc. So really the way we look at it, quarter-over-quarter volatility effectively was flat and there was one less trading day this quarter. So there’s always a little bit of nuance if you look under the covers, and I think that kind of explains the performance this quarter.

Understood. Thanks. One follow-up regarding the powerful and detailed comments on regulation. My question is about size improvement because you've pointed out, and it's supported by others in the industry, that size improvement offers nearly double the benefit of price improvement.

I appreciate your comments, Rich. I feel strongly about these issues because I believe someone needs to take a stand. I have great respect for the Chair and his background, and this is not personal. However, I will always advocate for what is best for our firm and our clients. The ecosystem in this country has evolved over the last 30 years, providing significant benefits to retail investors, as we've outlined in our white paper regarding size improvement. The current 605 and 606 rules fail to capture the true impact of this. When an order is sent to a wholesaler, whether it's Virtu, Citadel, or others, we are required to fulfill that order, which we do, independent of the size on any National Securities Exchange. This is important liquidity, especially for small and mid-cap companies. Our 2020 white paper estimated that price improvement exceeded $2 billion in a selectively competitive market. If selective competition is proposed, as suggested by Gensler, there's no obligation for wholesalers or market participants to provide size improvement, leading to worse outcomes for retail investors and wider spreads for issuers raising capital. I am uncertain about the thought processes behind these recommendations and believe the responsibility lies with the SEC to prove that their approach is valid. The Chief Economist at the SEC is capable, but I doubt they can substantiate their claims against all available data. It's important for the SEC Chair to understand that changing 30 years of market structure is not simple. As market volatility increases, the services provided by wholesalers and the benefits of size improvement become even more crucial. We are puzzled by these suggestions and believe they stem from political motives. We encourage the Chair to consult with market participants to discuss reasonable reforms. While we acknowledge changes are necessary and have submitted our own proposals to the SEC, we've not received any response. It's essential to approach this with accurate data rather than politically influenced narratives. We want to assure our investors that the probability of these changes occurring is minimal and that any necessary adjustments by Virtu will be manageable. Our institutional clients, who are major asset managers, are confused by these proposals as well; they do not support tiny ticket sizes or fading quotes. We are comfortable with the current interaction with retail investors and find the Chair's statements lack factual support. In the coming years, we'll look back at this situation and likely see it as a lot of discussion that ultimately led to minimal changes.

Understood. Thanks for the color, Doug. Thanks.

Thank you. Our next question comes from Dan Fannon from Jefferies. Dan, please go ahead.

Thanks. Good morning. I do want to go back to the earlier question, just with regard to the environment. Maybe you brought it for the first half, because if you are looking at the metrics that you gave us on slide four and then I just kind of look at the ANTI from the first quarter, the second quarter decline. It doesn’t really match up, so I understand there are some specific things within maybe 2Q that were different, but can you talk about levels of internalization or other areas that were impacted more significantly, maybe in your business in the second quarter, because as I said, these external factors still don’t look nearly as down as much as what we are seeing in your numbers?

Yeah. I appreciate it, and I certainly superficially, I could see how you could say that. But if you look at the retail like on page four, if you look at the IBKR retail equity share volumes being down 17%, notional volumes being down 15%. And as I said 4Q, if you look at mean versus median volatility quarter-over-quarter, it was flat. So like on all of our internal metrics, we performed and are exposing, we have beaten guidance here as well to the extent that means anything. So the realized meaning Russell 2000 volatility was down 2% quarter-over-quarter. That’s significant, Dan. So I get it. You can look at realized volatility in a very superficial topline manner and say, okay, I don’t understand quarter-to-quarter results. But when you look under the covers and look at on page four, there are a whole number of indices like, I am looking towards the bottom of the page that the European and Japanese realized volatility being down 25% to 21%. Goldman Sachs’ commodities realized volatility index is down 34%. I mean there’s a whole host of global indices in the various products and services that we provide that were either flat or materially down quarter-over-quarter. So this quarter looks a lot like the second quarter of 2021. I think we performed exceptionally well and based on all of our internal metrics, we outperformed.

Okay. Thanks. And just to clarify, I think the statement you made 12 months to 18 months, I think it was something that you said to exhaust the buyback, and just want to make sure I heard that correctly and based on everything you are seeing in the environment, I think you have given us some quarter date metrics, the buybacks remains the primary use of excess capital and still no thoughts around M&A or other things that might be increasing in terms of priority here?

Yeah. Absolutely. Dan, great question. Yeah, that is exactly what I said. We have $425 million remaining in our program. We would think that would be exhausted in the next 12 to 18 months. We are in the market every day. We don’t try to time the market. Obviously, we use a great broker to attempt to get new app every day. Based on the public guidance we have given you in the materials, we have made here under $7 million per day, we are right on target. We were opportunistic. There was a shareholder in our block that we were able to purchase in the first quarter from a significant investor and we will continue to look to do that. But 100% our focus is on capital return, and so we have our dividend. We will continue the buyback program. The hurdle for any type of merger or acquisition is significantly higher because we think the shares, as I have said publicly for years, are significantly undervalued by the public markets, and so we think it’s incredibly lucrative and the right thing in our shareholders’ best interest for us to continue to buy back stock.

Thank you.

Thank you.

Our next question comes from Alex Kramm from UBS. Alex, please go ahead.

Good morning, everyone. I noticed that you removed the retail slide that was included last quarter. I would like to know your perspective on what you've observed in retail regarding participation and any changes in the types of retail you're seeing. It seems like retail was likely the biggest factor in the quarter-over-quarter decline.

No. I don’t think that’s the biggest driver. It certainly is a driver. We have a very large diversified business. I suppose we took the slide out after it is just public data and we then people focused, and they were exclusively a reseller, we are not. There’s significant demand. More than half of our revenue comes from not retail trading. But certainly, yes, that along with all the other metrics that I went through in response to Dan’s question earlier tends to drive results if you look at the Commodities Indices and what happened in Europe and Japan, and the other global indices and the fact that they were down quarter-over-quarter in terms of volumes and volatility, that will end up driving results. We continue to be very, very bullish on the future of retail. If you just look at 2019 pre-zero commission trading involvement as compared to what is the retail engagement today, you will see that the amount of retail engagement has significantly increased, it’s almost a 100% increase from the pre-zero commission, not for pandemic, pre-zero commission which happened in October of 2019 when our friends at Schwab worked at zero commission and then a bunch of competitors matched them, creating the new norm in the industry. This introduced investing to a whole new class of investors, young, previously underbrokered and underbanked individuals. We think that is a systemic change. No one has ever shown me evidence that it’s not. We are not putting that genie back in the bottle. We are not going to go to a marketplace where people don’t have access on a smartphone to the U.S. equities market and these are the markets. But again, we are a very large diversified Market Making business. I am very proud of what we do in retail, I am obviously going to be a spokesperson and we will continue to be spokespeople for the industry and for our clients. But we run a very large diversified business and I am happy to talk about the other segments as well.

Very good. Thank you. And thanks for the status of retail validates the other businesses. That’s definitely helpful. And then just maybe this is more of a numbers question, but you obviously have that slide that gives the various scenarios in different ANTI environments. Just curious why if you look quarter-over-quarter, those I guess scenarios changed a bit. So, for whatever reason, the OpEx is higher in particular the low end, the EPS is lower, the EBITDA is lower. So just wondering what changed quarter-over-quarter in those scenarios and then maybe just a quick other data question. I saw share-based compensation or stock-based compensation increased quarter-over-quarter, just curious why that will be up in a lower revenue and earnings environment? Thank you.

Yeah. I will ask Cindy to answer the second question which is, I know there were some technical reasons why we had to recognize some stock-based compensation in the second quarter. Cindy?

Yes. Yes, Doug. In the second quarter, we have to accrue a percentage of share-based compensation piece of performance and these of the incentive compensation. That’s why it increased compared to the previous quarter publication.

I think we can discuss the first question later, but there were some slight increases in operating expenses. Nothing significant stands out, and I can't pinpoint any specific item; it might just be a couple of million more here and there. Overall, given the current inflationary environment, we are trying our best to maintain our position. So let's plan to follow up later, as nothing has particularly struck me, Alex.

Yeah. Makes sense. And I know it’s just for illustrative purposes anyways. So thanks again.

Yeah. Yes. Thank you.

Our next question comes from Michael Cyprys from Morgan Stanley. Michael, please go ahead.

Hey. Good morning. Thanks for taking the question. I wanted to ask and talk about the options Market Making business, I know that’s a big focus and priority for you guys. So just curious how many single-name tickers are you guys making markets in today on the options Market Making side? And maybe just any color how that compares to a year ago and any thoughts on where you would like that to be looking out three years or so or some timeframe? And maybe you could talk a little about some of the actions you are taking that would allow you to increase the number of upticks that you are making markets in today on the option side? Thank you.

Yeah. Yeah. Thank you. It’s a great question and you are right, it’s obviously a key growth area. I mean we hadn’t been at all really an options market maker three years ago, and certainly, two years ago, we were just getting started. So I am very, very proud of the folks in that group here in New York and in Singapore because we truly become more of a global firm. They will kill me if I give an exact data to we are going to start expanding symbology. The answer is, right now, we are trading dozens of individual names. We try to improve and increase that every day. As I mentioned in my prepared remarks, we are now interacting with routers, which is the first step towards having a more broad, what we call retail options Market Making business. We have learned an awful lot. We have improved our tools. As I said before, we re-engineered and re-architected all of our technology to be competitive. I can’t be really more pleased with the progress we have made both in cash, equity options, as well as what we learned in the options Market Making to other regions as other asset classes. I said previously that we have launched index options Market Making in Asia. So I am not going to give a definitive date and say, by the next quarter of next year, we are going to be full hog into the 605 options business, because that would frankly be irresponsible of me, because I frankly don’t know right now. It really depends on how we continue to grow, what the market opportunities look like, what our clients are asking us to do and how the market structure continues to evolve. The good news is that it is a meaningful growth area. If you had said to me two years ago that we were going to have near a nine-figure adjusted net trading income business in options, I might have questioned whether that was feasible. But that’s where we are; we are full at, and so I am very, very proud of what we have accomplished. Everybody can look at the marketplace and look at the volumes and competitors and say, this is a very significant opportunity for the firm. I continue to be very, very bullish on it. We are going to work our tails off to accomplish it.

Great. Thank you. And just maybe a follow-up question on fixed income. Maybe you could just provide a little bit of color on how meaningful that contributed in the quarter relative to the first quarter and maybe you could talk a little bit about some of the initiatives that you have going on on the fixed income side? Thank you.

Yeah. Great question. It’s still very early in fixed income. I mean, where options rose a couple of years ago. So very, very nascent, good group. We have got some lateral hiring. We have established connectivity to electronic fixed income markets like market access, and obviously, Bloomberg and Tradeweb. More importantly, we are onboarding clients and we have done our first portfolio trades for clients of corporate credit, which again, instead, I never thought I would say even as recently as a year ago. I am very proud of the accomplishments we have made there. It’s a big asset class obviously. Historically it has been dominated by dealers who are a number of our competitors that are very meaningful in it. It is important to us because it’s a large asset class. But more importantly, it is part of what we offer as a global ETF market maker. In order to be in that business, we concluded that we needed to have a corporate credit capability as well because there are a lot of fixed income ETFs both here, Europe, and in Asia. So we just needed to be in that marketplace and it was done methodically and strategically. It is not at all the material part of what we do today, but I am optimistic that it will grow the same way our options capability has grown.

Great. Thank you.

Thank you.

Our next question comes from Paul Gulberg from Bloomberg Intelligence. Paul, please go ahead.

Yes. Good morning, and thank you very much for the commentary. Quick questions on the crypto, which is kind of broader in terms than just Virtu and given the good joint venture with Citadel and other partners. Looking to see where you would look to differentiate from the entire ecosystem, because everybody’s from both sides trying to get into the space. The crypto guys trying to get into equities and options trading, and the traditional players are looking into crypto. So where is the differentiation we should look for?

Yeah. Look, it’s a great question. We are very, very excited about this venture. We have got some incredibly talented partners. We have partnered again with our main competitor, Citadel Securities, that just shows you how when we need to collaborate on something, we need to collaborate. This is client-driven. So clients come to us and said, we recognize that this is an asset class that’s not going away. I am not commenting on whether Bitcoin is going to be a 1,000 or 100,000, I don’t know, and frankly, I am either not really interested in it. But when clients come to us and say, we have both retail and institutional interest in this asset class. We are not satisfied. We trust you guys. You have done a great job for us in equities, and in Citadel’s case, they have done a great job in options and in other asset classes. We know that you will architect this the right way. We have got great potential partners that have a great relationship with Citadel, our partners and have an unbelievable understanding of the marketplace. So the goal of this venture is to create a reliable and stable ecosystem around crypto. That is client-driven, whether that’s an indictment, or a reflection of the competitors in the marketplace? I don’t really know and I don’t really care. I know clients come to us and say, we want you to do something. If you do it properly, we will trade on that venue, and therefore, you will be part of that as a partner in it. More importantly, we will have more confidence in that ecosystem, and so therefore, we will send more client flows there, and that’s a Market Making opportunity for Virtu Financial. So it’s a strategic initiative on our part. Your second question is about crypto players becoming stock trading venues. I support that. That’s exciting. It’s great. It brings more people into the marketplace. It’s a very crowded field. So I wish them luck. But more people trading is not only a good thing. We have relationships with FTX and Coinbase and everybody else. So, if they start trading cash equities and options, god bless them; more power to them; bring more investors into the market in a sensible, safe and transparent manner. We are all in favor of that.

Thank you. Our next question comes from Alex Kramm from UBS. Alex, please go ahead.

Yeah. Hello, everyone. Again, I guess, it looks like a lot of people tied up. So I figured I'd come in for a follow-up, so a couple of them. First of all, you mentioned, Doug, three years of ITG integration, the Execution Services business doesn’t get a lot of attention from investors. I think a lot of people still think this is predominantly a U.S. equities business, and I know it’s not. So maybe a quick reminder, where that business stands today in terms of the biggest buckets or where it makes money? And then what the biggest opportunity sets are that you are kind of like going after right now?

Thank you for the great question. To revisit the past, we initiated a modest offering by acquiring Knight, which primarily catered to U.S. hedge funds with a focus on high touch and low touch services. We recognized the potential to enhance this model and envisioned a global, integrated financial products business. This led us to buy ITG, a respected firm that needed significant technological upgrades. Acquiring ITG presented challenges as it was once a market leader facing difficulties, similar to Knight Capital. We have since integrated it and achieved substantial cost reductions. Currently, we believe we are the leading non-big bank firm in this space. We operate as an execution-only entity without prime services, calendars, information technology, or research. Our margins in this business are likely industry-leading. We have streamlined offerings by integrating Knight and ITG algorithms into a single platform, allowing us to offer a comprehensive financial services package with both high and low touch execution. We rank among the top ten brokers in the U.S. and Europe despite lacking prime and research services, which is quite exceptional. Our growth strategy includes selling more products and services to existing clients through execution management services and analytics. The revenue from our Virtu Execution Services predominantly comes from commissions, with a significant portion derived from recurring, subscription-based workflow solutions. The aim is to engage global clients who utilize multiple products, as this yields higher revenue per client. We encourage using our various offerings, including trial analytics, commission management, and our block trading capabilities. The delivery of these integrated services provides clients with exceptional execution capabilities. I commend our Execution Services team for their tremendous work in transforming our operations while maintaining service continuity. I am pleased with our progress and grateful to our clients for their trust during this enhancement process.

Very good. Thanks for the update. And then, just lastly, you get on these calls, and it sounds little bit like a broken record in a positive way, I guess that the stock is undervalued and you think it’s the best investment, so not really interested in M&A right now. So I guess the question is, like, why do you think it still makes sense to be a public company? Why do you need that currency? If you think the stock is still undervalued, a lot of your peers are obviously private, some of your peers have gotten investments, some real blue-chip investors out there. So is that something that crosses your mind and does it eventually make sense if it doesn’t feel like the public market really gets the story that you are trying to tell us?

It's a good question and quite clear. For the record, we have no plans to go private. As a former M&A lawyer, I'm aware of the complexities and will be cautious with my words. We are very pleased with our status as a public company, which has allowed us to raise significant capital. It's truly humbling to recognize the trust that both debt and equity investors have placed in us, enabling us to make two transformative acquisitions of outstanding businesses that we couldn't have matched on our own. It's frustrating that public investors seem to overlook our growth narrative, but I believe strongly in the firm that I co-founded with my partner. We have successfully increased our earnings per share from around $1 prior to the acquisitions to $2 in the first half of 2022, despite experiencing a contraction in multiples since going public. We've set ambitious goals and demonstrated how we've achieved them while maintaining our expense base better than our competitors, reducing headcount and returning capital to shareholders. I remain confident in the public markets and believe that investors will eventually recognize our value. This quarter exemplifies our performance in a challenging environment where, despite volatility, we still achieved $0.73 per share. When I consider this, it doesn't make sense to me that the stock doesn't reflect a higher price than it was yesterday. Therefore, I'm evaluating whether to invest in a competitor or to buy back our stock, which I believe is undervalued and beneficial. I will continue to choose the latter until I see a reason to change.

All right. Thanks for your thoughts.

Thank you.

We currently have no further questions. So I will now hand it back to the management team for closing remarks.

Thank you very much and thank you everybody very much for your interest in Virtu. We look forward to speaking with you in the fall. Have a great day.

This concludes today’s call. Thank you for joining. You may now disconnect your lines.