UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q 

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from     to     

Commission file number:  001-37352

Virtu Financial, Inc.

(Exact name of registrant as specified in its charter)

Delaware	32-0420206
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

One Liberty Plaza		10006
165 Broadway
New York,	New York
(Address of principal executive offices)		(Zip Code)

(212) 418-0100

(Registrant’s telephone number, including area code) 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Class A common stock, par value $0.00001 per share	VIRT	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐	Non-accelerated filer	☐	Smaller reporting company	☐
						Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Securities Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒

Class of Stock	Shares outstanding as of May 7, 2021
Class A common stock, par value $0.00001 per share	119,548,903
Class C common stock, par value $0.00001 per share	10,135,182
Class D common stock, par value $0.00001 per share	60,091,740

1

VIRTU FINANCIAL, INC. AND SUBSIDIARIES

INDEX TO FORM 10-Q

FOR THE QUARTER ENDED March 31, 2021

		PAGE NUMBER
PART I -	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Statements of Financial Condition (Unaudited)	3
	Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)	5
	Condensed Consolidated Statements of Changes in Equity (Unaudited)	6
	Condensed Consolidated Statements of Cash Flows (Unaudited)	7
	Notes to Condensed Consolidated Financial Statements (Unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	42
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	66
Item 4.	Controls and Procedures	68
PART II -	OTHER INFORMATION
Item 1.	Legal Proceedings	69
Item 1A.	Risk Factors	69
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	69
Item 3.	Defaults Upon Senior Securities	69
Item 4.	Mine Safety Disclosures	70
Item 5.	Other Information	70
Item 6.	Exhibits	70
	SIGNATURES	71

1

PART I

ITEM 1. FINANCIAL STATEMENTS

Index to Condensed Consolidated Financial Statements

	PAGE NUMBER
Condensed Consolidated Statements of Financial Condition (Unaudited)	3
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)	5
Condensed Consolidated Statements of Changes in Equity (Unaudited)	6
Condensed Consolidated Statements of Cash Flows (Unaudited)	7
Notes to Condensed Consolidated Financial Statements (Unaudited)	9

2

Virtu Financial, Inc. and Subsidiaries

Condensed Consolidated Statements of Financial Condition (Unaudited)

(in thousands, except share data)	March 31, 2021		December 31, 2020
Assets
Cash and cash equivalents	$	899,041	$	889,559
Cash restricted or segregated under regulations and other	122,792		117,446
Securities borrowed	1,384,134		1,425,016
Securities purchased under agreements to resell	36,071		22,866
Receivables from broker-dealers and clearing organizations	1,656,347		1,684,006
Trading assets, at fair value:
Financial instruments owned	2,976,372		2,369,192
Financial instruments owned and pledged	929,669		746,539
Receivables from customers	515,519		214,478
Property, equipment and capitalized software (net of accumulated depreciation of $463,514 and $455,961 as of March 31, 2021 and December 31, 2020, respectively)	109,697		113,590
Operating lease right-of-use assets	252,027		268,864
Goodwill	1,148,926		1,148,926
Intangibles (net of accumulated amortization of $201,571 and $183,494 as of March 31, 2021 and December 31, 2020, respectively)	436,422		454,499
Deferred tax assets	183,035		193,070
Other assets ($68,750 and $68,316, at fair value, as of March 31, 2021 and December 31, 2020, respectively)	240,579		317,747
Total assets	$	10,890,631	$	9,965,798
Liabilities and equity
Liabilities
Short-term borrowings	$	240,444	$	64,686
Securities loaned	1,191,615		948,256
Securities sold under agreements to repurchase	410,164		461,235
Payables to broker-dealers and clearing organizations	1,079,808		876,446
Payables to customers	347,184		118,826
Trading liabilities, at fair value:
Financial instruments sold, not yet purchased	2,984,733		2,923,708
Tax receivable agreement obligations	271,165		271,165
Accounts payable, accrued expenses and other liabilities	386,328		491,818
Operating lease liabilities	298,890		315,340
Long-term borrowings	1,636,221		1,639,280
Total liabilities	8,846,552		8,110,760
Commitments and Contingencies (Note 13)
Virtu Financial Inc. Stockholders' equity
Class A common stock (par value $0.00001), Authorized — 1,000,000,000 and 1,000,000,000 shares, Issued — 127,154,019 and 125,627,277 shares, Outstanding — 121,261,513 and 122,012,180 shares at March 31, 2021 and December 31, 2020, respectively	1		1
Class B common stock (par value $0.00001), Authorized — 175,000,000 and 175,000,000 shares, Issued and Outstanding — 0 and 0 shares at March 31, 2021 and December 31, 2020, respectively	—		—
Class C common stock (par value $0.00001), Authorized — 90,000,000 and 90,000,000 shares, Issued and Outstanding — 10,135,182 and 10,226,939 shares at March 31, 2021 and December 31, 2020, respectively	—		—
Class D common stock (par value $0.00001), Authorized — 175,000,000 and 175,000,000 shares, Issued and Outstanding — 60,091,740 and 60,091,740 shares at March 31, 2021 and December 31, 2020, respectively	1		1
Treasury stock, at cost, 5,892,506 and 3,615,097 shares at March 31, 2021 and December 31, 2020, respectively	(152,282)		(88,923)
Additional paid-in capital	1,190,950		1,160,567
Retained earnings (accumulated deficit)	615,580		422,381
Accumulated other comprehensive income (loss)	(15,045)		(25,487)
Total Virtu Financial Inc. stockholders' equity	1,639,205		1,468,540

3

Virtu Financial, Inc. and Subsidiaries

Condensed Consolidated Statements of Financial Condition (Unaudited)

(in thousands, except share data)	March 31, 2021		December 31, 2020
Noncontrolling interest	404,874		386,498
Total equity	2,044,079		1,855,038
Total liabilities and equity	$	10,890,631	$	9,965,798

See accompanying Notes to the Condensed Consolidated Financial Statements (Unaudited).

4

Virtu Financial, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

	Three Months Ended March 31,
(in thousands, except share and per share data)	2021		2020
Revenues:
Trading income, net	$	812,743	$	802,466
Interest and dividends income	6,997		26,516
Commissions, net and technology services	191,649		170,744
Other, net	1,183		895
Total revenue	1,012,572		1,000,621
Operating Expenses:
Brokerage, exchange, clearance fees and payments for order flow, net	259,332		173,818
Communication and data processing	51,690		55,027
Employee compensation and payroll taxes	104,771		170,358
Interest and dividends expense	24,028		41,440
Operations and administrative	25,655		27,130
Depreciation and amortization	16,778		17,360
Amortization of purchased intangibles and acquired capitalized software	18,077		18,958
Termination of office leases	1,221		276
Debt issue cost related to debt refinancing, prepayment and commitment fees	1,755		4,171
Transaction advisory fees and expenses	(14)		188
Financing interest expense on long-term borrowings	19,492		25,670
Total operating expenses	522,785		534,396
Income before income taxes and noncontrolling interest	489,787		466,225
Provision for income taxes	80,555		77,987
Net income	409,232		388,238
Noncontrolling interest	(169,827)		(167,169)
Net income available for common stockholders	$	239,405	$	221,069
Earnings per share
Basic	$	1.91	$	1.80
Diluted	$	1.89	$	1.80
Weighted average common shares outstanding
Basic	122,062,555		119,757,158
Diluted	123,389,328		119,788,475
Net income	$	409,232	$	388,238
Other comprehensive income
Foreign exchange translation adjustment, net of taxes	(3,676)		(10,396)
Net change in unrealized cash flow hedges gain (loss), net of taxes	21,906		(55,602)
Comprehensive income	427,462		322,240
Less: Comprehensive income attributable to noncontrolling interest	(177,616)		(138,523)
Comprehensive income attributable to common stockholders	$	249,846	$	183,717

See accompanying Notes to the Condensed Consolidated Financial Statements (Unaudited).

5

Virtu Financial, Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Equity (Unaudited)

Three Months Ended March 31, 2021 and 2020

	Class A Common Stock			Class C Common Stock			Class D Common Stock			Treasury Stock			Additional Paid-in Capital		Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive Income (Loss)		Total Virtu Financial Inc. Stockholders' Equity		Non-Controlling Interest		Total Equity
(in thousands, except share and interest data)	Shares	Amounts		Shares	Amounts		Shares	Amounts		Shares	Amounts		Amounts
Balance at December 31, 2020	125,627,277	$	1	10,226,939	$	—	60,091,740	$	1	(3,615,097)	$	(88,923)	$	1,160,567	$	422,381	$	(25,487)	$	1,468,540	$	386,498	$	1,855,038
Share based compensation	1,896,407	—		—	—		—	—		—	—		$	27,450	$	—	$	—	$	27,450	$	—	$	27,450
Treasury stock purchases	(615,794)	—		—	—		—	—		(2,277,409)	(63,359)		$	—	$	(16,059)	$	—	$	(79,418)	$	—	$	(79,418)
Stock options exercised	154,372	—		—	—		—	—		—	—		$	2,933	$	—	$	—	$	2,933	$	—	$	2,933
Net income	—	—		—	—		—	—		—	—		$	—	$	239,405	$	—	$	239,405	$	169,827	$	409,232
Foreign exchange translation adjustment	—	—		—	—		—	—		—	—		$	—	$	—	$	(2,165)	$	(2,165)	$	(1,511)	$	(3,676)
Net change in unrealized cash flow hedges gains (losses)	—	—		—	—		—	—		—	—		$	—	$	—	$	12,607	$	12,607	$	9,299	$	21,906
Dividends ($0.24 per share of Class A common stock and participating Restricted Stock Unit and Restricted Stock Award) and distributions from Virtu Financial to non-controlling interest	—	—		—	—		—	—		—	—		$	—	$	(30,147)	$	—	$	(30,147)	$	(159,239)	$	(189,386)
Issuance of common stock in connection with employee exchanges	91,757	—		—	—		—	—		—	—		$	—	$	—	$	—	$	—	$	—	$	—
Repurchase of Virtu Financial Units and corresponding number of Class C common stock in connection with employee exchanges	—	—		(91,757)	—		—	—		—	—		$	—	$	—	$	—	$	—	$	—	$	—
Balance at March 31, 2021	127,154,019	$	1	10,135,182	$	—	60,091,740	$	1	(5,892,506)	$	(152,282)	$	1,190,950	$	615,580	$	(15,045)	$	1,639,205	$	404,874	$	2,044,079

	Class A Common Stock			Class C Common Stock			Class D Common Stock			Treasury Stock			Additional Paid-in Capital		Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive Income (Loss)		Total Virtu Financial Inc. Stockholders' Equity		Non-Controlling Interest		Total Equity
(in thousands, except share and interest data)	Shares	Amounts		Shares	Amounts		Shares	Amounts		Shares	Amounts		Amounts
Balance at December 31, 2019	120,435,912	$	1	12,887,178	$	—	60,091,740	$	1	(2,178,771)	$	(55,005)	$	1,077,398	$	(90,374)	$	(647)	$	931,374	$	297,562	$	1,228,936
Share based compensation	1,854,961	—		—	—		—	—		—	—		21,357		—		—		21,357		—		21,357
Treasury stock purchases	(642,869)	—		—	—		—	—		—	—		—		(9,801)		—		(9,801)		—		(9,801)
Stock options exercised	213,129	—		—	—		—	—		—	—		3,206		—		—		3,206		—		3,206
Warrants issued	—	—		—	—		—	—		—	—		11,486		—		—		11,486		—		11,486
Net income	—	—		—	—		—	—		—	—		—		221,069		—		221,069		167,169		388,238
Foreign exchange translation adjustment	—	—		—	—		—	—		—	—		—		—		(5,884)		(5,884)		(4,512)		(10,396)
Net change in unrealized cash flow hedges gains (losses)	—	—		—	—		—	—		—	—		—		—		(31,468)		(31,468)		(24,134)		(55,602)
Dividends ($0.24 per share of Class A common stock and participating Restricted Stock Unit and Restricted Stock Award) and distributions from Virtu Financial to non-controlling interest	—	—		—	—		—	—		—	—		—		(29,602)		—		(29,602)		(19,165)		(48,767)
Issuance of common stock in connection with employee exchanges	724,327	—		—	—		—	—		—	—		—		—		—		—		—		—
Repurchase of Virtu Financial Units and corresponding number of Class C common stock in connection with employee exchanges	—	—		(724,327)	—		—	—		—	—		—		—		—		—		—		—
Balance at March 31, 2020	122,585,460	$	1	12,162,851	$	—	60,091,740	$	1	(2,178,771)	$	(55,005)	$	1,113,447	$	91,292	$	(37,999)	$	1,111,737	$	416,920	$	1,528,657