Hello, everybody, and welcome to the Virtu Financial Third Quarter 2025 Earnings Call. My name is Elliot, and I'll be coordinating your call today. I'd now like to hand over to Andrew Smith, Head of Investor Relations. Please go ahead.

Thank you, Elliot, and good morning, everyone. Thank you for joining us. Our third quarter 2025 results were released this morning and are available on our website. With us this morning are Mr. Aaron Simons, our Chief Executive Officer; Mr. Joseph Molluso, our Co-President and Co-Chief Operating Officer; and Ms. Cindy Lee, our Chief Financial Officer. We will start with prepared remarks and then take your questions. First, a few reminders. Today's call may include forward-looking statements, which represent Virtu's current beliefs about future events and are therefore subject to risks, assumptions, and uncertainties 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 mention that any forward-looking statements made during this call are based on information available to the company at this time, and we will not update or revise any forward-looking statements as new information becomes available. We encourage you to review the disclaimers in our press release and to examine the description of risk factors in our annual report, Form 10-K, and other public filings. During today's call, in addition to GAAP measures, we may reference certain non-GAAP measures, including adjusted net trading income, adjusted net income, adjusted EBITDA, and adjusted EBITDA margin. These non-GAAP measures should be viewed as supplemental and not as a substitute for financial measures reported in accordance with GAAP. We direct listeners to the Investor section of our website, where you will find additional supplemental information mentioned in this call, as well as a reconciliation of non-GAAP measures to the equivalent GAAP terms in the earnings materials, with an explanation of why we consider this information significant and how management utilizes these measures. And with that, I would like to turn the call over to Aaron.

Thanks, Andrew. Good morning. Let me begin by noting this quarter's prepared remarks are brief in order to leave more time for questions. As usual, all relevant performance data are included in our earnings release and supplemental material. Before I turn it over to Cindy to discuss our results, I just wanted to make a few high-level remarks to orient everyone as the company's direction moving forward. Over the past several years, we have completed major integrations, established trading in new asset classes and returned significant capital to shareholders. Our edge in the market is created by our technology, our risk management and our operational efficiency. Additionally, as a business, we carry over our attention to detail to expense management as well as our client relationships. None of that is changing. However, now we feel ready to focus on growing our trading results through investing in our infrastructure, acquiring talent and expanding our capital base. Importantly, this will not be limited to a small number of previously highlighted growth initiatives, rather an overall focus on growth everywhere in the firm. You may recall in the past, we have provided earnings scenarios at different levels of adjusted net trading income in the range of $6 million to $10 million per day, and our goal is to grow our business to trend toward the higher end of this range as a base case. Just on a personal note, I took over the role of CEO on August 1, almost exactly 17 years after first starting at Virtu. An unbelievable amount has changed since then, and somehow now is always the most exciting time to be a part of this company. With that, I'd like to turn it over to Cindy for details on this quarter's performance.

Thank you, Aaron. Good morning, everyone. Turning to this quarter's results. The firm reported normalized adjusted EPS of $1.05, adjusted net trading income or ANTI was $467 million or $7.4 million per day, predominantly driven by a positive operating environment, which has persisted for most of the year as well as a renewed focus on growth. Market Making reported ANTI of $344 million, or $5.1 million per day, driven by strong performance across all businesses, particularly global equities, cryptos and currencies and commodities. We're also seeing continued momentum in Virtu execution services and are excited about our work expanding the VES product set to include multi-asset class capabilities. VES reported ANTI of $123 million or $1.9 million per day, marking its best quarter since early 2021 and a sixth consecutive quarter of increased ANTI. Earlier this year, we noted goal of $2 million per day through the cycle for VES. We're encouraged by VES performance and consistent quarter-on-quarter growth regardless of the environment. VES offers market-leading financial trading products globally across the entire lifecycle of a trade. Notably, VES has a suite of workflow and analytics products led by Triton which was recently awarded the top spot in Trade 2025 EMS survey for the third year in a row. These products represent a strong embedded base of revenue. On a trailing 12-month basis, the workflow and analytics business generated $137 million of ANTI. In terms of legacy revenue disclosures, we achieved strong results on our existing growth initiatives, which delivered ANTI per day that was slightly ahead of the prior quarter. While the areas included within the existing growth initiatives are important and represent businesses that have grown meaningfully over the years, we will look to grow more rapidly in all areas of our business. While we will, of course, maintain our annual dividend, we will seek to grow our capital base to take advantage of the trading opportunities as they arise. Now we can turn it over for Q&A.

First question comes from Patrick Moley with Piper Sandler.

Welcome, Aaron. I'm really looking forward to working with you. So I have a 2-part question. First, I appreciate all the disclosure around the focus shifting to growth opportunities. I was hoping you could break that down for us a little bit more and maybe speak to some of the areas where you see the most significant opportunity for growth. How much of that is going to be expanding into existing areas where you already have a presence versus entirely new opportunities? And then as a second part, you mentioned in the deck that you'll look to dial back share repurchases in order to build more capital. I was hoping you could flesh out for us maybe how much capital you could potentially be looking to build and what that means for your longer-term capital return priorities?

Sure. Thanks, Patrick. I think it's hard to predict in advance. We've always been a firm that reacts to the opportunity that's in front of us. So currently, I think there's a pretty good growth opportunity everywhere in the firm. I mean, obviously, the areas that we've highlighted previously, like crypto, options, ETF block continue to be fast-growing areas, especially given the environment. And so you'll probably continue to see growth there. In terms of the additional capital, I think we provided in the supplemental materials already in 2025 through retained earnings as well as debt financing, we've raised over $500 million of new trading capital, which has already been immediately deployed. I think in terms of a long-term plan, we want to significantly grow the P&L. So if we look at our return on capital rates, they've always been in the upper 60s to 100% return on capital. So if we want to double the P&L of the firm, we're probably going to have to double the capital base. But that's a long-term plan. It may take a few years. And if you look at the reports of the free cash flow that the business generates, I think there's pretty significant opportunity to just accumulate that organically over time. And we've always been incremental in our approach to growing, and we'll just continue to do that.

We now turn to Alex Blostein with Goldman Sachs.

Aaron, a warm welcome to the call. I would love to get just a little bit more meat around those bones. Obviously, it sounds like it's a bit of a pivot in the strategy. And I guess a multipart question on this. But I guess first is why now? What prevented Virtu in the past from going after these opportunities that you feel like this is the right time to sort of do this today? And when you think about the existing asset classes, you spoke about, obviously, the newer things, whether it's digital and crypto or options, we know you guys have been on the path for a while. But when you think about the traditional kind of market-making businesses that you're already in, do you see an opportunity to accelerate market share gain within that as well? And what would it take, I guess, for you guys to do that?

Yes, I can answer some of that. So as to the why now question, well, there's not like a step change, but there's been like a confluence of factors. So over the past several years, we've pulled off some pretty large integrations and a lot from a technical standpoint, some from a people, cultural standpoint, added significant new business lines. And now that we sort of have a handle on that and things are coming to an end, we're able to refocus some of our talent base on attacking new opportunities. So that's certainly part of it. The world hasn't gotten quieter. So there's definitely just been an uptick in overall external opportunity. And so we just sort of feel it's the right time. And I think the employees are excited about refocusing on growth. In terms of the areas, like obviously, the ones I highlighted, but yes, in our core businesses, there's definitely room to grow. So one of the things that we've always done, right, is that our platform is scaled. It operates the same way everywhere in the world. It's sort of easy for us to redeploy to new asset classes with flexibility. and compete technologically in any market. So when you say our core business, even that encompasses many, many different types of trades in different areas. So there's always like interesting new corners of the markets. There's always like sort of idiosyncratic opportunities in ETF trades or foreign markets or commodities. And we're always just going to try to adapt to what's in front of us and just focus on our processes.

Alex, I would like to add that the areas we previously identified for growth continue to show promise. While we have provided those figures, the key point is to recognize that this includes options, crypto, ETF blocks, and rates, without excluding other parts of our business. We included the capital management priority slide in our supplement, which also relates to Patrick's question. Our management team has established a strong long-term track record of effective capital management, integrating acquisitions, operating a scaled business, and selectively growing various sectors. With Aaron leading, we see an expanding set of opportunities, which we will discuss during this call. However, we did not want to restrict our perspective to just a few previously mentioned growth initiatives.

Right. Right. And then as in addition to capital, do you guys anticipate there is a larger OpEx lift that this will be required? Or do you think you can largely leverage the existing footprint so the incremental revenues presumably will come in at a fairly high incremental margin?

You should still observe very strong positive operating leverage in our business. This does not mean we won't need to attract and retain top talent, nor does it imply we are committed to a specific compensation-to-net-revenue ratio as seen in the past. I believe it will remain reasonable and resemble past patterns. However, if growth occurs, it will be due to very high levels of positive operating leverage and solid growth. There's no significant change expected; as Aaron mentioned, we have always approached things incrementally, and we will continue to do so.

We now turn to Elia Bud with Bank of America.

Aaron, congrats on the new role. Craig and I look forward to working with you. You highlighted options as an area where there will be a larger focus on growth going forward. I was wondering if you have a timeline in mind for when Virtu can start customer market making in options. Is that a near-term 2026 objective or more of a 5- or even 10-year target? And then could M&A be part of your roadmap in options?

Sure. We are not specifically aiming to engage in customer market making. If our business scales and becomes more profitable, we would have the necessary infrastructure and relationships to explore that opportunity. However, our main focus is on excelling in options trading, and we will see where that takes us.

Yes, in terms of mergers and acquisitions, it relates back to our priorities in capital management. If you review our history, we've utilized leverage and capital to make two significant and highly beneficial acquisitions that are essential to Virtu's current standing. We have also employed our capital for share buybacks when we deemed our shares were undervalued. Currently, we are using our capital for growth. If an opportunity arises where the returns from an M&A deal exceed the opportunities we currently see, we will consider it. We have a history of prudently pursuing such deals without overpaying. Our past acquisitions involved acquiring volatility at low prices, making the initial purchase attractive, and the execution has been strong in delivering value and synergies. Right now, nothing we are examining competes with Aaron's strategy for revenue growth. Consequently, any additional capital will be directed towards growing the business, as our ultimate goal is to enhance shareholder value through effective capital allocation.

Got it. And for a follow-up, can you hit on the revenue capture in the Market Making segment this quarter? Your 605 quoted spread opportunity declined 3% sequentially, but your Market Making revenue fell 26% sequentially. Like how should we reconcile that delta there?

It is always good to kind of look at that. I think there's a great focus on the retail business. Some very smart guys in a research report yesterday wrote that we sit downstream from a long-term secular trend in retail, and we agree with that. But the way we look at it is we performed well against the opportunity overall. Yes, those indicators were down, the volumes and volatility as well as the 605 reports showed declining activity, but we're very happy about how we performed. And I think I mentioned that focus on retail because if you look at our performance this quarter overall, there's always this hyper focus on retail, but our business is a lot broader, right? We have a global operation in multiple asset classes around the world. We did very well in crypto. We did very well in our proprietary Market-Making business in commodities, for example. We haven't talked about VES, right? So I think if you look at us, I think there's this hyper focus on retail for good reason, but there's a lot more there.

We now turn to Chris Allen with Citi.

I wanted to ask on the third quarter results. I think in general, people, the results were outperformed expectations given the environment realized volatility. I'm just wondering, obviously, you raised some capital during the quarter. You noted that it's been deployed, what impact that had? And then any color just on the sequential improvement in the organic growth initiatives or opportunities where there were the best tailwinds this past quarter.

Yes. It's challenging to pinpoint the exact impact of the new capital. The debt raise occurred on September 23, close to the end of the quarter. On Slide 4 of the supplement, we reported a 95% return on our capital, meaning that any additional dollar we invested this quarter yielded a 95% return, including capital from earlier in the year. As for performance highlights, crypto was particularly strong, and we anticipate that trend to continue. We also saw robust performance in options and a solid quarter in ETF blocks. Overall, our growth initiatives performed slightly better than in the second quarter. Moreover, VES is demonstrating growth across various environments, and Steve Cavoli has done an outstanding job, positioning that business for success.

Got it. Just as a follow-up, when we think about increased capital deployment moving forward, are you considering developing new strategies for addressing some of the existing businesses, or is this just about putting capital to work with your current strategies?

It's all of the above. I want to emphasize that we are not looking to take on additional risk. Everything is within the risk parameters that we have traditionally found comfortable in our roles as a market participant, liquidity provider, and service provider. It mainly involves leveraging our current infrastructure and connectivity. However, we will have more capital to deploy and additional talent to develop strategies. That is how I would describe it.

We now turn to Dan Fannon with Jefferies.

I wanted to clarify a few things. As we evaluate Virtu's strategy over the past couple of years, we've observed more consistent results and less fluctuation. With the shift towards deploying more capital, do you anticipate increased variability in quarterly revenue and ANTI EBITDA, or do you think this will lead to more stable results? What is the ultimate goal here?

The goal is to aim for the higher end of the range we've shared in the past regarding net trading income. This is always a challenging question for Virtu because it depends on the timeframe you're considering. Whether it's daily, weekly, monthly, or quarterly really matters. As mentioned, the objective is to lean toward the high end of that range as a baseline. While there may be more variability, I don't see that as a sign of being less predictable or less volatile. We operate in a volatile industry, and that will continue. Interestingly, I don't perceive the past year or two as being less volatile. We've effectively grown the business, and now we're poised to accelerate that growth.

Okay. And then just to clarify some of the other questions. So as we think about now you're deploying more capital today, you're going to obviously accrue more capital. Where do we think about the level of investment? So level of investment will go with the revenue opportunity. We don't need to invest today more based upon having more capital wanting to do more. So I just want to understand the timing of new investment in terms of people, strategies, all these things versus the revenue opportunity. Are those in line with each other or one comes before the other?

Mostly in line, Dan. I wouldn't say there's any long-term delay here. That said, as I mentioned in response to your previous question, we remain a volatile business, and the environment will significantly influence our performance. Consequently, it will be challenging to distinguish between the noise associated with the environment and the effects of additional talent and capital. This is an age-old question for us; over the long term, we are trending upwards towards the high end of that range. There will definitely be fluctuations from quarter to quarter, but any plans we pursue won't require a multi-year investment before we start seeing results. While it's not immediate, it should generally align with expectations.

We now turn to Ken Worthington with JPMorgan.

So the stock price has dropped a lot more recently. You've clearly highlighted routine earning growth strategies are the priority. How do opportunistic buybacks play into capital management when you see big declines in the stock price like we've seen more recently?

Ken, we believe that the current opportunity presents the best way to utilize our additional capital effectively. Our primary responsibility as business managers is to enhance the stock price and maximize value. We collectively agreed that investing in the business is the most effective approach to elevate the stock price to its potential. For a significant period, we felt that our incremental capital was best used for stock repurchases. We are not dismissing any options publicly; we still have available funds under our buyback authorization, and as shares vest from compensation plans, we may aim to offset the effects to prevent share dilution. However, our clear focus is on using our incremental funds for business growth and maintaining our capital base.

Okay. Perfect. made it crystal clear. The other narrative that was sort of going around was tokenization. So maybe how is Virtu positioned for an increase in tokenized assets moving on-chain? Sort of what is your right to win? Will the infrastructure that you have need to change to support this sort of transition to tokenization? And if so, maybe to the prior question, what sort of incremental investment is required if the world moves to more tokenized on-chain assets?

Yes, I can answer that. I mean I think it fits with our current business. So we're very active in many crypto markets around the world. A lot of them obviously are the centralized exchange model, but we do participate in some direct on-chain interactions. We're partnering with people in terms of various interesting initiatives like we're part of the PIT Foundation, more part of the Canton network. So we're always active in developing new interesting trading infrastructure. And I think with regards to this and other sort of new opportunities, like everyone is talking about prediction markets, anything that is trading electronically and has sufficient depth of liquidity, we stand ready to make markets and our technology is adaptable to all of those opportunities. So we're excited about it.

We now turn to Michael Cyprys with Morgan Stanley.

I recall in the past that we heard that doubling the capital base wouldn't necessarily double earnings. So curious what's changed in that regard? And what areas or what would be the top few areas that you anticipate allocating more capital toward? Like how might you rank order or prioritize that? And maybe you could touch upon some of the areas where you're looking to hire?

Yes. Michael, I believe we included a slide in the supplemental materials. We have demonstrated our capability in capital allocation, committing it to the most effective uses, whether through acquisitions, integrating those acquisitions, or buying back our stock. Previously, we pinpointed growth areas, successfully expanded businesses from $0 to over $100 million, and enhanced our capital base. The market has evolved, and I feel we are ready now. We may not have been prepared in the past, but our scaled infrastructure and capable team, along with our new CEO who is focused on growth, position us well to pursue this strategy.

There are many positions available, and we are actively hiring developers, which is crucial for our business. While it's a broad term that I dislike, we're particularly focusing on hiring quants and traders. Essentially, we are looking to strengthen every aspect of the business. Referring back to Joe's response, I believe it's important to consider the previous comments in context. It's not as simple as receiving double the amount of capital and automatically generating twice the profit. The reality is that while we can increase earnings with additional capital, it demands considerable effort. This includes bringing in more personnel, enhancing our strategies, and expanding our infrastructure. It's not a straightforward process where more money instantly translates to more returns, but we are enthusiastic about the work ahead and the potential for business growth.

And what areas do you expect to allocate that capital to more meaningfully than others? How do you think about prioritizing that? And when you think about doubling the earnings, what areas do you think will be meaningfully contributing towards that?

It will be flexible and influenced by market conditions. For instance, in the crypto space where we've seen significant success, the market is fragmented, which requires more capital intensity due to the lack of settlement utility and the presence of multiple venues. The ETF block is a substantial part of our business that has also grown well, and inherently, it is more capital intensive. Therefore, our capital allocation will depend on the end market characteristics, prime brokers, venues, participants, and trading formats. U.S. equities, particularly the 605 business, operate in a very capital-efficient manner. While we expect to grow in all areas, our capital usage will focus on regions where it is necessary for growth, such as commodities and foreign exchange, which vary based on market structure and conditions. Ultimately, our approach will be determined by the dynamics of the market and the characteristics of the end markets.

That's all the time we have for questions. I'll hand back to Aaron Simons for any final remarks.

Thanks, everyone, for joining. Hopefully, this is informative, and we look forward to seeing you next quarter.

Ladies and gentlemen, today's call has now concluded. We'd like to thank you for your participation. You may now disconnect your lines.