Virtu Financial, Inc. Class A Aktie

Hello, everyone. Thank you for joining us, and welcome to the Virtu Financial Second Quarter 2026 Earnings Call. [Operator Instructions] I will now hand the conference over to Matthew Sandberg, Head of IR. Matthew, please go ahead.

Thank you. Good morning. Our second quarter 2026 results were released this morning and are available on our website. With us today on this morning's call, we have Aaron Simons, our Chief Executive Officer; Cindy Lee, our Chief Financial Officer; and Joe Molluso, our Co-President and Co-Chief Operating Officer. We will begin with brief prepared remarks and then 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'll find additional supplemental information referred to on this call as well as a reconciliation to non-GAAP measure -- 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.

With that, I'd like to turn the call over to Aaron.

Thank you, and good morning. A year ago, we announced our plans to pivot towards growth, including investing in infrastructure, acquiring talent and growing our capital base. I'm happy to report substantial progress in that direction. We have made investments in power and compute and have begun to establish select partnerships via investment. Our talent acquisition efforts are proceeding as planned. We are reestablishing our reputation as a firm run by technologists and traders. And as a result, attrition rates are at multiyear lows. Following our recent opportunistic term loan increase as well as 12 months of retained earnings, our total trading capital stands at $3.4 billion, up from $2 billion a year ago. We continue to find new ways to leverage our technology to productively deploy our growing pool of capital across all markets, and we'll continue accumulating trading capital for future growth through free cash flow. We have provided additional perspective on the quarter in our detailed financial supplement, and we'll be answering your questions shortly.

First, Cindy Lee, our Chief Financial Officer, will review the financial results for the quarter.

Thanks, Aaron, and good morning, everyone. For the second quarter of 2026, we generated adjusted net trading income or ANT of $11.6 million per day or a total of $718 million per day. Market Making reported ANT of $9.4 million per day, while Execution Services reported an ANT of $2.2 million per day. Both of our operating segments continue to benefit from favorable market conditions and strong execution by our teams. Our profitability this quarter was robust. We generated $437 million in adjusted EBITDA, representing a 61% margin. Adjusted EPS was $1.82. Over the last 12 months, we have recorded ANT per day of $10.4 million, adjusted EBITDA of $1.7 billion and adjusted EPS of $6.96. All of these numbers represent all-time highs for Virtu from a trailing 12-month perspective.

On Slide 6 of our supplemental materials, we provided a summary of our operating expenses. Through June 30, our cash compensation ratio is 23% of our total -- and our total compensation ratio is 28%. Again, these are the levels that we have stated would be appropriate in the near term. Turning to capital. Our invested capital stands at $2.9 billion as of June 30, while generating an average return of 106% over the past year. As Aaron mentioned, we upsized term loan in early July, raising an incremental of $500 million in debt. Our trailing debt-to-EBITDA ratio is 1.5x. So we remain modestly leveraged. We will continue to grow our capital base organically and deploy capital where we see the greatest opportunities, all while maintaining our quarterly dividend of $0.24 per share.

We will now take your questions. Thank you.

[Operator Instructions]

Your first question comes from the line of Patrick Moley with Piper Sandler.

So I just had one on the trading capital build, invested capital up $270 million this quarter. You added the $500 million term loan. Just curious, how aggressive could you be from here with the trading capital build? Is this a onetime step up? Or should we expect the growth to kind of continue at this pace? And then if you could just maybe speak to how quickly you could look to deploy the proceeds from the term loan and when we should expect that to show up in the financials?

Sure. Patrick, it's Joe. I'll take that question, and then Aaron and Cindy will add anything I leave out. But I think the answer is we've guided previously that we've got a long-term goal of net trading income, and we need to sort of fit capital within that. And that will come from 2 sources in the long term. One is the appropriate amount of leverage and the other is organically through free cash flow generation. And in the debt markets and the leveraged loan markets and the high-yield markets, you raise money when you can, right, not when you have to, and we did that. We had a terrific opportunity to add on to our term loan at the current spread levels. The pricing was very tight. It was a great execution. We were able to do it with a minimum of effort and at an attractive price, and our deal was very oversubscribed. So we're happy with it. But the overall leverage level, I think in the near term here, maybe near to midterm, we're set.

And I think further accumulation will come from free cash flow generation, as Aaron mentioned in his opening remarks, right? And that will be the primary means. In terms of deploying the capital, I think the returns speak for themselves. There's active deployment and active opportunities given the markets and the continued levels of volumes and volatility and just opportunity that we're seeing. And in fact, we have been making use of our -- some of our short-term liquidity to capture these opportunities, and now we sort of go back to normal with this level of capital. So it is deployed. We do have opportunities and long term -- sorry, near to medium term, this level of debt is sustainable, and we're happy where we are.

Okay. Great. And then as a follow-up, just on the cash compensation ratio came in around 25%. It's up a little bit on a year-over-year basis from closer to the 20% level. I know Cindy said that, that 25%, I think, was what we should expect in the near term. But just as we think longer term and as we model the business out over the next couple of years, is there anything more episodic in the near term that's going to keep it around that 25% level? Or is that just sort of the new norm and that's how we should think about the level of comp going forward? And then maybe as a second part to that, just if we do get a down quarter, can you give us any sense of how much we should think about that comp ratio kind of flexing in a weaker environment?

Well. I think we've hired lots of real talent. Again, as Aaron mentioned, we're a little more tolerant of an investment period. Saying all that, we've guided to low to mid-20s compensation ratio on a cash basis, which I think for a business like ours is market and very reasonable. And sure, notionally, given the size of the P&L this year, the notional numbers look big. And it's always been our practice to take a top-down approach early in the year and then sharpen our pencil later in the year. But I think that guidance remains around -- and I'm looking more at the year-to-date ratio than the second quarter ratio because we do try to true up our accruals and get them right heading towards year-end. So I look at the 23%. We guided mid -- low to mid-20s and 23% is pretty -- low to mid-20s. So...

Your next question comes from the line of Dan Fannon with Jefferies.

So I was hoping to just expand a bit upon just kind of the current environment. Obviously, you've talked about the capital that's being deployed in the business, but maybe discuss the opportunity set as 2Q kind of progressed and as you sit here in July, maybe some of the asset classes or markets that are generating higher levels of return or more interest or attractive in this current environment?

Sure. Thanks, Dan. It's Joe again. I think the growth markets that we used to refer to and call out have continued to grow. So crypto and options and block ETF. But I think the emphasis, again, through hiring, through accessing markets, through the growth of capital has been pretty global and pretty widespread. And that is what we wanted and what Aaron's referred to for the past year. So global equities, retail and prop were standouts this quarter, right? Of course, the operating environment is one of the primary determinants of how we do, but it's also notable, I think that we've improved qualitatively. I think if you repeated this environment 2 years ago or more, then we wouldn't have done as well. So -- and I'd mentioned VES as well. VES kind of reaching a level that's been consistently above $2 million a day for 3 quarters in a row is something we don't talk about a lot, but that consistency has been a contributing factor, and that's a very good business that's coming into its own.

Okay. And then just as a follow-up, you mentioned the hiring. And can you just talk to where you think you are in that process? Is that -- is there a time frame to think about in terms of getting to where you want to be in terms of the talent? And then you also mentioned low attrition. I don't remember you guys ever referring to attrition. So any numbers or things you could put around maybe what's happening today versus a year ago or any context would be helpful.

This is Aaron. I'll answer that. We don't have like a headcount target in mind. And at this point, it's really more just we're kind of hiring as fast as we can in all key areas like quants, researchers, traders and especially engineers, developers. And I think we're just going to kind of continue on that pace until we feel like we don't have too much work for the number of people that we have. And I mean, it's very hard for me to say because we always discover new things that we want to do. But I would say, at least for the next couple of years, you can expect us to be hiring pretty aggressively. I think in terms of the attrition, it's not that we were like targeting again certain numbers, but it's more just kind of trying to highlight that there's been an overall culture shift, and I think it's been recognized by the employee base and also just by the available talent pool and reflected in the interest that we're seeing.

Your next question comes from the line of Ken Worthington with JPMorgan.

So you're building capital, you're hiring more trading talent. Can you maybe help us understand which of the asset classes and the products that you're focusing these incremental resources towards? Is it completely broad-based? Or are you really focusing it on some particular areas, geographies or products or asset classes?

Sure. I'll answer. I mean I think Joe sort of said this in the previous question, but it's really broad-based. I mean, of course, it's not going to be dollar for dollar equal everywhere. There are some that in any given quarter, take more capital or less capital. And as we've kind of highlighted on other calls, the structure of the company, the flat structure, the way we make decisions, capital can move around opportunistically extremely quickly. So even if I had a plan, it would change tomorrow. But there's really a number of areas across the firm over the last year have seen sustained increases in deployable trading capital.

Okay. And then can you talk about the jump in the brokerage and transaction costs? Maybe how did the mix change versus the last maybe 2 quarters to drive the bigger jump in the brokerage and transaction cost this quarter?

That's going to really depend on business mix. It could depend on geographic mix. It could depend on timing of expenses. So I wouldn't really read too much into it. I'd look long term. I don't know, Cindy, is there anything to add?

Yes. No. I mean it's just -- as Joe was saying, right, it kind of really depends on the type of instrument. So that's why in kind of our disclosure, we try to guide people to not focus on just one line item on the income statement.

Your next question comes from the line of Michael Cyprys with Morgan Stanley.

Just wanted to ask on perpetual futures. There's obviously been a lot of discussion around scope for regulated perpetual futures of late. Just curious as you think about that market potentially developing in the U.S., is that ultimately a new revenue opportunity for firms like Virtu? Or is it simply shifting volume from existing products? Just curious how you think about that.

Sure. Thanks for the question. So I mean, I don't think we think we can predict where volumes are going to go. It does seem historically that when there's been new ways to trade things and new sources of fragmentation that generally volumes go up. And certainly, in the short term, it seems like that has happened and exactly where it shakes out, we don't know. But our attitude is always just be connected to everything that trades electronically everywhere we can and stand ready to be able to price and shift liquidity around in the market. And it's been great for us so far, and we're going to continue to be there as it grows.

And also just curious to get your perspective on the appeal that you see for customers with perpetual futures. Just curious how much interest appetite you see from customers for that sort of product. What is it that appeals in your view that you think is most compelling? I mean, overseas, it seems like it's the high leverage and the 24/7 access as that comes to the U.S. Curious what you think might appeal? What might be the appetite from institutions? And what might be the scope for the perpetual product to evolve over time, maybe to address some of the perceived shortcomings in some pockets?

When you say a customer appeal, are you talking retail? I wasn't following.

All of the above.

All of the above. Look [indiscernible] Sure. Virtu Execution Services has institutional customers. There's not a big demand right now. And I think as you know, we don't have direct retail customers. We're a wholesaler for a number of hundreds of retail brokers. And Mike, I think I'd refer to Aaron's previous answer, right? We will be there to trade these products as they evolve. I don't actually recognize them. We don't think of them as a new asset class. It is the evolution of lots of existing asset classes. So if there are novel ways that customers want to trade and hedge and use these products, we will be there, as Aaron said, to price them and to trade them, right? So and we generally don't take a view as to if something is a better product or a worse product or something that we'd like to see more or less of. We try to be agnostic and just trade it as it becomes tradable and liquid and something that we can offer our services around.

There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.

Hello, everyone. Thank you for joining us, and welcome to the Virtu Financial First Quarter 2026 Earnings Call. [Operator Instructions] I will now hand the conference over to Matthew Sandberg, Head of IR and FP&A. Matthew, please go ahead.

Thank you. Good morning, everyone. Our first quarter 2026 results were released this morning and are available on our website. With us today on this morning's call, we have Aaron Simons, our Chief Executive Officer; Cindy Lee, our Chief Financial Officer; and Joe Molluso, our Co-President and Co-Chief Operating Officer. We will begin with brief prepared remarks and then 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'll find additional supplemental information referred to on this call as well as a 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.

With that, I'd like to turn the call over to Aaron.

Thanks, Matt. Good morning, everyone. Again, just like very brief remarks before Cindy goes over the detailed results, and we move to Q&A. But just wanted to highlight that our first quarter results show that we're executing on our plan to grow through investing in our infrastructure, acquiring top talent and expanding our capital base.

Following that plan in the last 7 months, we have added over $500 million in new trading capital and maintained a return on our total capital in excess of 100%. Our results for the first quarter were among the best in Virtu's history, aided by an operating environment, which was even more favorable than the fourth quarter of last year.

Within the context of that environment, all of our businesses performed well, customer and noncustomer Market Making as well as Execution Services. We've provided additional perspective on the quarter in our detailed financial supplement, and we'll be answering your questions shortly.

First though, Cindy Lee, our Chief Financial Officer, will review the financial results for the quarter.

Thanks, Aaron. Good morning, everyone. For the first quarter of 2026, we generated adjusted net trading income, or ANTI, of $12.9 million per day or a total of $787 million. This was the highest quarter total ever for Virtu. Turning to our segment performance, Market Making reported ANTI of $10.4 million per day for Q1, Execution Services reached $2.5 million per day for the quarter and $2.1 million on a trailing 12-month basis.

This is the eighth consecutive quarter of increased total [ ANTI ], An indication of the substantial progress we have been noting within the VES business. This performance reflects the investments we have made in technology, our focus on client acquisition and the expansion of our product offering.

Both of our operating segments benefited from generally favorable market conditions and strong execution by our team. Our profitability this quarter was robust. We generated $521 million in adjusted EBITDA, representing a 66% margin. Adjusted EPS was $2.24. For the last 12 months, we recorded $1.6 billion in adjusted EBITDA, a 66% margin and the $6.66 in adjusted EPS.

These numbers all represent high since early 2021 and an all-time quarterly high in case of adjusted EPS, underscoring the operating leverage inherent in our business.

On Slide 7 of our supplemental materials will provide a summary of our operating expenses. Our first quarter 2026 cash compensation ratio was at 22%, which was within the historical range. The increase in compensation expense reflects our continued focus on retaining and acquiring top talent across the organization, particularly in trading and technology.

Turning to capital. our invested capital stands at $2.6 billion as of March 31, while generating an average return of 107% on the capital over the past year. We will continue to expand our capital base, strengthening our infrastructure and deploy capital where we see the greatest opportunities, all while maintaining our quarterly dividend of $0.24 per share.

We will now take your questions.

[Operator Instructions] Your first question comes from the line of Patrick Moley from Piper Sandler.

Congrats on the strong quarter. I think the environment across the board was very good, but you guys seem to outperform that. So I was hoping maybe you could just level set with us and talk about where you saw the most opportunity in the quarter. And then maybe with with ANTI up where it is the highest level on record, how should we think about the sustainability of that in this environment?

Patrick, it's Joe. You're right. The environment was very robust, as I think you noted. And I think we did outperform. It's difficult to kind of pinpoint growth since we've had this growth pivot. It's across the board.

And I think for the last couple of quarters, our focus has been on growing the firm. But that means a lot of things across the board in a lot of asset classes and a lot of geographies. And it naturally includes growth and investment in asset classes that maybe we were historically less focused on, but we want to accelerate growth in.

But it's hard to pinpoint, right? So I think in the past, we've talked about crypto we've talked about options, right? But our growth -- we want to make sure that it's understood, the growth plan isn't limited to a handful of narrow areas, it's really broad-based and focused on a lot of different areas. And it includes all the things that we've been talking about, capital includes personnel. It includes investment in technology, et cetera.

Okay. And then I mean, was there -- anything you can share in terms of asset classes, where you maybe saw outsized growth this quarter? I can think of maybe the metals market, we saw a lot of activity, especially among retail in the earlier part of the quarter. So anything there that you can share on asset classes?

We made the point last quarter to remind the world that Virtu's performance is not solely based on retail investor participation, which, by the way, remains strong. So the customer Market Making business has done very well. But I think we saw continued outstanding performance and growth in what we call prop Market Making.

And the headline volatility in the quarter, obviously, from exogenous events contributed, but there's also a lot of underlying growth in trades and investments that have been made over a long period of time. We want to get away from talking about specific areas, but I think it's pretty obvious in the quarter, if you look at just the volatility in the world and what's been going on that, that was a good environment, that was helped by our continued investment and everything else we've been talking about.

Yes, maybe I'll just add one like instead of -- and I guess it's hard like quarter-over-quarter, the environment, as we pointed out last time is the most important variable. But it's not like we found some new trade or something took off.

Really what I tried to highlight in the introductory remarks was you should think of this as what would have happened in the counterfactual world where we didn't add $500 million of new trading capital. Our P&L would not have been what it was in the first quarter, right?

I'm not saying it's a one-for-one difference, right? But it definitely was a huge factor. And so going forward, the idea is that in any environment, we should outperform where we were before with lower capital.

Okay. So maybe just if I could sneak one more in here, just a bigger-picture question. I think it was just a few quarters ago, you said you were looking to target about 10 million a day in ANTI through the cycle, and that was kind of the longer-term goal for the business.

So how should we interpret this quarter? Do you feel like we're kind of at that point where we can -- we're sort of building toward this $10 million a day through the cycle? And if not, what still needs to be done to kind of get us to that, please?

I mean the honest answer is we don't know. I mean, the trailing return on capital was over 100%. I don't think we always achieve that through like a multiyear cycle. So at points in the cycle where it's less than 100%, you can back into how much capital we might need to make 10 million a day. But in environments like this, then we need much less and we make more than 10 million a day.

Yes. But through the cycle, at the point, Patrick, is the key point in that discussion, and it makes it, it is what makes it difficult to say where we are. I think, as Aaron pointed out and I think as I pointed out in earlier calls, when we talk about goals and trading capital of $4 billion, that factors into that goal.

But it's more than that. There have been a number of investments in personnel, in people. Recruiting environment for Virtu, I think is very good. The investments in technology being stepped up, all contribute to that, right?

So you need all of those things together to execute on that. And I think, in the past, we've used terms like the medium term, like a 3-year time horizon kind of being something that when forced to give a view is something we feel comfortable giving to you.

Your next question comes from Dan Fannon at Jefferies. Your line is open.

So I wanted to just talk about what you've been doing. Obviously, you talked about $500 million of incremental capital. Can you also talk about the hiring if there's -- where you've been focused, where you are do you think in terms of the goal of what you're looking to expand and invest in internally?

Yes, sure. So there's definitely a number of areas where we're trying to hire people. So definitely, people that are in the sort of like continuum of trader to quant to researcher type role, we're trying to hire a lot of engineers, software developers. That takes time because we have a very high bar for quality, but we're trying to kind of do that as quickly as possible.

We have made a few key senior hires in the last 6 to 7 months that have started, and they're going to have an impact on the business, hopefully, in short time frame. But it is a longer-term expansion as well. I think this year, we hope to get our headcount close to 1,100.

I don't -- we don't have like an exact number. It's more about just having a sufficient number of people to do a certain level of quality work that we need done. But definitely for the foreseeable future, we're going to be pretty aggressively hiring.

Great. That's helpful. And then just in the context of that, and obviously, the revenue environment that you're operating in, how to think about expense growth would be helpful in the context of way you're thinking about either cash compensation versus previously and/or growth in the kind of more fixed cost base to support new asset classes, new personnel, all the things you're investing in.

Sure. So I think we have given some guidance on the compensation ratios. And the first quarter accrual sort of reflects where we want to be. Obviously, when you have a great quarter, it's much easier and the percentage looks lower. But as we've highlighted last few quarters, like we have been adjusting that up slightly because we are trying to attract the best talent in the business, and part of retention is competitive compensation.

But I think we are at that level. And you can see that it doesn't really affect the ratios or the EBITDA margin all that much, especially when you have a great quarter. As far as like the infrastructure investment, I mean, yes, we are going to do incrementally more of that. But already, our business has a very heavy capital expenditure profile. So I'm not sure it's going to be like so immediately obvious in the expense tables.

I don't know, Joe, if you want to add?

No, I think that's exactly where we are. We you saw the comp accrual is quarter as a nominal number, certainly looks outsized compared to the past. But as Aaron said, we want to hire the best people and pay them best-in-class. So that is -- that reflects it.

So Dan, if we have a comp accrual or if we have a comp ratio that creeps up in the future, even in a a really robust environment or even in a median environment, that will be deliberate and intentional and in our view, will be a good thing, right? If you see that. It will mean that the growth plan is being executed on and we're creating value for shareholders, but -- and we're just paying people market comps or better than market comps.

Your next question comes from Alex Blostein, Goldman Sachs.

Yes, there we go. I'm sorry about that. So a bit of a nuance question, but when we look at the trends in cost of trading sort of like kind of [ DCE ] and and payment for order flow and things like that, in the quarter, it seems to show a pretty meaningful divergence in the Market Making business. Those are down. Obviously, the trading results are up. So maybe just a little bit more granularity of what drove that?

And what I'm trying to get to, I guess, is are we starting to see some incremental benefits of internalization or things like that, that could make sort of the flow more profitable for you guys? Or is this something else went on this quarter that sort of boosted the net trading numbers in from that perspective specifically?

Thanks, Alex. The answer is all of the above. when the flow characteristics were attractive this quarter. And in addition, again, I'd go back to the answer on it's not just a retail machine, although the business -- that business had a great quarter. And again, the flow was very attractive, I think, leading to some of the things you're talking about.

But also a reminder that the business is not wholly dependent on retail and is pretty diversified, both globally and by asset class on the Market Making side. So depending on the sources of that noncustomer Market Making P&L, you could get divergence in brokerage clearing exchange as a percentage of the gross number.

I'm not sure I'd read anything permanent or long term into it. I think, over time, we're always looking to lower execution costs, we're always looking to internalize more to the extent we can and optimize. But some of that is environment dependent as opposed to just us getting better and better.

Yes. Understood. It's just the absolute divergence, not so much the percentage, was very notable. One was up a lot, the other one was down a bit. That's it. Okay.

And then, obviously, we don't want to get into a habit of calling every month, but there's been quite significant change in the backdrop this April versus last year's April and obviously, over the last couple of months. So any color you guys have on how the environment is unfolding so far in the second quarter, both on the retail side and just broadly would be super helpful.

Look, and you started your question with the correct answer, which is we really don't do this month-to-month. My only comment to you -- well, I'd say two things. One is key perspective, right? So we had an all-time high here. And that, as Aaron said, is helped by the robust environment.

Just because it's more muted, I think you said in your note, doesn't mean it isn't a very good environment. And we're only 1/3 of the way through it. But you can see the headline numbers, while not in terms of some of the numbers in the first quarter, are still very good from any perspective. So that's point 1.

Point 2 is we haven't talked about Execution Services. But if you look at the momentum in that business over the past 2 years, it has grown through the cycle, truly grown through the cycle in a number of different environments, and there's a tremendous amount of momentum there. There's client wins, there's multiple products kind of being tied together across clients. So we're looking at that as a continued growth engine as well. And that business has a tremendous amount of momentum.

Your next question comes from Kenneth Worthington at JPMorgan.

I want to go back to sort of Patrick's question to get a better sense of how the investments that you've made contribute to the capacity to profit over a cycle. And Aaron, you mentioned invested capital is up 20%. You've added headcount, you've invested in technology. you sort of implied that there's a multiplier on the 20% growth in invested capital.

How do we think about that multiplier? Is it something like 1.1? Is it 1.3? It doesn't seem like it's something like 0.9. How do we think about that multiplier over a cycle?

Ken, I think what Aaron was stating was that the ANTI, the adjusted net trading income we achieved in this quarter would not have been achieved, had we not increased our capital. I'm not sure there was any implication of a multiplier around around capital. If anything, there will be a multiplier in a good environment, but it all comes out in the return. That's it.

We put the returns -- the original purpose of that return slide was to demonstrate that we're a services business and not a kind of risk business. So I'm not sure I'd read anything into any statement about a multiplier.

What I'd say -- I'd just repeat, capital is fungible, right? We're not we can't parse or bifurcate the new capital and the old capital. But I think what we are saying is that we are able to earn more because we had a bigger capital base, because there were greater opportunities. And it's important to remember that our capital is nimble, that we remain flexible and agile with it, and it goes where the opportunities are.

Okay. Okay. Fair enough. And maybe as we think about new asset classes like predictive markets and tokenized markets, sort of what do you see as holding more promise for Virtu? And where are you thinking about focusing investments there?

I mean it's hard to say. I think we're kind of ready to be -- to trade in any market, any exchange. And it's really about where the volume goes. Tokenization might be slightly easier just because to the extent things are linked to an underlier that we already trade, it's very easy for us to value and we know the trade very well. Whereas in prediction markets, like we don't have any expertise predicting like geopolitical events. But it really depends on volume, to be honest.

Your last question comes from Michael Cyprys at Morgan Stanley.

I was hoping to dig in on Execution Services and hoping you could elaborate and unpack some of the drivers of the momentum that you're seeing across the Execution Services business. And if you can just remind us as well the top revenue contributors under the hood there and how that's evolved over the past couple of years, and how you see that mix and contributors evolving as you look out over the next couple of years.

Sure, Michael, this is Joe. I'll take that question. As I said, the business has a tremendous amount of momentum. The business has grown through the cycle. It has been a multiyear process since we acquired ITG around a common technology platform, emphasizing the penetration of these products through the customer base.

I think what we inherited and what we bought was a very siloed organization. And I think Steve Cavoli and the team there have done an amazing job of tying together a global client list that is as blue chip as it gets. There is the same client list that any -- that your firm will have.

We service -- and we service them through products that we consider best-in-class, whether it's the [ Algo ] suite or whether it is the [ analytics ] platform or the EMS Triton, right?

So I think that it's a business that's evolved that is the technology is really paying off, and that is increasing client penetration, right? And the margins have improved. The business has been rationalized. Again, we don't break out down to the EBITDA line for -- by business. When we bought ITG, it had a mid-teens EBITDA margin that is -- think of something that is best-in-class now that is a multiple of that. in terms of how that business has performed.

So I think it's just a lot of work, a lot of blocking and tackling and a great sales effort kind of tying together a diverse product offering across geographies and across different types of products to an incredible blue-chip client list.

Great. And then just a quick follow-up question on AI, clearly, very quickly advancing. I was hoping you could talk about how you see the opportunity for a agentic AI and if you could elaborate on how you're using generative and maybe even a genetic AI today across the organization. How you see that evolving? What are some of the use cases? And if you're able to quantify any sort of the benefits that you're seeing?

Sure. I'll answer that. So I mean, I think like most other companies right now, we're definitely taking a look, doing exploratory things. We do believe that with the right sort of focus and setup, it can really be a productivity enhancement for our software developers.

But at the same time, our company is really built on a code base and we employ excellent engineers to maintain it, and it's something that is really beyond the capability of current tools to think about it at a high-level reason about and design. So in our environment, introducing a bunch of technical [ debt ] of AI-generated slop is really never going to be in our business plan.

But that being said, pairing high-quality engineers with a tool that can just kind of execute it beyond human speed and do sort of like boiler plate [ grunt ] work, assist in explanations, we're definitely trying to use that internally. And I'd say it's a little early yet to determine the productivity impact, but I expect in the coming year or 2, it will have a material impact and maybe we'll have a little bit more to say.

And if I could just sneak in a quick follow-up on that. Just curious, what impact you see across the competitive landscape from these advances in AI and agentic AI?

Well, I mean, as we said in the previous call, I think the term AI is pretty overloaded. And if you just want to talk about statistical modeling, that's been a big part of competitive landscape for trading businesses for 30 years on Wall Street, and this is just like another iteration with novel advancements in models and hardware availability.

I have zero insight as to what other people are doing with "agentic AI". So I don't really feel like I can give any color there.

Your next question comes from Craig Siegenthaler at Bank of America.

Hope you're all doing well. First question on risk management. Given the strong results -- can you guys hear me [Technical Difficulty] Yes. Let me -- changing to the speakers. So can you hear me okay?

Yes, yes.

All right. Good. So given the strong results, we were curious, how do you quantify the changes in risk management that Virtu has been taking in the Market Making business over the last few quarters?

I don't think there's been any change in risk management. I got it. if you're asking the elevated P&L was the result of us taking on more risk and things we weren't doing before, the answer is no.

Okay. And Aaron, any way to quantify that?

In terms of?

Well, in terms of how you guys look at..

Yes. No, I think that's the answer, is that based on how we look at risk, no, the answer is the risk profile of the firm has not changed materially.

Got it. I think that was, Joe. Thank you, Joe. It is -- One follow-up here. Some of your market-making peers operate a hedge fund in parallel to the core business. I'm curious, why Virtu doesn't look at doing that, that could provide a whole new revenue source for the company? So just wondering how you think about that potential strategic initiative.

That is a tough one, Craig. I'm not sure which competitors you're referring to. We're a public company, obviously, and we pay -- maintain a dividend. I think you might be referring to some competitors that have been around a long time, are bigger and maybe have retained personal capital in the firm that they use to make investments or have a side-pocket hedge fund.

We haven't contemplated Virtu asset management lately, but we'll talk a few years from now and see, okay? It's -- I don't want to be misinterpreted, we're not currently contemplating anything around beginning a hedge fund.

I guess like another way to think about it, and this is again something we've highlighted on previous calls, at the moment, our business is very high sharp but capacity constrained. So acquiring a bunch of assets, we wouldn't really have a productive use for them. And in order to deploy them, we probably have to put them in far lower sharp strategies, and we already have difficulty explaining the variance in our earnings quarter-to-quarter. So I think it would just make the problem much worse.

Yes, you asked about risk management, and we don't have an infrastructure in place to really manage a sharp 1, sharp 2 hedge fund setup.

Got it. And listen, I think some of your peers sit at Citadel, Susquehanna, their hedge fund strategies are different than the market-making strategy. So I don't know if capacity is really an issue for them.

Well, Citadel is a great firm, but they began as a hedge fund. So that's a different evolution of the firm.

Well, I think you're right, right? But that's not our expertise. We don't hire a bunch of long-short [ guys ] and give them a risk allocation and say, good luck to you. Like we run highly automated electronic market making strategies backed by statistical research. That is capacity limited at the scale we're talking about.

This concludes our Q&A session. I will now turn the call back to Aaron Simons, CEO, for closing remarks.

Nothing really, but thanks, everyone, for joining, and thanks for the questions, and we'll talk to you next quarter.

This concludes today's call. Thank you for attending. You may now disconnect.

Hello, everybody, and welcome to the Virtu Financial Fourth Quarter 2025 Earnings Call. My name is Elliot, and I'll be coordinating your call today. [Operator Instructions]

I'd now like to hand over to Matt Sandberg at Virtu Financial. Please go ahead.

Thank you, and good morning, everyone. Thank you for joining us. Our fourth quarter 2025 results were released this morning and are available on our website. With us today on this morning's call, we have Aaron Simons, our Chief Executive Officer; Cindy Lee; our Chief Financial Officer; and Joe Molluso, our Co-President and Co-Chief Operating Officer. We will begin with brief prepared remarks and then take your questions.

First, if you remind us, 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 not -- 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'll find additional supplemental information referred to on this call as well as a 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.

With that, I will turn the call over to Aaron.

Thanks, Matt. Good morning, everyone. As a reminder, the prepared remarks for earnings calls moving forward, will focus predominantly on our financial results, allowing us to get to Q&A more quickly. Last call, we spoke about our plans to grow our trading by investing in our infrastructure, acquiring talent and expanding our capital base. We also emphasize that this growth would be a broad effort across the firm not limited to a handful of initiatives. The fourth quarter was a preview of the impact of this renewed focus on growth. Our results for the fourth quarter were impacted positively by a favorable operating environment, and while our capital accumulation efforts are just underway, the incremental capital we added and our ability to dynamically deploy it had a meaningful impact on our results.

I'll hand it over to our Chief Financial Officer, Cindy Lee, who will review the financial results. As always, you can find additional perspective on the quarter in our detailed supplement. After her statement, we will move on to Q&A.

Thank you, Aaron, and good morning, everyone. For the fourth quarter of 2025, we generated adjusted net trading income or ANTI of $9.7 million per day or a total of $613 million. This was the highest quarterly total since Q1 2021. For the full year 2025, we generated $8.6 million per day or $2.1 billion in total.

Turning to our segment performance. Market Making reported ANTI of $7.8 million per day for Q4 and $6.7 million per day for the full year 2025. Virtu Execution Services reached $2 million per day for the quarter and $1.9 million per day for the full year. This is the seventh consecutive quarter of increased ANTI for VES and high watermark since early 2022. An indication of substantial progress we have been noting within the VES business. This performance reflects the investment we have made in technology, our focus on client acquisition and the expansion of our product offering. Both of our operating segments benefited from generally favorable market conditions, elevated volumes and strong execution by our team.

Our profitability this quarter was robust. We generated $442 million in adjusted EBITDA, representing a 72% margin. Adjusted EPS was $1.85. For the full year 2025, we recorded $1.4 billion in adjusted EBITDA, 65% margin and $5.73 in adjusted EPS. These numbers all represent high since 2021 and underscores the operating leverage inherent in our business.

On Slide 6 of our supplemental materials, we provided a summary of our operating expenses. Our full year 2025 cash compensation ratio was at 19%, which was within the historical range. The increase in compensation expense reflects our continued focus on retaining and acquiring top talent across the organization, particularly in trading and technology.

Turning to capital. We increased our invested capital by $625 million in 2025, $448 million of which came in the second half of the year while generating an average return of 100% over the year. We will continue to expand our capital base, strengthen our infrastructure and deploy capital where we see the greatest opportunities, all while maintaining our quarterly dividend of $0.24 per share.

This completes our prepared remarks. We will now take your questions.

[Operator Instructions] First question comes from Eli Abboud from Bank of America.

The dollar value of your 605 quoted spreads looked like it declined sequentially. So is it fair for us to conclude that this quarter's strong performance came from areas outside of equities, and if so, can you provide some granularity on which asset classes were the largest contributors to your sequential growth?

Eli, It's Joe. I think when you look at our performance this quarter, you've got to begin with the favorable operating environment, realized the volatility was up. The VIX was up. Equity share volumes were up, and there's a number of underlying drivers in the environment that should hopefully allow that to continue around asset rotation, around dollars, fixed income, currencies, commodities. We're a scaled globally connected firm, and we are more than just the retail flow business that shows up in the 605 reports.

So I think that's the takeaway that we would want to leave with you. I think the growth in the trading capital base had an impact. We had a 100% return on incremental capital in the quarter. I don't expect that to always be the case, but obviously, when you make that kind of return and you have incrementally more capital, then it has an impact.

And as Cindy mentioned, VES had a record quarter. All of its businesses are performing well. There's accelerating client engagement. There's new clients doing business. They're onboarding a lot of clients, there's existing clients doing more business. And that performance has been across all products, brokerage, algos, venues, workflow analytics and all geographies.

So yes, that's the long answer. The short answer to your question is yes. the customer market making business, even though the quoted spreads have been down in the beginning of the quarter, as you can see from the public information, it's still elevated, I think, over a long period of time. But the noncustomer businesses, it did well, very well.

Got it. And for a follow-up, ETF fund launches are expected to hit a record in 2026 with the recent ETF share class proposal out to the SEC. So I was wondering if you could refresh us on where Virtu has exposure to the ETF market and help us understand the potential -- the materiality to Virtu, if that does, in fact, come to pass? And in particular, I was hoping maybe you could help us size up the contribution of your create-redeem business for the overall Virtu P&L?

Again, Eli, I think it's difficult right now to give you something that would quantify the impact. But in general, we are a very large player across all of our businesses. In ETFs, we're an AP, and I don't know how many, but a large number of ETFs. There are -- it's a growing share class. It's continued to be a growing share clastic which you may be referring to some of the electronification around and tokenization, which, again, more, more product, more structure is generally a good thing for us. So I can't quantify for you a specific ETF statistic. It's just -- it touches just about every part of our business.

We now turn to Patrick Moley with Piper Sandler.

This is Will Katz on for Patrick. Production markets, obviously, it seems like hey take an even larger role in the headlines every day. Can you give us your updated thoughts on participating in the asset class and whether sports or non-sports contracts would represent a more attractive entry point in the space?

Sure. So we're generally optimistic anytime there's a new market or a new asset class to trade. So we're definitely in the process of connecting, understanding how the venues work, establishing relationships. That being said, in these markets, there's not like perfect regulatory or legal certainty. So we're definitely being very careful and evaluating how those things are going to shake out.

With regards to the actual markets, I mean, obviously, there are certain markets that are much more similar to our current trading than, for example, like outright sports bets. But even within that context, there are market making like activities, cross-exchange, arbitrage and things of the like that will certainly investigate.

We now turn to Dan Fannon with Jefferies.

This is actually Rick Roy on for Dan. And just my formal welcome to the new management. And regard from that, aside from that, are you able to quantify or perhaps describe how impactful the non-equity side of the business was in terms of the market-making metrics that you posted this quarter and perhaps even layering that on to VES and things like cross-asset workflows. And specifically with regards to some of the volatility that we saw with digital assets, precious metals and commodities and I know you don't give sort of that breakout anymore, but any sort of incremental color around that would be helpful.

Sure. Again, this is Joe. I think I would repeat a little bit the answer to the first question. And oftentimes, when we get an equities versus non-equities question, there's an underlying assumption there that equities represents the 605 business and everything else is non-equities, and that's not true. So the 605 retail flow business is what it is. It was as I said, it was a very good quarter. It was elevated relative to the past, and it was just the public metrics anyway, indicated as someone pointed out that it was down quarter-over-quarter.

But in the non-customer Market Making business, we have a very large equities presence. We have a fixed income currencies and commodities presence. We have an options presence. We have a crypto presence. And as I said, we're global. So in the quarter where you have these kind of asset flows and these kind of movements in asset prices between fixed income and commodities and currencies and equities in Europe and in Asia and in the U.S., a firm like ours can thrive. So we don't break that out. We have no intention of breaking it out. But it's important, I think, to understand that outside of the retail flow business, we have a broad market making business that includes global equities, which did very well.

Understood. And then maybe just a follow-up then on sort of the non-retail more so client side of the business. Just wondering where are you sort of seeing the greatest level of incremental demand? Is it -- would it be incremental customer adds or greater utilization of some of those services, whether on the Market Making side or on the execution side?

That's more of a VES question, I think. And as I said, VES is firing on all cylinders. There's been a great deal of product improvement over the past year, 2 years, 3 years in terms of the algos in terms of venue -- the venues and in terms of workflow and analytics. There is retooling going on to accommodate non-equity asset classes in the workflow and analytics products and that's continuing. So VES had a very good quarter. And we had stated a goal of [ $2 million ] a day through the cycle for VES. Obviously, this is a favorable environment, and they were just short of it. So I think we're well on our way to getting to that goal on a through-the-cycle basis.

Understood, that's helpful. But I guess, any commentary on maybe the forward pipeline of adding customers or product innovation on that side?

Yes. All of the above.

We now turn to Alex Blostein with Goldman Sachs.

This is actually [ Aditya ] filling in for Alex. Just zooming out and looking at the bigger picture, can you discuss your top 3 strategic priorities for 2026 in terms of either new initiatives or existing markets?

Yes. So I mean as we sort of said in the last 2 statements, we're not focusing on a very small number of growth initiatives. We're really just focusing on growing everywhere in the firm and responding dynamically to the market opportunities that are available. But it's a very broad effort to increase the total firm's trading capital, which we move around relative to opportunity, investing in our infrastructure and acquiring excellent people.

[Operator Instructions] We now turn to Ken Worthington with JPMorgan.

You mentioned you deployed incremental capital during the quarter. Can you give us a sense of the magnitude of the incremental capital that you did deploy. And as we look to the coming quarters, if market conditions are accommodative, what is the magnitude of incremental capital that you could deploy if you so choose -- you so chose?

Yes, Ken. I think if you look at the 2024 year-end trading capital that we published and then if you look at the 2025 year-end trading capital that we publish, the total increase was over $600 million -- $628 million, $450 million of that was in the second half. And as you know, as your firm helped us increase our total debt by $300 million. So the debt increase was a portion of that.

It is -- the answer in terms of how much we deployed is sort of easy in that we've deployed pretty much all of it. And that doesn't mean that we don't maintain substantial buffers and substantial excess capital in our U.S. broker-dealer and our other regulated entities. It just means that we've reduced the cost of capital because we relied less on contingent liquidity like revolvers to fund our operations.

But I think overall and long term, when you have a quarter like this, you're going to have opportunities to deploy the capital. There will possibly be quarters when you're not deploying all of it or your buffers are greater just because the opportunity isn't there. Again, I think the underlying drivers of the environment are in place that hopefully we're not in that position. I think on the prior call, last quarter, we stated a long-term goal of being through the cycle, [ $10 million ] a day.

And if you look at historical returns on capital, I don't expect them to be 100%. But if they're in the 50%, 60%, 70% range, you can do the math and figure out that we would expect to be able to deploy more capital than we have today, and we will achieve that through organic growth, and we'll achieve it through incremental borrowings to the extent they make sense and they're prudent, right. So it's a nuanced answer because it's really going to depend quarter-to-quarter. But in order to achieve our long-term goals, we're going to use the amount of capital we have today and even more.

Okay. Great. I'll take a shot on this question. ICE bought its way into poly market in part because of innovations around clearing, settlement and collateral. Do you see the potential for these types of efficiencies to be big enough to make a difference to the Virtu P&L. And if so, does -- do these sort of changes widen the advantage that the Virtu citadels and jumps have over the rest of the market? Or do they level the playing field?

I can take that. I think it's like a little early to say what the exact economic impact is going to be. Like I don't really view it as something that's going to be a step change in sort of all-in profitability on these sorts of trades. But I do think, in general, when there is added complexity in the market space of just different ways of trading the same thing, more connectivity, more different protocols, that's a relative competitive advantage for us because we're in everything, everywhere and connecting to another venue and understanding another clearing settlement cycle is just something that we've done over and over and over again. So any time they're sort of like multiple products with the same underlayer, that's a relative tailwind for us. So we're happy for the increased product space.

This concludes our question-and-answer session. I'll hand back to the management team for any final remarks.

I think that's it. Thanks, everyone, for joining.

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

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. [Operator Instructions]

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 today this morning, we have 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 begin 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 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 discourage you -- 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'll find additional supplemental information referred to on this call as well as a reconciliation of non-GAAP measures to the equivalent GAAP term in the earnings materials with an explanation of why we deem this information meaningful as well as how management uses these measures.

And with that, I'd 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, were $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 offer market-leading financial -- market-leading financial trading products globally across the entire life cycle of a trade. Notable, 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. Well, the areas included within the existing growth initiatives are important and represent businesses 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 arrive.

Now we can turn it over for Q&A.

[Operator Instructions] 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 you 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 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 past 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 just add to that. This is Joe. The areas that we always outlined is growth continue to be growth areas, right? So we've given that number but I think the pivot here as you describe it, is really to include options. It includes crypto, it includes ETF block, it includes rates. But it doesn't exclude other areas of our business, right? And I think we put in the supplement the capital management priority slide, and this is a little bit to Patrick's question as well, right? We have shown -- and this is the management team that's in here, right? We have shown a long-term track record that demonstrates that we know how to manage capital, right?

So we've have a long-term track record of managing capital. We have a long-term track record of integrating acquisitions. We have a long-term track record of operating a scaled business. And we have a long-term track record of growing in select businesses, right? So I think with Aaron at the helm, there's a set of opportunities that are -- that we all agree are getting bigger, right? And that includes a lot of the things that I'm sure we'll talk about on this call. But we didn't want it to sort of look at it as being limited to just a handful of things that we've talked about in the past as 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?%

There should be -- you should still see very strong positive operating leverage in our business. That doesn't mean that we won't need to attract top talent, retain top talent. That doesn't mean that we're committed to a particular ratio of comp to net revenue that we've had in the past, but I think it will still be reasonable. It will look more like the past than not. But I think if it grows, it's going to grow because we're experiencing very high levels of positive operating leverage, good growth. And I think there's no big bang here. As Aaron said, right, we've always been incremental, and we'll continue to be incremental.

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 time line 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 road map in options?

Sure. So I don't -- we're not in the business specifically with the goal of doing customer market making 605. If we get to the point where our business is scaled and more profitable, then we have the infrastructure and the relationships where we'd love to get into that business. But really, our focus is on just being excellent at trading options, and we're focused on that and where it leads is where it leads.

Yes, [ Eli ] in terms of M&A, it goes back to the answer on capital management priorities. I think if you look at our history, we used leverage and our capital to execute 2 very highly accretive, important acquisitions to what Virtu is today. We used our capital to buy back our shares when we thought they were undervalued. And we're using our capital today to grow. And should an opportunity present itself where the returns that we can get from an M&A deal are superior to what we have looking in front of us, then we'll explore it.

And I think we've got a track record of doing that prudently and not paying -- I think if you look at the acquisitions we've done, we've bought volatility at very low prices. And so I think the purchase price going in was attractive and the execution was excellent in terms of value creation and synergies. There's nothing that we're looking at today that competes with Aaron's plan to grow revenue. And so therefore, our incremental capital dollar is going to grow in the business, but we're always -- we're here to create shareholder value and allocate capital to do that.

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. Look, again, I think if you -- it's a difficult question to answer what impact did the new capital have. In terms of the debt raise, the debt raise was September 23. So that was pretty much towards the end of the quarter. Our -- on Slide 4 of the supplement, you see we earned a 95% incremental return on our capital. So my answer would be any incremental dollar that we deployed this quarter, we earned a 95% return on. And that includes the capital from the beginning of the year.

In terms of the performance and what to highlight, I think we mentioned already, I think crypto was a standout, and we expect that to continue. We had a strong performance in options. We had a strong quarter in ETF block. I think all of the things that we've included as growth initiatives were above where we were in the second quarter, just a little bit. So it was all of the above, Chris. And again, I'll mention VES, right? VES is showing growth through different environments. And Steve Cavoli has done an amazing job there, and that business is set up for success.

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

It's all of the above. I'll be make sure I want to point out and say that we're not looking at taking on more risk. I think everything is within the risk parameters that we've historically been comfortable with in terms of Virtu as a market participant, as a liquidity provider, as a service provider. You may -- it's mainly leveraging our existing infrastructure and connectivity. But we'll have more capital to deploy. We'll have incremental talent to develop strategies. And that's really how I'd describe it.

We now turn to Dan Fannon with Jefferies.

So just wanted to clarify a few things. So as we think about Virtu's strategy over the last kind of couple of years, we've seen more consistent results and less kind of peak and trough. And given this change in putting more capital work, do you expect to see more variability in the quarter-to-quarter revenue and/or ANTI EBITDA, however you want to think about it, given -- as the opportunity set changes? Or is this going to drive more consistent results? I guess what's the goal here?

Well, the goal is, as Aaron stated, to move to the higher end of the range that we published in the past of different levels of net trading income, right? So that's always been a difficult question to answer for Virtu because you've got to give me a time parameter, right? If it's -- if you're talking about daily or weekly, maybe. If you're talking about monthly, maybe if you're talking about quarterly, it really depends, Dan.

So I think Aaron stated it clearly, right? The goal is to move towards the high end of that range. It's a trend toward it as a base case, right? And there could be more variability, but I don't consider that being sort of less predictable or less volatile even, right? We're a volatile business, and we're going to remain a volatile business. And I don't think -- I really don't think of us in the past -- it's interesting to hear you say that. I don't think of us in the past year or 2 as being less volatile. I think we've just done good job growing the business, and now we're going 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. There's no long-term lag here, I would say. Now that all being said, we are -- as I just answered your previous question, we're still a volatile business, and the environment is still going to have a big impact on our performance. So it's going to be hard to separate the noise there in terms of the environment versus the impact of incremental talent, incremental capital. But it's the age-old question for us, I think, long term, up to the right, moving towards the high end of that range. And there'll be noise quarter-to-quarter for sure. But none of it as a plan requires a multiyear sort of investment before you start seeing results. It's not instant, but it should largely be in line.

[Operator Instructions] 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, I think we have stated that the opportunity in front of us allows for the highest and best use of our incremental capital dollar. And the best way -- our jobs every day as managers of the business is to increase the stock price and maximize the value and putting dollars to work in the business, Aaron, and we all determined is the best way to get the stock price to where we think it should be.

We -- for a very long time, we were trading at levels that we thought the incremental dollar was best spent on our stock. We're not ruling anything out publicly in terms of we still have dry powder under the buyback authorization and perhaps as we have vesting shares from compensation plans, we may look to just sort of neutralize the impact of that so that we don't have share creep. But the direction is clear that our incremental dollars are going to be spent growing the business and in our trading 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. Again, Michael, I think we put a slide in the supplement. I think we have proven that we know how to allocate capital. We've proven that we're going to devote it to the highest and best use, whether it was acquisitions, integrating acquisitions, buying back our stock. And I think we -- in the past, we identified areas where we needed to grow and grew businesses that were 0 to $100 million-plus businesses and increased our capital base. So I think the markets evolved. And I think we're ready now. I think we probably weren't ready in the past, and we have the ability to do it given our infrastructure, our scaled infrastructure. And we've got the team in place, and we have a new CEO who wants us to pivot to growth, and that's what we're doing.

And just in terms of the question around prioritizing areas that you're hiring?

I mean there's a lot of them, but yes, we're aggressively hiring what you would call broadly developers that's very important for our business. It's a vague term, which I hate, but we're probably hiring a lot of quants. We're hiring traders. So basically, any aspect of the business.

I think just going back to the question, which I think Joe answered very well, but the previous comments, I think you have to take in the context. So it's not the case that we could just -- if someone gifted us double the amount of capital tomorrow that we could just turn it on and make twice the money. The comment is that yes, we can grow the earnings with more capital, but it requires a lot of hard work to do that. So it requires more people. It requires working on our strategies. It requires revamping and expanding our infrastructure. So it's not like a magic machine where we can just dump more money in and get more money out, but we're excited about doing the work and growing the business.

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 you think will be meaningfully contributing towards that?

It will be flexible. It will be based in part on what is going on in the market. I think if you look at an area like crypto where we've done very well, crypto was a fragmented market, which necessitates the need for more capital intensity because there's no settlement utility, and there's multiple venues. ETF block is a big business that we've grown quite well, that by its nature is more capital intensive. So it really depends on the end market. It depends on the characteristics of the end market. It depends on the prime brokers. It depends on the venues. It depends on the participants, depends on the trading format.

U.S. equities, 605 business is a very capital efficient business, right? So we think we're going to grow everywhere. But the capital usage is going to go to areas where we think we can -- where we need it -- where we needed to grow, right? So areas like commodities, areas like foreign exchange, they're all different, depending on the end market, depending on the market structure. So really, it just really depends on what is going on in the market and the sort of the nature of the end market.

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.