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Item 2. Management’s Discussion and Analysis

2024-04-26 compared with 2023-11-02 · 106 added, 250 removed, 597 unchanged (37% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following management’s discussion and analysis covers the three and nine months ended September 30, 2023, and 2022 should be read in conjunction with the Condensed Consolidated Financial Statements and accompanying notes for the period ended September 30, 2023, which are included in Part 1, Item 1 of this Quarterly Report on Form 10-Q, and the audited consolidated financial statements and accompanying notes and MD&A for the year ended December 31, 2022, which are included in Items 8 and 7 respectively, of the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

The following management’s discussion and analysis covers the three months ended March 31, 2024, and 2023 should be read in conjunction with the Condensed Consolidated Financial Statements and accompanying notes for the period ended March 31, 2024, which are included in Part I, Item 1 of this Quarterly Report on Form 10-Q, and the audited consolidated financial statements and accompanying notes and MD&A for the year ended December 31, 2023, which are included in Item 8 and 7 respectively, of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

This management’s discussion and analysis contains forward-looking statements that involve risks and uncertainties.

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• volatility in levels of overall trading activity;

• dependence upon trading counterparties and clearing houses performing their obligations to us;

• dependence upon trading counterparties, clients and clearing houses performing their obligations to us;

• failures of our customized trading platform;

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• the effects of and changes in economic conditions (such as volatility in the financial markets, increased inflation, monetary conditions and foreign currency and continued or exacerbated exchange rate fluctuations, foreign currency controls and/or government mandated pricing controls, as well as in trade, monetary, fiscal and tax policies in international markets), political conditions (such as military actions and terrorist activities), and other global events such as fires, geopolitical conflicts, natural disasters, pandemics or extreme weather;

• the continuing impacts of COVID-19 and the governmental and other responses thereto, including but not limited to the risk of employees and executives contracting COVID-19 and the deployment of our business continuity plan pursuant to which a significant number of our employees may work remotely and our return to office plan, each of which may increase operational risk, as well as increases in market, counterparty and other forms of operational risk;

• risks associated with potential growth and associated corporate actions;

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Our Corporate segment contains investments principally in strategic financial services-oriented opportunities and maintains corporate overhead expenses and all other income and expenses that are not attributable to our other segments.

Acquisition of ITG

Credit Agreement

On March 1, 2019, the “ITG Closing Date”, we announced the completed acquisition of Investment Technology Group, Inc.

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In connection with the IPO, non-qualified stock options to purchase 9,228,000 shares were granted at the IPO per share price, each of which vested in equal annual installments over a period of four years from the grant date and expire not later than 10 years from the grant date.

Subsequent to the IPO and through September 30, 2023, options to purchase 1,643,750 shares in the aggregate were forfeited and 6,072,474 options were exercised.

Subsequent to the IPO and through March 31, 2024, options to purchase 1,643,750 shares in the aggregate were forfeited and 6,072,474 options were exercised.

The fair value of the stock option grants was determined through the application of the Black-Scholes-Merton model and was recognized on a straight-line basis over the vesting period.

Amended and Restated Investment Technology Group, Inc.

2007 Omnibus Equity Compensation Plan

On the ITG Closing Date, the Company assumed the Amended and Restated ITG 2007 Omnibus Equity Compensation Plan, dated as of June 8, 2017 (the "Amended and Restated ITG 2007 Equity Plan") and certain stock option awards, restricted stock unit awards, deferred stock unit awards and performance stock unit awards granted under the Amended and Restated ITG 2007 Equity Plan (the “Assumed Awards”).

The Assumed Awards are subject to the same terms and conditions that were applicable to them under the Amended and Restated ITG 2007 Equity Plan, except that (i) the Assumed Awards relate to shares of the Company’s Class A Common Stock, (ii) the number of shares of Class A Common Stock subject to the Assumed Awards was the result of an adjustment based upon an Exchange Ratio (as defined in the Agreement and Plan of Merger by and between the Company, Impala Merger Sub, Inc., a Delaware corporation and an indirect wholly owned subsidiary of the Company, and ITG, dated as of November 6, 2018, the "ITG Merger Agreement") and (iii) the performance share unit awards were converted into service-based vesting restricted stock unit awards that were no longer subject to any performance based vesting conditions.

Parent Company Financial Information

There are no material differences between our condensed consolidated financial statements and the financial statements of Virtu Financial except as follows:

(i) cash and cash equivalents reflected on our Condensed Consolidated Statements of Financial Condition as of September 30, 2023 in the amount of $58.9 million;

(ii) deferred tax assets reflected on our Condensed Consolidated Statements of Financial Condition as of September 30, 2023 in the amount of $127.0 million and tax receivable agreement obligation in the amount of $215.5 million, in each case as described in greater detail in Note 4 "Tax Receivable Agreements" of Part I Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q;

(iii) a portion of the member's equity of Virtu Financial is represented as noncontrolling interest on our Condensed Consolidated Statements of Financial Condition as of September 30, 2023;

and (iv) provision for corporate income tax in the amount of $15.9 million and $34.9 million reflected on our Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2023, respectively.

(i) cash and cash equivalents reflected on our Condensed Consolidated Statements of Financial Condition as of March 31, 2024 in the amount of $5.6 million;

(ii) deferred tax assets reflected on our Condensed Consolidated Statements of Financial Condition as of March 31, 2024 in the amount of $125.2 million and tax receivable agreement obligation in the amount of $196.3 million, in each case as described in greater detail in Note 4 “Tax Receivable Agreements” of Part I Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q;

(iii) a portion of the member’s equity of Virtu Financial is represented as noncontrolling interest on our Condensed Consolidated Statements of Financial Condition as of March 31, 2024;

and (iv) provision for corporate income tax in the amount of $19.2 million reflected on our Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2024.

Components of Our Results of Operations

The following table shows our i) Total revenue, ii) Total operating expenses, and iii) Income before income taxes and noncontrolling interest by segment for the three and nine months ended September 30, 2023, and 2022:

(in thousands) Three Months Ended September 30, Nine Months Ended September 30,

The following table shows our i) Total revenue, ii) Total operating expenses, and iii) Income before income taxes and noncontrolling interest by segment for the three months ended March 31, 2024 and 2023:

(in thousands) Three Months Ended March 31,

Market Making 2024 2023

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Income before income taxes and noncontrolling interest $ 139,820 $ 134,765

The following table shows our results of operations for the three and nine months ended September 30, 2023, and 2022:

Three Months Ended September 30, Nine Months Ended September 30,

The following table shows our results of operations for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,

(in thousands) 2024 2023

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Net income available to stockholders and basic and diluted earnings per share are presented below:

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands, except for share or per share data) 2024 2023

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Our trading income, net, results from gains and losses associated with trading strategies, which are designed to capture small bid/ask spreads, while hedging risks.

Trading income, net, accounted for 59% and 70% of our total revenues for the nine months ended September 30, 2023 and 2022, respectively.

Trading income, net, accounted for 63% and 66% of our total revenues for the three months ended March 31, 2024 and 2023, respectively.

Interest and dividends income.

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We incur interest expense from loaning certain equity securities in the general course of our market making activities pursuant to collateralized lending transactions.

Typically, dividend expense is incurred when a dividend is paid on securities sold short.

Typically, dividends expense is incurred when a dividend is paid on securities sold short.

Operations and administrative.

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Our presentation of Adjusted Net Trading Income should not be construed as an indication that our future results will be unaffected by revenues or expenses that are not directly associated with our core business activities.

• “EBITDA”, which measures our operating performance by adjusting net income to exclude Financing interest expense on long-term borrowings, Debt issue cost related to debt refinancing, prepayment, and commitment fees, Depreciation and amortization, Amortization of purchased intangibles and acquired capitalized software, and Income tax expense, and “Adjusted EBITDA”, which measures our operating performance by further adjusting EBITDA to exclude severance, transaction advisory fees and expenses, termination of office leases, charges related to share-based compensation and other expenses, which includes reserves for legal matters, and Other, net, which includes gains and losses from strategic investments and the sales of businesses.

• “EBITDA”, which measures our operating performance by adjusting Net Income to exclude Financing interest expense on long-term borrowings, Debt issue cost related to debt refinancing, prepayment, and commitment fees, Depreciation and amortization, Amortization of purchased intangibles and acquired capitalized software, and Income tax expense, and “Adjusted EBITDA”, which measures our operating performance by further adjusting EBITDA to exclude severance, transaction advisory fees and expenses, termination of office leases, charges related to share-based compensation and other expenses, which includes reserves for legal matters, and Other, net, which includes gains and losses from strategic investments, the sales of businesses, and other income.

• “Normalized Adjusted Net Income”, “Normalized Adjusted Net Income before income taxes”, “Normalized provision for income taxes”, and “Normalized Adjusted EPS”, which we calculate by adjusting Net Income to exclude certain items, and other non-cash items, assuming that all vested and unvested Virtu Financial Units have been exchanged for Class A Common Stock, and applying an effective tax rate, which was approximately 24%.

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GAAP measure.

The following table reconciles the Condensed Consolidated Statements of Comprehensive Income to arrive at Adjusted Net Trading Income, EBITDA, Adjusted EBITDA, and Non-GAAP Operating Margins for the three and nine months ended September 30, 2023, and 2022.

Three Months Ended September 30, Nine Months Ended September 30,

The following table reconciles the Condensed Consolidated Statements of Comprehensive Income to arrive at Adjusted Net Trading Income, EBITDA, Adjusted EBITDA, and Operating Margins for the three months ended March 31, 2024 and 2023.

Three Months Ended March 31,

(in thousands) 2024 2023

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(4) Calculated by dividing Adjusted EBITDA by Adjusted Net Trading Income.

The following table reconciles Net income to arrive at Normalized Adjusted Net Income before income taxes, Normalized provision for income taxes, Normalized Adjusted Net Income and Normalized Adjusted EPS for the three and nine months ended September 30, 2023, and 2022:

Three Months Ended September 30, Nine Months Ended September 30,

The following table reconciles Net Income to arrive at Normalized Adjusted Net Income before income taxes, Normalized provision for income taxes, Normalized Adjusted Net Income and Normalized Adjusted EPS for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,

(in thousands, except share and per share data) 2024 2023

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(2) Assumes that (1) holders of all vested and unvested non-vesting Virtu Financial Units (together with corresponding shares of the Company's Class C common stock, par value $0.00001 per share (the “Class C Common Stock”)) have exercised their right to exchange such Virtu Financial Units for shares of Class A Common Stock on a one-for-one basis, (2) holders of all Virtu Financial Units (together with corresponding shares of the Company's Class D common stock, par value $0.00001 per share (the “Class D Common Stock”)) have exercised their right to exchange such Virtu Financial Units for shares of the Company's Class B common stock, par value $0.00001 per share (the “Class B Common Stock”) on a one-for-one basis, and subsequently exercised their right to convert the shares of Class B Common Stock into shares of Class A Common Stock on a one-for-one basis.

Includes additional shares from dilutive impact of options, restricted stock units and restricted stock awards outstanding under the Amended and Restated 2015 Management Incentive Plan and the Amended and Restated ITG 2007 Equity Plan during the three and nine months ended September 30, 2023 and 2022.

The following tables reconcile Trading income, net to Adjusted Net Trading Income by segment for the three and nine months ended September 30, 2023, and 2022:

Three Months Ended September 30, 2023

(in thousands) Market Making Execution Services Corporate Total

Trading income, net $ 310,523 $ 5,562 $ — $ 316,085

Commissions, net and technology services 6,343 103,933 — 110,276

Interest and dividends income 124,803 2,890 — 127,693

Brokerage, exchange, clearance fees and payments for order flow, net (101,077) (22,168) — (123,245)

Interest and dividends expense (132,523) (279) — (132,802)

Adjusted Net Trading Income $ 208,069 $ 89,938 $ — $ 298,007

Three Months Ended September 30, 2022

(in thousands) Market Making Execution Services Corporate Total

Trading income, net $ 392,496 $ 4,887 $ — $ 397,383

Commissions, net and technology services 10,687 110,299 — 120,986

Interest and dividends income 43,446 185 — 43,631

Brokerage, exchange, clearance fees and payments for order flow, net (147,346) (21,523) — (168,869)

Interest and dividends expense (61,019) (970) — (61,989)

Adjusted Net Trading Income $ 238,264 $ 92,878 $ — $ 331,142

Nine Months Ended September 30, 2023

Includes additional shares from the dilutive impact of options, restricted stock units and restricted stock awards outstanding under the Amended and Restated 2015 Management Incentive Plan and the Amended and Restated ITG 2007 Equity Plan during the three months ended March 31, 2024 and 2023.

The following tables reconcile Trading income, net to Adjusted Net Trading Income by segment for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31, 2024

(in thousands) Market Making Execution Services Corporate Total

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Adjusted Net Trading Income $ 273,678 $ 93,193 $ — $ 366,871

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

(in thousands) Market Making Execution Services Corporate Total

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Adjusted Net Trading Income $ 277,857 $ 95,218 $ — $ 373,075

The following table shows our Adjusted Net Trading Income and average daily Adjusted Net Trading Income by segment for the three and nine months ended September 30, 2023, and 2022:

Three Months Ended September 30,

Adjusted Net Trading Income by Segment (in thousands):

2023 2022 % Change

Market Making $ 208,069 $ 238,264 (12.7)%

Execution Services 89,938 92,878 (3.2)%

Adjusted Net Trading Income $ 298,007 $ 331,142 (10.0)%

Three Months Ended September 30,

Average Daily Adjusted Net Trading Income by Segment (in thousands):

2023 2022 % Change

The following table shows our Adjusted Net Trading Income and average daily Adjusted Net Trading Income by segment for the three months ended March 31, 2024 and 2023:

(in thousands, except %) 2024 2023

Adjusted Net Trading Income by Segment:

Total Average Daily % Total Average Daily %

Market Making:

Execution Services 1,428 1,451 (1.6)%

Average Daily Adjusted Net Trading Income $ 4,731 $ 5,174 (9.6)%

Nine Months Ended September 30,

Adjusted Net Trading Income by Segment (in thousands):

2023 2022 % Change

Market Making $ 273,678 $ 4,487 74.6 % $ 277,857 $ 4,482 74.5 %

Execution Services 93,193 1,528 25.4 % 95,218 1,536 25.5 %

Corporate — — — % — — — %

Adjusted Net Trading Income $ 366,871 $ 6,015 100.0 % $ 373,075 $ 6,018 100.0 %

Nine Months Ended September 30,

Average Daily Adjusted Net Trading Income by Segment (in thousands):

2023 2022 % Change

Market Making $ 3,632 $ 4,648 (21.9)%

Execution Services 1,447 1,701 (14.9)%

Average Daily Adjusted Net Trading Income $ 5,079 $ 6,349 (19.0)%

Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Total Revenues

Our total revenues increased $69.2 million, or 12.3%, to $630.2 million for the three months ended September 30, 2023, compared to $561.0 million for the three months ended September 30, 2022.

The increase was primarily driven by an increase in Other, net as a result of gains recorded from settlement fund recoveries received in the three months ended September 30, 2023.

The following table shows total revenues by segment for the three months ended September 30, 2023 and 2022.

Three Months Ended September 30,

Our total revenues increased $22.4 million, or 3.6%, to $642.8 million for the three months ended March 31, 2024, compared to $620.4 million for the three months ended March 31, 2023.

The increase was primarily driven by an increase in Interest and dividends income due to higher interest rates during the three months ended March 31, 2024 compared to the same period in 2023.

The following table shows total revenues by segment for the three months ended March 31, 2024 and 2023.

Three Months Ended March 31,

(in thousands, except for percentage) 2024 2023 % Change

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Commissions, net and technology services 7,202 9,701 (25.8)%

Other, net 75,682 1,257 NM

Other, net 6,306 1,190 429.9%

Total revenues from Market Making $ 521,008 $ 498,921 4.4%

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Trading income, net $ 4,397 $ 4,168 5.5%

Interest and dividends income 2,890 185 NM

Interest and dividends income 2,190 2,557 (14.4)%

Commissions, net and technology services 111,409 111,743 (0.3)%

Other, net 68 4,228 (98.4)%

Total revenues from Execution Services $ 112,453 $ 119,599 (6.0)%

Other, net (208) 10 NM

Total revenues from Corporate $ 360 $ (6,441) NM

Total revenues from Execution Services $ 117,788 $ 118,478 (0.6)%

Other, net $ 4,043 $ 2,981 35.6%

Total revenues from Corporate $ 4,043 $ 2,981 35.6%

Trading income, net $ 408,095 $ 412,511 (1.1)%

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Commissions, net and technology services 118,611 121,444 (2.3)%

Other, net 76,110 (956) NM

Other, net 10,141 4,181 142.5%

Total revenues $ 642,839 $ 620,380 3.6%

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Trading income, net was primarily earned by our Market Making segment.

Trading income, net decreased $81.3 million, or 20.5% to $316.1 million for the three months ended September 30, 2023, compared to $397.4 million for the three months ended September 30, 2022.

The decrease was largely a result of lower market volumes and lower volatility across global markets and decreased opportunity in our customer market making trading as a result of lower spread opportunity and decreased quality of the order flow with which we interacted.

Trading income, net decreased $4.4 million, or 1.1% to $408.1 million for the three months ended March 31, 2024, compared to $412.5 million for the three months ended March 31, 2023.

The decrease was largely a result of one fewer trading day during the three months ended March 31, 2024 compared to the same period in 2023.

Rather than analyzing trading income, net, in isolation, we evaluate it in the broader context of our Adjusted Net Trading Income, together with Interest and dividends income, Interest and dividends expense, Commissions, net and technology services and Brokerage, exchange, clearance fees and payments for order flow, net, each of which is described below.

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Interest and dividends income was primarily earned by our Market Making segment.

Interest and dividends income increased $84.1 million, or 192.9%, to $127.7 million for the three months ended September 30, 2023, compared to $43.6 million for the three months ended September 30, 2022.

Interest and dividends income increased $23.8 million, or 29.0%, to $106.0 million for the three months ended March 31, 2024, compared to $82.2 million for the three months ended March 31, 2023.

This increase was primarily attributable to an increase in interest income earned on cash collateral posted as part of securities borrowing transactions and interest earned on balances maintained at banks and prime brokers, and higher dividends earned on market making trading assets held over periods when dividends are paid, both of which benefited from higher interest rates for the period compared to the same period during the prior year.

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Commissions, net and technology services revenues were primarily earned by our Execution Services segment.

Commissions, net and technology services revenues decreased $10.7 million, or 8.8%, to $110.3 million for the three months ended September 30, 2023, compared to $121.0 million for the three months ended September 30, 2022.

This decrease was driven by lower market volumes, a reduction of institutional investors' commissions available, and declining institutional engagement.

Commissions, net and technology services revenues decreased $2.8 million, or 2.3%, to $118.6 million for the three months ended March 31, 2024, compared to $121.4 million for the three months ended March 31, 2023.

This decrease was driven by slightly lower market volumes, a reduction of institutional investors' commissions available, and declining institutional engagement.

As indicated above, rather than analyzing interest and dividends income in isolation, we evaluate it in the broader context of our Adjusted Net Trading Income.

Other, net increased $77.1 million, to $76.1 million for the three months ended September 30, 2023, compared to $(1.0) million for the three months ended September 30, 2022.

Other, net comprises changes in the valuation on our level 3 investment, as well as other miscellaneous income including various nonrecurring gains and losses.

The three months ended September 30, 2023 included gains on settlement fund recoveries in which we are eligible to participate based on

our transactions in the applicable products.

Refer to Note 9 "Financial Assets and Liabilities" in Part I Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q for more details on our level 3 investment.

Other, net increased $5.9 million, to $10.1 million for the three months ended March 31, 2024, compared to $4.2 million for the three months ended March 31, 2023.

The three months ended March 31, 2024 included gains on settlement fund recoveries in which we are eligible to participate based on our transactions in the applicable products.

Adjusted Net Trading Income

Adjusted Net Trading Income, which is a non-GAAP measure, decreased $33.1 million, or 10.0%, to $298.0 million for the three months ended September 30, 2023, compared to $331.1 million for the three months ended September 30, 2022.

This decrease was primarily attributable to lower Trading income, net in the Market Making segment during the three months ended September 30, 2023 compared to the same period in 2022, as noted above.

Adjusted Net Trading Income per day decreased $0.5 million, or 9.6%, to $4.7 million for the three months ended September 30, 2023, compared to $5.2 million for the three months ended September 30, 2022.

Adjusted Net Trading Income, which is a non-GAAP measure, decreased $6.2 million, or 1.7%, to $366.9 million for the three months ended March 31, 2024, compared to $373.1 million for the three months ended March 31, 2023.

This decrease was primarily attributable to lower Trading income, net in the Market Making segment due to one fewer trading day during the three months ended March 31, 2024 compared to the same period in 2023, as noted above.

Average daily Adjusted Net Trading Income remained consistent at $6.0 million for the three months ended March 31, 2024 and 2023.

For a full description of Adjusted Net Trading Income and a reconciliation of Adjusted Net Trading Income to trading income, net, see “Non-GAAP Financial Measures and Other Items” in this Item 2.

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Operating Expenses

Our operating expenses increased $32.7 million, or 7.1%, to $492.1 million for the three months ended September 30, 2023, compared to $459.4 million for the three months ended September 30, 2022.

Our operating expenses increased $17.4 million, or 3.6%, to $503.0 million for the three months ended March 31, 2024, compared to $485.6 million for the three months ended March 31, 2023.

The increase in operating expenses is primarily due to an increase in Interest and dividends expense, partially offset by a decline in Brokerage, exchange, clearance fees and payments for order flow, net, described in more detail below.

Brokerage, exchange, clearance fees and payments for order flow, net.

Brokerage exchange, clearance fees and payments for order flow, net, decreased $45.7 million, or 27.1%, to $123.2 million for the three months ended September 30, 2023, compared to $168.9 million for the three months ended September 30, 2022.

Brokerage exchange, clearance fees and payments for order flow, net, decreased $5.7 million, or 3.9%, to $139.8 million for the three months ended March 31, 2024, compared to $145.5 million for the three months ended March 31, 2023.

These costs vary period to period based upon the level and composition of our trading activities.

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Communication and data processing.

Communication and data processing expense increased $4.2 million, or 7.9%, to $57.1 million for the three months ended September 30, 2023, compared to $52.9 million for the three months ended September 30, 2022.

This increase was primarily due to increased connectivity spending on colocation, access, ports, and gateways, and microwave communication networks maintained by our joint ventures.

Communication and data processing expense increased $1.4 million, or 2.5%, to $58.2 million for the three months ended March 31, 2024, compared to $56.8 million for the three months ended March 31, 2023.

This increase was primarily due to increased connectivity spending on subscription and microwave communication networks maintained by our joint ventures.

Employee compensation and payroll taxes.

Employee compensation and payroll taxes decreased $6.1 million, or 5.9% to $97.2 million for the three months ended September 30, 2023, compared to $103.3 million for the three months ended September 30, 2022.

Employee compensation and payroll taxes decreased $2.6 million, or 2.5% to $100.8 million for the three months ended March 31, 2024, compared to $103.4 million for the three months ended March 31, 2023.

The decrease in compensation levels was primarily attributable to a decrease in accrued incentive compensation, which is recorded at management’s discretion and is generally accrued in connection with the overall level of profitability on a year-to-date basis, as well as the anticipated mix of cash and stock-based awards.

We have capitalized and therefore excluded employee compensation and benefits related to software development of $9.7 million and $8.4 million for the three months ended September 30, 2023, and 2022, respectively.

We have capitalized and therefore excluded employee compensation and benefits related to software development of $10.2 million and $8.4 million for the three months ended March 31, 2024, and 2023, respectively.

Interest and dividends expense.

Interest and dividends expense increased $70.8 million or 114.2% to $132.8 million for the three months ended September 30, 2023, compared to $62.0 million for the three months ended September 30, 2022.

This increase was primarily attributable to higher interest expense incurred on cash collateral received as part of securities lending transactions and higher financing costs with respect to trading assets driven by higher interest rates, and higher dividend expense with respect to securities sold, not yet purchased.

Interest and dividends expense increased $28.4 million or 29.1% to $126.0 million for the three months ended March 31, 2024, compared to $97.6 million for the three months ended March 31, 2023.

This increase was primarily attributable to increased usage of broker-dealer credit facilities, as well as higher interest expense incurred on cash collateral received as part of securities lending transactions and higher financing costs with respect to trading assets driven by higher interest rates, and higher dividends expense with respect to securities sold, not yet purchased.

As indicated above, rather than analyzing interest and dividends expense in isolation, we evaluate it in the broader context of our Adjusted Net Trading Income.

Operations and administrative.

Operations and administrative expense increased $8.1 million or 56.6% to $22.4 million for the three months ended September 30, 2023, compared to $14.3 million for the three months ended September 30, 2022.

This increase was primarily driven by favorable foreign exchange rate movements in the prior year period.

Operations and administrative expense decreased $2.0 million or 8.2% to $22.3 million for the three months ended March 31, 2024, compared to $24.3 million for the three months ended March 31, 2023.

This decrease was primarily driven by a decrease in recruiting expenses and favorable foreign exchange rate movements.

Depreciation and amortization.

Depreciation and amortization decreased $0.9 million, or 5.4% to $15.8 million for the three months ended September 30, 2023, compared to $16.7 million for the three months ended September 30, 2022.

The decrease is driven primarily by decreased depreciation on computer equipment and amortization of capitalized software compared to the prior period.

Depreciation and amortization increased $0.8 million, or 5.2% to $16.1 million for the three months ended March 31, 2024, compared to $15.3 million for the three months ended March 31, 2023.

The increase is driven primarily by increased depreciation on equipment and amortization of capitalized software compared to the same period in 2023.

Amortization of purchased intangibles and acquired capitalized software.

Amortization of purchased intangibles and acquired capitalized software decreased $0.1 million, or 0.6%, to $16.0 million for the three months ended September 30, 2023,

compared to $16.1 million for the three months ended September 30, 2022.

Amortization of purchased intangibles and acquired capitalized software decreased $1.3 million, or 8.1%, to $14.7 million for the three months ended March 31, 2024, compared to $16.0 million for the three months ended March 31, 2023.

This decrease was due to certain intangible assets being fully amortized during 2023.

Termination of office leases.

Termination of office leases was $0.4 million for the three months ended September 30, 2023, and September 30, 2022.

Termination of office leases was insignificant for the three months ended March 31, 2024 and March 31, 2023.

These expenses are related to the impairment of lease right-of-use assets, leasehold improvements and fixed assets for certain abandoned or vacated office space.

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Debt issue cost related to debt refinancing, prepayment and commitment fees.

Expense from debt issue cost related to debt refinancing, prepayment and commitment fees increased to $1.8 million for the three months ended September 30, 2023, compared to $1.4 million for the three months ended September 30, 2022.

The increase was primarily driven by costs incurred related to amending VAL's credit facility.

Expense from debt issue cost related to debt refinancing, prepayment and commitment fees decreased to $1.7 million for the three months ended March 31, 2024, compared to $2.2 million for the three months ended March 31, 2023.

The decrease was primarily driven by lower commitment fees as a result of increased usage of broker-dealer credit facilities during the three months ended March 31, 2024.

Refer to Note 8 “Borrowings” in Part I Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q for more details on our borrowing arrangements.

Transaction advisory fees and expenses.

Transaction advisory fees and expenses were insignificant for both the three months ended September 30, 2023, and September 30, 2022.

Transaction advisory fees and expenses were insignificant for both the three months ended March 31, 2024, and March 31, 2023.

These expenses are primarily incurred in relation to our strategic investment portfolio.

Financing interest expense on long-term borrowings.

Financing interest expense on long-term borrowings increased $1.9 million or 8.1% to $25.4 million for the three months ended September 30, 2023, compared to $23.5 million for the three months ended September 30, 2022.The increase was attributable to the effect of higher interest rates applied on our outstanding principal.

Provision for income taxes

We incur corporate tax at the U.S.

federal income tax rate on our taxable income, as adjusted for noncontrolling interest in Virtu Financial.

Our income tax expense reflects such U.S.

federal income tax as well as taxes payable by certain of our non-U.S.

subsidiaries.

Our provision for income taxes and effective tax rates were $20.5 million and 14.9% for the three months ended September 30, 2023, compared to $21.7 million and 21.4% for the three months ended September 30, 2022.

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

Total Revenues

Our total revenues decreased $109.6 million, or 5.9%, to $1,757.4 million for the nine months ended September 30, 2023, compared to $1,867.0 million for the nine months ended September 30, 2022.

This decrease was primarily attributable to a decrease of $280.8 million in Trading income, net, during the nine months ended September 30, 2023 compared to the prior period, partially offset by an increase of $212.5 million in Interest and dividends income, which is largely driven by the level of trading assets held over periods when dividends are paid, and the levels of stock borrowing and trading asset financing during the nine months ended September 30, 2023 compared to the same period in 2022.

The following table shows the total revenues by segment for the nine months ended September 30, 2023 and 2022.

Nine Months Ended September 30,

(in thousands, except for percentage) 2023 2022 % Change

Market Making

Trading income, net $ 1,021,179 $ 1,299,117 (21.4)%

Interest and dividends income 300,086 95,221 215.1%

Commissions, net and technology services 22,677 30,881 (26.6)%

Other, net 77,580 1,825 NM

Total revenues from Market Making $ 1,421,522 $ 1,427,044 (0.4)%

Execution Services

Trading income, net $ 13,585 $ 16,501 (17.7)

Interest and dividends income 7,830 214 NM

Commissions, net and technology services 318,546 381,100 (16.4)%

Other, net 84 4,525 (98)%

Total revenues from Execution Services $ 340,045 $ 402,340 (15.5)%

Other, net $ (4,171) $ 37,660 NM

Total revenues from Corporate $ (4,171) $ 37,660 NM

Trading income, net $ 1,034,764 $ 1,315,618 (21.3)%

Interest and dividends income 307,916 95,435 222.6%

Commissions, net and technology services 341,223 411,981 (17.2)%

Other, net 73,493 44,010 67.0%

Total revenues $ 1,757,396 $ 1,867,044 (5.9)%

Trading income, net.

Trading income, net was primarily earned by our Market Making segment.

Trading income, net, decreased $280.8 million, or 21.3%, to $1,034.8 million for the nine months ended September 30, 2023, compared to $1,315.6 million for the nine months ended September 30, 2022.

The decrease was largely a result of the decreased opportunity in our customer market making trading as a result of lower spread opportunity and decreased quality of the order flow with which we interact.

Rather than analyzing Trading income, net, in isolation, we evaluate it in the broader context of our Adjusted Net Trading Income, together with Interest and dividends income, Interest and dividends expense, Commissions, net and technology services and Brokerage, exchange, clearance fees and payments for order flow, net, each of which are described below.

Interest and dividends income.

Interest and dividends income was primarily earned by our Market Making segment.

Interest and dividends income increased $212.5 million, or 222.7%, to $307.9 million for the nine months ended September 30, 2023, compared to $95.4 million for the nine months ended September 30, 2022.

This increase was primarily attributable to an increase in interest income earned on cash collateral posted as part of securities borrowed transactions, and higher dividends earned on market making trading assets held over periods when dividends are paid, both of which benefited from higher interest rates for the period compared to the prior period.

As indicated above, rather than analyzing interest and dividends income in isolation, we evaluate it in the broader context of our Adjusted Net Trading Income.

Commissions, net and technology services.

Commissions, net and technology services revenues were primarily earned by our Execution Services segment.

Commissions, net and technology services revenues decreased $70.8 million, or 17.2%, to $341.2 million for the nine months ended September 30, 2023, compared to $412.0 million for the nine months ended September 30, 2022.

This decrease was driven by the reduction of institutional investors commissions available, and declining institutional engagement, both of which result in lower commission income.

As indicated above, rather than analyzing commission income in isolation, we evaluate it in the broader context of our Adjusted Net Trading Income.

Other, net increased $29.5 million, or 67.0%, to $73.5 million for the nine months ended September 30, 2023, compared to $44.0 million for the nine months ended September 30, 2022.

The income for the nine months ended September 30, 2023 primarily related to gains on settlement fund recoveries in which we are eligible to participate based on our

transactions in the applicable products.

The income in 2022 was primarily due to gains recognized from sales of investments in our strategic investments portfolio.

Adjusted Net Trading Income

Adjusted Net Trading Income, which is a non-GAAP measure, decreased $243.8 million, or 20.4%, to $949.8 million for the nine months ended September 30, 2023, compared to $1,193.6 million for the nine months ended September 30, 2022.

This decrease was primarily attributable to lower Trading income, net as noted above, partially offset by an increase in Interest and dividends income, as described above, and lower Brokerage, exchange, clearance fees and payments for order flow, net as described below.

Adjusted Net Trading Income per day decreased $1.2 million, or 19.0%, to $5.1 million for the nine months ended September 30, 2023, compared to $6.3 million for the nine months ended September 30, 2022.

The number of trading days was 187 days for the nine months ended September 30, 2023, compared to 188 days for the nine months ended September 30, 2022.

For a full description of Adjusted Net Trading Income and a reconciliation of Adjusted Net Trading Income to trading income, net, see “Non-GAAP Financial Measures and Other Items” in this “Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations”.

Operating Expenses

Our operating expenses increased $99.2 million, or 7.3%, to $1,449.1 million for the nine months ended September 30, 2023, compared to $1,349.9 million for the nine months ended September 30, 2022.

The increase was primarily driven by increased in Interest and dividends expense, offset in part, by lower Brokerage, exchange, clearance fees and payments for order flow, net, and lower Debt issue cost related to debt refinancing, prepayment and commitment fees.

Brokerage, exchange, clearance fees and payments for order flow, net.

Brokerage, exchange, clearance fees and payments for order flow, net, decreased $85.0 million, or 17.8%, to $391.2 million for the nine months ended September 30, 2023, compared to $476.2 million for the nine months ended September 30, 2022.

These costs vary period to period based upon the level and composition of our trading activities.

We evaluate this category, representing direct costs associated with transacting our business, in the broader context of our Adjusted Net Trading Income.

Communication and data processing.

Communication and data processing expense increased $6.4 million, or 3.9%, to $170.8 million for the nine months ended September 30, 2023, compared to $164.4 million for the nine months ended September 30, 2022.

This increase was primarily attributable to increased connectivity spending on colocation, access ports and gateways, and microwave communication networks maintained by our joint ventures.

Employee compensation and payroll taxes.

Employee compensation and payroll taxes decreased $9.1 million, or 3.0%, to $296.2 million for the nine months ended September 30, 2023, compared to $305.3 million for the nine months ended September 30, 2022.

We have capitalized and therefore excluded employee compensation and benefits related to software development of $29.5 million and $25.1 million for the nine months ended September 30, 2023 and 2022, respectively.

Interest and dividends expense.

Interest and dividends expense increased $189.7 million, or 123.8%, to $342.9 million for the nine months ended September 30, 2023, compared to $153.2 million for the nine months ended September 30, 2022.

This increase was primarily attributable to higher interest expense incurred on cash collateral received driven by higher interest rates, as well as an increase in securities lending transactions and higher dividend expense with respect to securities sold, not yet purchased for the period compared to the same period during the prior year.

As indicated above, rather than analyzing interest and dividends expense in isolation, we generally evaluate it in the broader context of our Adjusted Net Trading Income.

Operations and administrative.

Operations and administrative expense increased $19.1 million, or 36.0%, to $72.2 million for the nine months ended September 30, 2023, compared to $53.1 million for the nine months ended September 30, 2022.

The increase was primarily driven by the beneficial effect of a strong U.S.

dollar on foreign exchange translation gains during the prior year period.

Depreciation and amortization.

Depreciation and amortization decreased $3.4 million, or 6.7%, to $47.1 million for the nine months ended September 30, 2023, compared to $50.5 million for the nine months ended September 30, 2022.

This decrease is driven primarily by decreased depreciation of computer equipment, and amortization of capitalized software compared to the prior period.

Amortization of purchased intangibles and acquired capitalized software.

Amortization of purchased intangibles and acquired capitalized software decreased $0.8 million, or 1.6%, to $48.0 million for the nine months ended September 30, 2023, compared to $48.8 million for the nine months ended September 30, 2022.

This decrease was primarily attributable to certain intangible assets being fully amortized in 2022.

Termination of office leases.

Termination of office leases was $0.3 million for the nine months ended September 30, 2023, compared to $1.7 million for the nine months ended September 30, 2022.

These expenses in the prior period are related to the impairment of lease right-of-use assets, leasehold improvements and fixed assets for certain abandoned or vacated office space.

Debt issue cost related to debt refinancing, prepayment and commitment fees.

Expense from debt issue cost related to debt refinancing, prepayment and commitment fees decreased $22.8 million, or 80.0%, to $5.7 million for the nine months ended September 30, 2023, compared to $28.5 million for the nine months ended September 30, 2022.

The decrease was primarily driven by the acceleration of deferred debt issuance costs as a result of refinancing our long-term debt transaction in January 2022.

See Note 8 "Borrowings" of Part I Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q for additional details.

Transaction advisory fees and expenses.

Transaction advisory fees and expenses were immaterial for the nine months ended September 30, 2023, compared to $1.1 million for the nine months ended September 30, 2022.

These expenses were primarily incurred in relation to our strategic investment portfolio.

Financing interest expense on long term borrowings.

Financing interest expense on long-term borrowings increased $7.6 million, or 11.4%, to $74.5 million for the nine months ended September 30, 2023, compared to $66.9 million for the nine months ended September 30, 2022.

This increase was attributable to the increase in outstanding principal as a result of refinancing our long-term debt in January 2022, as described in further detail below, and the effect of higher interest rates.

Financing interest expense on long-term borrowings decreased $1.1 million or 4.5% to $23.2 million for the three months ended March 31, 2024, compared to $24.3 million for the three months ended March 31, 2023.The decrease was attributable to the decrease in outstanding principal as a result of the voluntary prepayment in December 2023 and the amortization of the amounts in AOCI related to the interest rate swaps terminated in December 2023.

The decrease is partially offset by the effect of higher interest rates applied on our outstanding principal.

Provision for income taxes

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subsidiaries.

Our provision for income taxes and effective tax rate was $51.1 million and 16.6% for the nine months ended September 30, 2023, compared to a provision for income taxes and effective tax rate of $88.4 million and 17.1% for the nine months ended September 30, 2022.

Our provision for income taxes and effective tax rates were $28.5 million and 20.4% for the three months ended March 31, 2024, compared to $24.7 million and 18.3% for the three months ended March 31, 2023.

Liquidity and Capital Resources

As of September 30, 2023, we had $688.8 million in Cash and cash equivalents.

As of March 31, 2024, we had $399.6 million in Cash and cash equivalents.

This balance is maintained primarily to support operating activities, for capital expenditures and for short-term access to liquidity, and for other general corporate purposes.

As of September 30, 2023, we had borrowings under our prime brokerage credit facilities of approximately $93.6 million, borrowings under our broker dealer facilities of $100.0 million, and long-term debt outstanding in an aggregate principal amount of approximately $1,805.4 million.

As of March 31, 2024, we had borrowings under our prime brokerage credit facilities of approximately $170.7 million, borrowings under our broker dealer facilities of $140.0 million, and long-term debt outstanding in an aggregate principal amount of approximately $1,750.1 million.

The majority of our trading assets consist of exchange-listed marketable securities, which are marked-to-market daily, and collateralized receivables from broker-dealers and clearing organizations arising from proprietary securities transactions.

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Short-term Liquidity and Capital Resources

Based on our current level of operations, we believe our cash flows from operations, available cash and cash equivalents, and available borrowings under our broker-dealer credit facilities will be adequate to meet our future liquidity

needs for the next twelve months.

We anticipate that our primary upcoming cash and liquidity needs will be increased margin requirements from increased trading activities in markets where we currently provide liquidity and in new markets into which we plan to expand.

We anticipate that our primary upcoming cash and liquidity needs will be increased due to margin requirements from increased trading activities in markets where we currently provide liquidity and in new markets into which we plan to expand.

We manage and monitor our margin and liquidity needs on a real-time basis and can adjust our requirements both intra-day and inter-day, as required.

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We will retain the remaining 15% of any such cash tax savings.

We expect that future payments to certain direct or indirect equity holders of Virtu Financial described in Note 4 "Tax Receivable Agreements" of Part I Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q are expected to range from approximately $36.4 thousand to $22.0 million per year over the next 15 years.

We expect that future payments to certain direct or indirect equity holders of Virtu Financial described in Note 4 “Tax Receivable Agreements” of Part I Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q are expected to range from approximately $0.1 million to $22.0 million per year over the next 15 years.

Such payments will occur only after we have filed our U.S.

federal and state income tax returns and realized the cash tax savings from the favorable tax attributes.

We made our first payment of $7.0 million in February 2017, and subsequent payments of $12.4 million in September 2018, $13.3 million in March 2020, $16.5 million in April 2021, $21.3 million in March 2022, and $23.3 million in April 2023.

Future payments under the tax receivable agreements in respect of subsequent exchanges would be in addition to these amounts.

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These rules also dictate the ratio of debt-to-equity in the regulatory capital composition of a broker-dealer and constrain the ability of a broker-dealer to expand its business under certain circumstances.

If a firm fails to maintain the required regulatory capital, it may be subject to suspension or revocation of registration by the applicable regulatory agency, and suspension or expulsion by these regulators could ultimately lead to the firm’s liquidation.

Additionally, certain applicable rules impose requirements that may have the effect of prohibiting a broker-dealer from distributing or withdrawing capital and requiring prior notice to and/or approval from the SEC and FINRA for certain capital withdrawals.

VAL is also subject to

rules set forth by NYSE and is required to maintain a certain level of capital in connection with the operation of its designated market maker business.

VAL is also subject to rules set forth by NYSE and is required to maintain a certain level of capital in connection with the operation of its designated market maker business.

Our Canadian subsidiaries, Virtu Canada Corp (f/k/a Virtu ITG Canada Corp.) and Virtu Financial Canada ULC, are subject to regulatory capital requirements and periodic requirements to report their regulatory capital and submit other regulatory reports set forth by the Canadian Investment Regulatory Organization.

Our Irish subsidiaries, Virtu Financial Ireland Limited ("VFIL") and Virtu Europe Trading Limited ("VETL") (f/k/a Virtu ITG Europe Limited) are regulated by the Central Bank of Ireland as Investment Firms and in accordance with European Union law are required to maintain a minimum amount of regulatory capital based upon their positions, financial conditions, and other factors.

Our Irish subsidiaries, Virtu Financial Ireland

Limited (“VFIL”) and Virtu Europe Trading Limited (“VETL”) (f/k/a Virtu ITG Europe Limited) are regulated by the Central Bank of Ireland as Investment Firms and in accordance with European Union law are required to maintain a minimum amount of regulatory capital based upon their positions, financial conditions, and other factors.

In addition to periodic requirements to report their regulatory capital and submit other regulatory reports, VFIL and VETL are required to obtain consent prior to receiving capital contributions or making capital distributions from their regulatory capital.

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See Note 8 “Borrowings” of Part I Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q for details on our various credit facilities.

As of September 30, 2023, there was an outstanding principal balance on our broker-dealer facilities of $100.0 million, and the outstanding aggregate short-term credit facilities with various prime brokers and other financial institutions from which the Company receives execution or clearing services was approximately $93.6 million, which was netted within Receivables from broker-dealers and clearing organizations on the Condensed Consolidated Statements of Financial Condition of Part I Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q.

On March 20, 2020, a broker-dealer subsidiary of the Company entered into a loan agreement (the “Founder Member Loan Facility”) with TJMT Holdings LLC (the “Founder Member”), as lender and administrative agent, providing for unsecured term loans from time to time (the “Founder Member Loans”) in an aggregate original principal amount not to exceed $300 million.

The Founder Member Loans were available to be borrowed in one or more borrowings on or after March 20, 2020 and prior to September 20, 2020, though no borrowings were made.

The Founder Member is an affiliate of Mr.

Vincent Viola, the Company’s founder and Chairman Emeritus.

Upon the execution of and in consideration for the Lender’s commitments under the Founder Member Loan Facility, the Company delivered to the Founder Member a warrant to purchase shares of the Company’s Class A Common Stock, as described below.

On March 20, 2020, in connection with and in consideration of the Founder Member’s commitments under the Founder Member Loan Facility, the Company delivered to the Founder Member a warrant (the “Warrant”) to purchase shares of the Company’s Class A Common Stock.

Pursuant to the Warrant, the Founder Member was entitled to purchase up to 3,000,000 shares of Class A Common Stock on or after May 22, 2020 and up to and including January 15, 2022 at a price of $22.98.

The Warrant was exercised on December 17, 2021 for 3,000,000 shares of the Company's Class A Common Stock.

The Warrant and Class A Common Stock issued pursuant to the Warrant were offered, issued and sold, in reliance on the exemption from the registration requirements of the Securities Act, set forth under Section 4(a)(2) of the Securities Act relating to sales by an issuer not involving any public offering.

As of March 31, 2024, there was an outstanding principal balance on our broker-dealer facilities of $140.0 million, and the outstanding aggregate short-term credit facilities with various prime brokers and other financial institutions from which the Company receives execution or clearing services was approximately $170.7 million, which was netted within Receivables from broker-dealers and clearing organizations on the Condensed Consolidated Statements of Financial Condition of Part I Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q.

Credit Agreement

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The Credit Agreement contains certain customary covenants and events of default, including relating to a change of control.

If an event of default occurs and is continuing, the lenders under the Credit Agreement will be entitled to take various actions, including the acceleration of amounts outstanding under the Credit Agreement and all actions permitted to be taken by a secured creditor in respect of the collateral securing the obligations under the Credit Agreement.

If an event of default occurs and is continuing, the lenders under the Credit Agreement will be entitled to take various

actions, including the acceleration of amounts outstanding under the Credit Agreement and all actions permitted to be taken by a secured creditor in respect of the collateral securing the obligations under the Credit Agreement.

Under the Credit Agreement, the term loans will mature on January 13, 2029.

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The revolving commitments will terminate on January 13, 2025.

As of September 30, 2023, $1,782.0 million was outstanding under the term loans.

We were in compliance with all applicable covenants under the Credit Agreement as of September 30, 2023.

As of March 31, 2024, $1,727.0 million was outstanding under the term loans.

We were in compliance with all applicable covenants under the Credit Agreement as of March 31, 2024.

In October 2019, the Company entered into a five-year $525 million floating-to-fixed interest rate swap agreement.

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The effective fixed interest payment obligations remained at 4.5%, with respect to the earlier maturing swap arrangement, and 4.6% with respect to the later maturing swap arrangement.

In December 2023, the Company terminated the two interest rate swap arrangements and received $55.8 million in proceeds from the counterparty.

The Company therefore dedesignated those cash flow hedges under ASC 815, and the amounts in AOCI related to the terminated swaps are to be amortized through interest expense.

The Company simultaneously entered into a two-year $1,525 million floating-to-fixed interest rate swap agreement with the same counterparty.

The new interest rate swap met the criteria to be considered and was designated as a qualifying cash flow hedge under ASC 815 as of December 2023, and it effectively fixed interest payment obligations on $1,525 million of principal under the First Lien Term Loan Facility at rate of 7.5% through November 2025, based on the interest rates set forth in the Credit Agreement.

Our main sources of liquidity are cash flow from the operations of our subsidiaries, our broker-dealer credit facilities (as described above), margin financing provided by our prime brokers and cash on hand.

The table below summarizes our primary sources and uses of cash for the nine months ended September 30, 2023, and 2022.

Nine Months Ended September 30,

The table below summarizes our primary sources and uses of cash for the three months ended March 31, 2024 and 2023.

Three Months Ended March 31,

Net cash provided by (used in):

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Effect of exchange rate changes on cash and cash equivalents (3,526) 1,648

Net decrease in cash and cash equivalents $ (311,887) $ (230,506)

Net increase (decrease) in cash and cash equivalents $ (426,054) $ (229,061)

Operating Activities

Net cash provided by operating activities was $143.7 million for the nine months ended September 30, 2023, compared to net cash provided by operating activities of $290.5 million for the nine months ended September 30, 2022.

The change in net cash provided by operating activities was primarily attributable to lower net income, as well as decreases in noncash adjustments for the nine months ended September 30, 2023 compared to the prior period.

Net cash used in operating activities was $395.4 million for the three months ended March 31, 2024, compared to net cash used in operating activities of $148.4 million for the three months ended March 31, 2023.

The change in net cash used in operating activities was primarily attributable to decreases in noncash adjustments for the three months ended March 31, 2024 compared to the prior period.

Investing Activities

Net cash used in investing activities, which includes cash used with respect to capitalized software and cash used in the acquisition of property and equipment, was $70.5 million for the nine months ended September 30, 2023, compared with net cash used in investing activities of $11.0 million for the nine months ended September 30, 2022.

Net cash used in investing activities for the nine months ended September 30, 2022 included cash proceeds from the sale of strategic investments, partially offsetting cash uses in the prior period.

Net cash used in investing activities, which includes cash used with respect to capitalized software and cash used in the acquisition of property and equipment, was $27.5 million for the three months ended March 31, 2024, compared with net cash used in investing activities of $35.8 million for the three months ended March 31, 2023.

The change in net cash used in investing activities was primarily attributable to decreases in acquisition of property and equipment in the three months ended March 31, 2024.

Financing Activities

Net cash used in financing activities was $385.3 million for the nine months ended September 30, 2023, compared to $466.5 million for the nine months ended September 30, 2022.

The cash used in financing activities for the nine months ended September 30, 2023 was primarily attributable to $251.9 million in dividends to stockholders and distributions made to noncontrolling interests and $184.4 million in purchases of treasury stock.

The cash used in financing activities of $466.5 million during the same period of 2022 primarily reflects $316.1 million net dividends to stockholders and distributions to noncontrolling interests, and $434.5 million purchase of treasury stock, partially offset by $164.4 million of net proceeds from long term borrowings, and an increase of $104.9 million in short-term borrowings.

Net cash provided by financing activities was $0.4 million for the three months ended March 31, 2024, compared to Net cash used in financing activities of $46.5 million for the three months ended March 31, 2023.

The cash provided by financing activities for the three months ended March 31, 2024 was primarily attributable to $140.0 million of net proceeds from short-term borrowings, offset by $67.6 million in dividends to stockholders and distributions made to noncontrolling interests and $51.8 million in purchases of treasury stock.

The cash used in financing activities of $46.5 million during the same period of 2023 primarily reflects $52.0 million net dividends to stockholders and distributions to noncontrolling interests, and $93.2 million purchase of treasury stock, partially offset by net proceeds of $121.1 million from short-term borrowings.

Share Repurchase Program

On November 6, 2020, the Company's Board of Directors authorized a new share repurchase program of up to $100.0 million in Class A common stock and Virtu Financial Units by December 31, 2021.

Subsequently, the Company's Board of Directors authorized expansions of the share repurchase program on February 11, 2021 to $170.0 million, May 4, 2021 to $470.0 million (and extended the duration through May 4, 2022), and on November 3, 2021 to $1,220.0 million (and extended the duration through November 3, 2023).

Subsequently, the Company's Board of Directors authorized expansions of the share repurchase program on February 11, 2021 to $170.0 million, on May 4, 2021 to $470.0 million (and extended the duration through May 4, 2022), on November 3, 2021 to $1,220.0 million (and extended the duration through November 3, 2023, and on November 2, 2023, further extended the program through December 31, 2024).

The share repurchase program authorizes the Company to repurchase shares from time to time in open market transactions, privately negotiated transactions or by other means.

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The timing and amount of repurchase transactions are determined by the Company's management based on its evaluation of market conditions, share price, cash sources, legal requirements and other factors.

From the inception of the program through September 30, 2023, the Company repurchased approximately 41.2 million shares of Class A Common Stock and Virtu Financial Units for approximately $1,065.6 million.

As of September 30, 2023, the Company has approximately of $154.4 million remaining capacity for future purchases of shares of Class A Common Stock and Virtu Financial Units under the program.

From the inception of the program through March 31, 2024, the Company repurchased approximately 45.6 million shares of Class A Common Stock and Virtu Financial Units for approximately $1,145.4 million.

As of March 31, 2024, the Company has approximately of $74.6 million remaining capacity for future purchases of shares of Class A Common Stock and Virtu Financial Units under the program.

Critical Accounting Policies and Estimates

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We assess goodwill for impairment on an annual basis as of July 1st and on an interim basis when certain events or circumstances exist.

In the impairment assessment as of July 1, 2023, we performed a quantitative assessment as described above for each reporting unit and, the estimated fair value of each of the reporting units exceeded its respective carrying value, and therefore, goodwill was not impaired.

The estimated fair value of each reporting unit was based on valuation techniques the firm believes market participants would use to value these reporting units, and allocated the enterprise value to each reporting unit based on an estimate of relative fair value for each reporting unit.

In the impairment assessment as of July 1, 2023, we performed a quantitative assessment as described

above for each reporting unit and, the estimated fair value of each of the reporting units exceeded its respective carrying value, and therefore, goodwill was not impaired.

The estimated fair value of each reporting unit was based on valuation techniques the Company believes market participants would use to value these reporting units, and allocated the enterprise value to each reporting unit based on an estimate of relative fair value for each reporting unit.

The carrying value of each reporting unit reflects an allocation of total shareholders’ equity and represents the estimated amount of total shareholders’ equity required to support the activities of the applicable reporting unit under currently applicable regulatory capital requirements.

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Our largest finite-lived intangible asset is customer relationships, which is being amortized over an estimated useful life of ten years.

Had we used a shorter estimated useful life of seven years, the Company would have recorded an additional $5.4 million and $16.3 million of amortization expense for the three and nine months ended September 30, 2023, and 2022, respectively.

Had we used a shorter estimated useful life of seven years, the Company would have recorded an additional $5.4 million and $4.1 million of amortization expense for the three months ended March 31, 2024 and 2023, respectively.

We test finite-lived intangible assets for impairment when impairment indicators are present, and if impaired, they are written down to fair value.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis