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Item 2. Management’s Discussion and Analysis

2024-07-26 compared with 2024-04-26 · 276 added, 99 removed, 604 unchanged (38% 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 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.

The following management’s discussion and analysis covers the three and six months ended June 30, 2024, and 2023 should be read in conjunction with the Condensed Consolidated Financial Statements and accompanying notes for the period ended June 30, 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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The Credit Agreement provides (i) a senior secured first lien term loan in an aggregate principal amount of $1,800.0 million, drawn in its entirety on the Credit Agreement Closing Date, the proceeds of which were used by VFH to repay all amounts outstanding under the Acquisition Credit Agreement, to pay fees and expenses in connection therewith, to fund share repurchases under the Company’s repurchase program and for general corporate purposes, and (ii) a $250.0 million senior secured first lien revolving facility to VFH, with a $20.0 million letter of credit subfacility and a $20.0 million swingline subfacility.

On June 21, 2024, the Company entered into Amendment No.

1 to the Credit Agreement (the “Amended Credit Agreement”) and completed the issuance of the Notes (as defined below).

Pursuant to the Amended Credit Agreement, $1,245.0 million in aggregate principal amount of Senior Secured First Lien Term B-1 Loans due 2031 (the “New Term Loans”) were issued, the proceeds of which were used, along with the proceeds of the Notes, to repay in full all term loans previously outstanding under the Credit Agreement.

Additionally, the Amended Credit Agreement provides an increase in its senior secured first lien revolving credit facility from $250.0 million to $300.0 million and an extension of the maturity thereof to three years after the Amendment Effective Date.

The New Term Loans will bear interest, at the Company’s election, at either (i) the greatest of (a) the prime rate in effect, (b) the greater of (1) the federal funds effective rate and (2) the overnight bank funding rate, in each case plus 0.50%, (c) term SOFR for a borrowing with an interest period of one month plus 1.00% and (d) 1.00%, plus, in each case, 1.75%, or (ii) the greater of (x) term SOFR for the interest period in effect and (y) 0%, plus, in each case, 2.75%.

The New Term Loans will mature on the seventh anniversary of the Amendment Effective Date and amortize in annual installments equal to 1.0% of the original aggregate principal amount of the New Term Loans.

The New Term Loans are also subject to contingent principal payments based on excess cash flow and certain other triggering events.

On June 21, 2024, VFH and Valor Co-Issuer, Inc., a subsidiary of Virtu Financial, (the “Co-Issuer”) completed the offering of $500.0 million aggregate principal amount of 7.50% senior secured first lien notes due 2031 (the “Notes”).

The Notes were issued under an Indenture, dated as of June 21, 2024 (the “Indenture”), among the VFH, the Co-Issuer, Virtu Financial and the subsidiary guarantors party thereto, and U.S.

Bank Trust Company, National Association, as the trustee and collateral agent.

The Notes mature on June 15, 2031.

Interest on the Notes accrues at 7.50% per annum, payable every six months through maturity on each June 15 and December 15, beginning on December 15, 2024.

We refer to VFH and the Co-Issuer together as, the “Issuers.”

Amended and Restated 2015 Management Incentive Plan

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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 March 31, 2024, 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 June 30, 2024, options to purchase 1,643,750 shares in the aggregate were forfeited and 6,101,849 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.

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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 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.

(i) cash and cash equivalents reflected on our Condensed Consolidated Statements of Financial Condition as of June 30, 2024 in the amount of $25.3 million;

(ii) deferred tax assets reflected on our Condensed Consolidated Statements of Financial Condition as of June 30, 2024 in the amount of $122.3 million and tax receivable agreement obligation in the amount of $196.3 million, in each case as described in greater detail in Note 5 “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 June 30, 2024;

and (iv) provision for corporate income tax in the amount of $15.6 million and $34.8 million reflected on our Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2024, respectively.

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 months ended March 31, 2024 and 2023:

(in thousands) Three Months Ended March 31,

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 six months ended June 30, 2024 and 2023:

(in thousands) Three Months Ended June 30, Six Months Ended June 30,

Market Making 2024 2023 2024 2023

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Income before income taxes and noncontrolling interest $ 155,385 $ 35,467 $ 295,205 $ 170,231

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

Three Months Ended March 31,

The following table shows our results of operations for the three and six months ended June 30, 2024 and 2023:

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2024 2023 2024 2023

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands, except for share or per share data) 2024 2023 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 63% and 66% of our total revenues for the three months ended March 31, 2024 and 2023, respectively.

Trading income, net, accounted for 62% and 64% of our total revenues for the six months ended June 30, 2024 and 2023, respectively.

Interest and dividends income.

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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 Operating Margins for the three months ended March 31, 2024 and 2023.

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2024 2023 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 months ended March 31, 2024 and 2023:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

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

The following tables reconcile Trading income, net to Adjusted Net Trading Income by segment for the three and six months ended June 30, 2024 and 2023:

Three Months Ended June 30, 2024

(in thousands) Market Making Execution Services Corporate Total

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Adjusted Net Trading Income $ 285,564 $ 99,518 $ — $ 385,082

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

(in thousands) Market Making Execution Services Corporate Total

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Adjusted Net Trading Income $ 193,191 $ 85,496 $ — $ 278,687

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 %

Six Months Ended June 30, 2024

(in thousands) Market Making Execution Services Corporate Total

Trading income, net $ 823,772 $ 10,718 $ — $ 834,490

Commissions, net and technology services 16,483 228,229 — 244,712

Interest and dividends income 208,113 4,945 — 213,058

Brokerage, exchange, clearance fees and payments for order flow, net (241,838) (48,748) — (290,586)

Interest and dividends expense (247,288) (2,433) — (249,721)

Adjusted Net Trading Income $ 559,242 $ 192,711 $ — $ 751,953

Six Months Ended June 30, 2023

(in thousands) Market Making Execution Services Corporate Total

Trading income, net $ 710,655 $ 8,024 $ — $ 718,679

Commissions, net and technology services 16,334 214,614 — 230,948

Interest and dividends income 175,283 4,940 — 180,223

Brokerage, exchange, clearance fees and payments for order flow, net (222,791) (45,202) — (267,993)

Interest and dividends expense (208,431) (1,663) — (210,094)

Adjusted Net Trading Income $ 471,050 $ 180,713 $ — $ 651,763

The following table shows our Adjusted Net Trading Income and average daily Adjusted Net Trading Income by segment for the three and six months ended June 30, 2024 and 2023:

Three Months Ended June 30,

Adjusted Net Trading Income by Segment (in thousands):

2024 2023 % Change

Market Making $ 285,564 $ 193,191 47.8%

Execution Services 99,518 85,496 16.4%

Adjusted Net Trading Income $ 385,082 $ 278,687 38.2%

Three Months Ended June 30,

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

2024 2023 % Change

Market Making $ 4,533 $ 3,116 45.5%

Execution Services 1,580 1,379 14.6%

Corporate — — — % — — — %

Average Daily Adjusted Net Trading Income $ 6,113 $ 4,495 35.6%

Six Months Ended June 30,

Adjusted Net Trading Income by Segment (in thousands):

2024 2023 % Change

Market Making $ 559,242 $ 471,050 18.7%

Execution Services 192,711 180,713 6.6%

Adjusted Net Trading Income $ 751,953 $ 651,763 15.4%

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

Six Months Ended June 30,

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

2024 2023 % Change

Market Making $ 4,510 $ 3,799 18.7%

Execution Services 1,554 1,457 6.6%

Average Daily Adjusted Net Trading Income $ 6,064 $ 5,256 15.1%

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

Total Revenues

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,

Our total revenues increased $186.1 million, or 36.7%, to $693.0 million for the three months ended June 30, 2024, compared to $506.9 million for the three months ended June 30, 2023.

The increase was primarily driven by an increase of $120.2 million in Trading income, net due to higher trading volumes and increased opportunities across global markets, an increase of $16.6 million in Commissions, net and technology services due to strengthened institutional engagement, as well as an increase of $40.2 million in Other, net, primarily driven by gains on settlement fund recoveries during the three months ended June 30, 2024 compared to the same period in 2023.

The following table shows total revenues by segment for the three months ended June 30, 2024 and 2023.

Three Months Ended June 30,

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

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Commissions, net and technology services 9,281 6,634 39.9%

Other, net 6,306 1,190 429.9%

Other, net 36,117 709 NM

Total revenues from Market Making $ 569,783 $ 405,250 40.6%

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Commissions, net and technology services 126,101 109,504 15.2%

Other, net 10,141 4,181 142.5%

Other, net 33,423 (6,797) NM

Total revenues $ 692,985 $ 506,854 36.7%

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

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.

Trading income, net increased $120.2 million, or 39.3% to $426.4 million for the three months ended June 30, 2024, compared to $306.2 million for the three months ended June 30, 2023.

The increase was largely a result of higher trading volumes and increased opportunities across global markets during the three months ended June 30, 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 $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.

Interest and dividends income increased $9.1 million, or 9.3%, to $107.1 million for the three months ended June 30, 2024, compared to $98.0 million for the three months ended June 30, 2023.

This increase was primarily attributable to an increase in interest income earned on cash collateral posted as part of securities borrowing 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 same period during the prior year.

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.

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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 $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.

Commissions, net and technology services revenues increased $16.6 million, or 15.2%, to $126.1 million for the three months ended June 30, 2024, compared to $109.5 million for the three months ended June 30, 2023.

This increase was driven by higher client volumes and increasing institutional engagement compared to the same period in 2023.

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 $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.

Other, net increased $40.2 million, to $33.4 million for the three months ended June 30, 2024, compared to $(6.8) million for the three months ended June 30, 2023.

The three months ended June 30, 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 $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.

Adjusted Net Trading Income, which is a non-GAAP measure, increased $106.4 million, or 38.2%, to $385.1 million for the three months ended June 30, 2024, compared to $278.7 million for the three months ended June 30, 2023.

This increase was primarily attributable to higher Trading income, net in the Market Making segment due to higher trading volumes and increased opportunities during the three months ended June 30, 2024 compared to the same period in 2023, as noted above, partially offset by higher Brokerage, exchange, clearance fees and payments for order flow, net as described below.

Average daily Adjusted Net Trading Income increased $1.6 million, or 35.6%, to $6.1 million for the three months ended June 30, 2024, compared to $4.5 million for the three months ended June 30, 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 $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.

Our operating expenses increased $66.2 million, or 14.0%, to $537.6 million for the three months ended June 30, 2024, compared to $471.4 million for the three months ended June 30, 2023.

The increase in operating expenses is primarily due to an increase in Brokerage, exchange, clearance fees and payments for order flow, net and Debt issue cost related to debt refinancing, prepayment and commitment fees, 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 $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.

Brokerage exchange, clearance fees and payments for order flow, net, increased $28.3 million, or 23.1%, to $150.8 million for the three months ended June 30, 2024, compared to $122.5 million for the three months ended June 30, 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 $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.

Communication and data processing expense increased $2.3 million, or 4.0%, to $59.3 million for the three months ended June 30, 2024, compared to $57.0 million for the three months ended June 30, 2023.

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

Employee compensation and payroll taxes.

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 $10.2 million and $8.4 million for the three months ended March 31, 2024, and 2023, respectively.

Employee compensation and payroll taxes increased $10.1 million, or 10.6%, to $105.7 million for the three months ended June 30, 2024, compared to $95.6 million for the three months ended June 30, 2023.

The increase in compensation levels was primarily attributable to an increase 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 $10.6 million and $10.1 million for the three months ended June 30, 2024, and 2023, respectively.

Interest and dividends expense.

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.

Interest and dividends expense increased $11.2 million, or 10.0%, to $123.7 million for the three months ended June 30, 2024, compared to $112.5 million for the three months ended June 30, 2023.

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 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 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.

Operations and administrative expense decreased $3.4 million, or 13.3%, to $22.1 million for the three months ended June 30, 2024, compared to $25.5 million for the three months ended June 30, 2023.

This decrease was primarily driven by a decrease in professional and regulatory expenses.

Depreciation and amortization.

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.

Depreciation and amortization increased $0.2 million, or 1.3%, to $16.1 million for the three months ended June 30, 2024, compared to $15.9 million for the three months ended June 30, 2023.

The increase is driven primarily by an increase in 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 $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.

Amortization of purchased intangibles and acquired capitalized software decreased $3.8 million, or 23.8%, to $12.2 million for the three months ended June 30, 2024, compared to $16.0 million for the three months ended June 30, 2023.

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

Termination of office leases.

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.

Termination of office leases was insignificant for the three months ended June 30, 2024 and June 30, 2023.

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

There were no significant lease terminations in either period.

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 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.

Expense from debt issue cost related to debt refinancing, prepayment and commitment fees increased to $24.3 million for the three months ended June 30, 2024, compared to $1.8 million for the three months ended June 30, 2023.

The increase was primarily driven by the acceleration of our capitalized debt issue cost and discount on our previous term loan as a result of refinancing during the three months ended June 30, 2024.

Refer to Note 9 “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 March 31, 2024, and March 31, 2023.

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

Transaction advisory fees and expenses were insignificant for both the three months ended June 30, 2024, and June 30, 2023.

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

Financing interest expense on long-term borrowings.

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.

Financing interest expense on long-term borrowings decreased $1.5 million, or 6.0%, to $23.4 million for the three months ended June 30, 2024, compared to $24.9 million for the three months ended June 30, 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, as well as a lower overall interest rate after the refinancing described in Note 9 “Borrowings” during the three months ended June 30, 2024.

Provision for income taxes

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subsidiaries.

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.

Our provision for income taxes and effective tax rates were $27.3 million and 17.6% for the three months ended June 30, 2024, compared to $5.9 million and 16.7% for the three months ended June 30, 2023.

Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023

Total Revenues

Our total revenues increased $208.6 million, or 18.5%, to $1,335.8 million for the six months ended June 30, 2024, compared to $1,127.2 million for the six months ended June 30, 2023.

This increase was primarily attributable to an increase of $115.8 million in Trading income, net due to higher trading volumes and increased opportunities across global markets, an increase of $32.9 million in Interest and dividends income as a result of higher interest rates during the period, as well as an increase of $46.2 million in Other, net primarily driven by gains on settlement fund recoveries during the six months ended June 30, 2024 compared to the same period in 2023.

The following table shows the total revenues by segment for the six months ended June 30, 2024 and 2023.

Six Months Ended June 30,

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

Market Making

Trading income, net $ 823,772 $ 710,655 15.9%

Interest and dividends income 208,113 175,283 18.7%

Commissions, net and technology services 16,483 16,334 0.9%

Other, net 42,423 1,897 NM

Total revenues from Market Making $ 1,090,791 $ 904,169 20.6%

Execution Services

Trading income, net $ 10,718 $ 8,024 33.6%

Interest and dividends income 4,945 4,940 0.1%

Commissions, net and technology services 228,229 214,614 6.3%

Other, net 955 15 NM

Total revenues from Execution Services $ 244,847 $ 227,593 7.6%

Other, net $ 186 $ (4,529) NM

Total revenues from Corporate $ 186 $ (4,529) NM

Trading income, net $ 834,490 $ 718,679 16.1%

Interest and dividends income 213,058 180,223 18.2%

Commissions, net and technology services 244,712 230,948 6.0%

Other, net 43,564 (2,617) NM

Total revenues $ 1,335,824 $ 1,127,233 18.5%

Trading income, net.

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

Trading income, net, increased $115.8 million, or 16.1%, to $834.5 million for the six months ended June 30, 2024, compared to $718.7 million for the six months ended June 30, 2023.

The increase was largely a result of higher trading volumes and increased opportunities across global markets during the six months ended June 30, 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 are described below.

Interest and dividends income.

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

Interest and dividends income increased $32.9 million, or 18.3%, to $213.1 million for the six months ended June 30, 2024, compared to $180.2 million for the six months ended June 30, 2023.

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 same period during the prior year.

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 increased $13.8 million, or 6.0%, to $244.7 million for the six months ended June 30, 2024, compared to $230.9 million for the six months ended June 30, 2023.

This increase was driven by relatively higher client volumes and increasing institutional engagement compared to the same period in 2023.

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 $46.2 million, or 1,776.9%, to $43.6 million for the six months ended June 30, 2024, compared to $(2.6) million for the six months ended June 30, 2023.

The income for the six months ended June 30, 2024 primarily related to 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, increased $100.2 million, or 15.4%, to $752.0 million for the six months ended June 30, 2024, compared to $651.8 million for the six months ended June 30, 2023.

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

Average daily Adjusted Net Trading Income increased $0.8 million, or 15.1%, to $6.1 million for the six months ended June 30, 2024, compared to $5.3 million for the six months ended June 30, 2023.

The number of trading days was 124 days for the six months ended June 30, 2024 and June 30, 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.

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

Operating Expenses

Our operating expenses increased $83.6 million, or 8.7%, to $1,040.6 million for the six months ended June 30, 2024, compared to $957.0 million for the six months ended June 30, 2023.

The increase was primarily driven by increase in Brokerage, exchange, clearance fees and payments for order flow, net, Interest and dividends expense, and 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, increased $22.6 million, or 8.4%, to $290.6 million for the six months ended June 30, 2024, compared to $268.0 million for the six months ended June 30, 2023.

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 $3.7 million, or 3.3%, to $117.5 million for the six months ended June 30, 2024, compared to $113.8 million for the six months ended June 30, 2023.

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

Employee compensation and payroll taxes.

Employee compensation and payroll taxes increased $7.5 million, or 3.8%, to $206.5 million for the six months ended June 30, 2024, compared to $199.0 million for the six months ended June 30, 2023.

We have capitalized and therefore excluded employee compensation and benefits related to software development of $20.8 million and $19.8 million for the six months ended June 30, 2024 and 2023, respectively.

Interest and dividends expense.

Interest and dividends expense increased $39.6 million, or 18.8%, to $249.7 million for the six months ended June 30, 2024, compared to $210.1 million for the six months ended June 30, 2023.

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 dividends 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 decreased $5.4 million, or 10.8%, to $44.4 million for the six months ended June 30, 2024, compared to $49.8 million for the six months ended June 30, 2023.

The decrease was primarily driven by a decrease in professional and regulatory expenses, as well as 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 increased $0.9 million, or 2.9%, to $32.2 million for the six months ended June 30, 2024, compared to $31.3 million for the six months ended June 30, 2023.

This increase was driven primarily by increased amortization of capitalized software and depreciation of leased equipment compared to the prior period.

Amortization of purchased intangibles and acquired capitalized software.

Amortization of purchased intangibles and acquired capitalized software decreased $5.2 million, or 16.3%, to $26.8 million for the six months ended June 30, 2024,

compared to $32.0 million for the six months ended June 30, 2023.

This decrease was primarily attributable to certain intangible assets being fully amortized in 2023.

Termination of office leases.

Termination of office leases was insignificant for the six months ended June 30, 2024 and June 30, 2023.

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

There were no significant lease terminations in either period.

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 $22.1 million, or 566.7%, to $26.0 million for the six months ended June 30, 2024, compared to $3.9 million for the six months ended June 30, 2023.

The increase was primarily driven by the acceleration of our capitalized debt issue cost and discount on our previous term loan as a result of refinancing during the six months ended June 30, 2024.

See Note 9 “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 insignificant for the six months ended June 30, 2024 and June 30, 2023.

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

Financing interest expense on long term borrowings.

Financing interest expense on long-term borrowings decreased $2.4 million, or 4.9%, to $46.7 million for the six months ended June 30, 2024, compared to $49.1 million for the six months ended June 30, 2023.

This 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, as well as a lower overall interest rate after the refinancing described in Note 9 “Borrowings” during the three months ended June 30, 2024.

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 rate was $55.8 million and 18.9% for the six months ended June 30, 2024, compared to a provision for income taxes and effective tax rate of $30.6 million and 18.0% for the six months ended June 30, 2023.

Liquidity and Capital Resources

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

As of June 30, 2024, we had $684.8 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 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.

As of June 30, 2024, we had borrowings under our prime brokerage credit facilities of approximately $119.3 million, borrowings under our broker dealer facilities of $75.0 million, and long-term debt outstanding in an aggregate principal amount of approximately $1,766.8 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.

needs for the next twelve months.

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.

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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, $23.3 million in April 2023, and $20.2 million in March 2024.

We made payments totaling $114.0 million from February 2017 through March 2024.

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

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In June 2023 our U.S.

subsidiary RFQ-Hub Americas LLC (“RAL”) became a registered U.S.

subsidiary RFQ-hub Americas LLC (“RAL”, as described in Note 3 “Business Held for Sale”, which is currently held for sale) became a registered U.S.

broker-dealer and as such is subject to regulation and capital requirements from its primary regulators, the SEC and FINRA.

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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 9 “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 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.

As of June 30, 2024, there was an outstanding principal balance on our broker-dealer facilities of $75.0 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 $119.3 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.

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

The term loans amortize in annual installments equal to 1.0% of the original aggregate principal amount of the term loans.

The revolving commitments will terminate on January 13, 2025.

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.

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.

In October 2019, the Company entered into a five-year $525.0 million floating-to-fixed interest rate swap agreement.

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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.

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

The Company simultaneously entered into a two-year $1,525.0 million floating-to-fixed interest rate swap agreement with the same counterparty (the “December 2023 Swap”).

The December 2023 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 $1,525.0 million of principal under the First Lien Term Loan Facility at a rate of 7.5% through November 2025, based on the interest rates set forth in the Credit Agreement.

On June 21, 2024 (the “Amendment Effective Date”), the Company entered into Amendment No.

1 to the Credit Agreement (the “Amended Credit Agreement”) and completed the issuance of the Notes (as defined below).

Pursuant to the Amended Credit Agreement, $1,245.0 million in aggregate principal amount of senior secured first lien term B-1 loans due 2031 (the “New Term Loans”) were issued, the proceeds of which were used, along with the proceeds of the Notes, to repay in full all term loans previously outstanding under the Credit Agreement.

The New Term Loans are also subject to contingent principal payments based on excess cash flow and certain other triggering events.

As of June 30, 2024, $1,245.0 million was outstanding under the term loans.

We were in compliance with all applicable covenants under the Credit Agreement as of June 30, 2024.

In connection with its entry into the Amended Credit Agreement and the associated reduction in term loan balance, the Company partially terminated the December 2023 Swap, reducing the notional amount thereof from $1,525.0 million to $1,075.0 million and received $2.0 million in proceeds from the counterparty.

The cash flow hedge was proportionally dedesignated under ASC 815 as of June 21, 2024.

As a result of the partial dedesignation, we recognized a gain of $5.7 million in Other Income.

The current interest rate swap effectively fixed interest payment obligations on the $1,075.0 million of principal of the New Term Loans at a rate of 7.17% through November 2025, based on the interest rates set forth in the Amended Credit Agreement.

Senior Secured First Lien Notes

The Notes were issued under an Indenture, dated as of June 21, 2024 (the “Indenture”), among the VFH, the Co-Issuer, Virtu Financial and the subsidiary guarantors party thereto, and U.S.

Bank Trust Company, National Association, as the trustee and collateral agent.

The Notes mature on June 15, 2031.

Interest on the Notes accrues at 7.50% per annum, payable every six months through maturity on each June 15 and December 15, beginning on December 15, 2024.

We refer to VFH and the Co-Issuer together as, the “Issuers.”

The Notes and the related guarantees are secured by first-priority perfected liens on substantially all of the Issuers’ and guarantors’ existing and future assets, subject to certain exceptions, including all material personal property, a pledge of the

capital stock of the Issuers, the guarantors (other than Virtu Financial) and the direct subsidiaries of the Issuers and the guarantors and 100% of the non-voting capital stock and up to 65.0% of the voting capital stock of any now-owned or later acquired foreign subsidiaries that are directly owned by the Issuers or any of the guarantors, which assets also secure

obligations under the Amended and Restated Credit Agreement on a first-priority basis.

The Indenture imposes certain limitations on our ability to (i) incur or guarantee additional indebtedness or issue preferred stock;

(ii) pay dividends, make certain investments and make repayments on indebtedness that is subordinated in right of payment to the Notes and make other “restricted payments”;

(iii) create liens on their assets to secure debt;

(iv) enter into transactions with affiliates;

(v) merge, consolidate or amalgamate with another company;

(vi) transfer and sell assets;

and (vii) permit restrictions on the payment of dividends by Virtu Financial’s subsidiaries.

The Indenture also contains customary events of default, including, among others, payment defaults related to the failure to pay principal or interest on Notes, covenant defaults, final maturity default or cross-acceleration with respect to material indebtedness and certain bankruptcy events.

Prior to June 15, 2027, we may redeem some or all of the Notes at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest, if any, to (but not including) the date of redemption, plus an applicable “make whole” premium.

Prior to June 15, 2027, we may also redeem up to 40% of the aggregate principal amount of the Notes at a redemption price equal to 107.500% of the principal amount thereof, plus accrued and unpaid interest, if any, to (but not including) the date of redemption with the net cash proceeds from certain equity offerings.

Prior to June 15, 2027, we may also, on one or more occasions, redeem during each successive twelve-month period following June 21, 2024 up to 10% of the aggregate original principal amount of notes, at a redemption price equal to 103% of the principal amount of notes to be redeemed, plus accrued and unpaid interest to, but not including, the redemption date.

On or after June 15, 2027, we may redeem some or all of the Notes, at the following redemption prices (expressed as percentages of principal amount), plus accrued and unpaid interest to (but not including) the date of redemption, if redeemed during the 12-month period beginning on June 15 of the years indicated below:

Period Percentage

2027 103.750%

2028 101.875%

2029 and thereafter

Upon the occurrence of specified change of control events as defined in the Indenture, we must offer to repurchase the Notes at 101% of the principal amount, plus accrued and unpaid interest, if any, to (but excluding) the purchase date.

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 three months ended March 31, 2024 and 2023.

Three Months Ended March 31,

The table below summarizes our primary sources and uses of cash for the six months ended June 30, 2024 and 2023.

Six Months Ended June 30,

Net cash provided by (used in):

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Operating Activities

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.

Net cash provided by operating activities was $95.4 million for the six months ended June 30, 2024, compared to net cash used in operating activities of $26.4 million for the six months ended June 30, 2023.

The change in net cash provided by operating activities was primarily attributable to decreases in noncash adjustments for the six months ended June 30, 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 $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.

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 $36.4 million for the six months ended June 30, 2024, compared with net cash used in investing activities of $55.1 million for the six months ended June 30, 2023.

The change in net cash used in investing activities was primarily attributable to decreases in acquisition of property and equipment in the six months ended June 30, 2024.

Financing Activities

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.

Net cash used in financing activities was $194.7 million for the six months ended June 30, 2024, compared to Net cash used in financing activities of $215.1 million for the six months ended June 30, 2023.

The cash used in financing activities for the six months ended June 30, 2024 was primarily attributable to $75.0 million of net proceeds from short-term borrowings, offset by $160.7 million in dividends to stockholders and distributions made to noncontrolling interests and $82.9 million in purchases of treasury stock.

The cash used in financing activities of $215.1 million during the same period of 2023 primarily reflects $145.7 million net dividends to stockholders and distributions to noncontrolling interests, and $135.0 million purchase of treasury stock, partially offset by net proceeds of $111.1 million from short-term borrowings.

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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, 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 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.

From the inception of the program through June 30, 2024, the Company repurchased approximately 47.0 million shares of Class A Common Stock and Virtu Financial Units for approximately $1,176.3 million.

As of June 30, 2024, the Company has approximately of $543.7 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.

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.

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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 $4.1 million of amortization expense for the three months ended March 31, 2024 and 2023, respectively.

Had we used a shorter estimated useful life of seven years, the Company would have recorded an additional $5.4 million and $10.8 million of amortization expense for the three and six months ended June 30, 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