Virtu Financial, Inc. · NYSE:VIRT
Virtu Financial — Merger or Acquisition (April 2017)
16 slides from Virtu Financial's merger presentation, Apr 20, 2017
Slide 1: Cautionary Statement Regarding Forward Looking Statements
2 CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS This presentation may contain “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Statements regarding Virtu Financial, Inc.’s (“Virtu’s,” the “Company’s” or “our
Slide 2: GAAP and Non-GAAP Results
3 GAAP AND NON-GAAP RESULTS This presentation includes certain non-GAAP financial measures, including Adjusted Net Trading Income, EBITDA, Adjusted EBITDA, Normalized Adjusted Net Income, Normalized Adjusted Pre-Tax Net Income, Normalized Adjusted Free Cash Flow, Net Cash and Trading Capital (collec
Slide 3: Virtu Leverages its Core Strengths in KCG Acquisition
Virtu Leverages its Core Strengths in KCG Acquisition 4 Benefits of Combination Combines KCG’s wholesale market making and independent agency execution franchises with Virtu’s extensive liquidity and order routing capabilities Greater scale and cost efficiencies in an increasingly competitive enviro
Slide 4: Transaction Summary
Transaction Summary 5 $20.00 per share, or approximately $1.4bn equity value1 100% cash consideration Offer represents 1.08x KCG’s tangible book value of $18.61 at 03/31/2017 Terms and conditions Virtu has entered into a commitment with J.P. Morgan Securities LLC to provide up to $1.65 billion of de
Slide 5: KCG Acquisition is Aligned with Virtu's Strategic Initiatives
Expand Virtu’s access to new order flow KCG Acquisition is Aligned with Virtu’s Strategic Initiatives 6 Virtu’s Strategic Growth Initiatives 1 Expand Virtu’s agency client base 2 Leverage existing scale 3 Impact of Transaction Allows Virtu to access new sources of attractive order flow Introduces Vi
Slide 6: Combination Benefits Both Market-Making and Agency Businesses
Combination Benefits Both Market-Making and Agency Businesses 7 Wholesale Market Making Principal Market Making Agency Offering Access to wholesale customer order flow Extensive client relationships Superior algorithms Efficient market access and hedging Enhanced internalization Customized liquidity
Slide 7: Combination Creates the Leading, Global, Electronic Market Maker
Combination Creates the Leading, Global, Electronic Market Maker on a Single Global Infrastructure 8 1 Represents sum of 2016A adjusted net trading income as reported of $414mm and technology services revenue of as reported of $10mm for Virtu and 2016A net revenues as reported by KCG Market Making 9
Slide 8: Achievable Cost Savings Identified through a Rigorous Diligence Process
Achievable Cost Savings Identified through a Rigorous Diligence Process 9 Rationalize non-core businesses and strategies that currently do not generate acceptable returns; estimated revenue foregone of $42mm Combine broker-dealers, systems and trading operations Does not account for any potential re
Slide 9: 2019E Modeled Base Case Incremental Earnings
2019E Modeled Base Case Incremental Earnings 10 Over 25% earnings accretion across range of modeled scenarios ~$23mm ~$129mm ~($5mm) ~$147mm KCG stand-alone net income1 Plus: Net Cost savings ($208mm pre-tax) Less: Incremental interest expense2 Total after-tax earnings contribution 1 Burdened by sto
Slide 10: Significant Unmodeled Upside Potential
Significant Unmodeled Upside Potential 11 A combination with KCG could yield sizeable trading revenue synergies Not included in Virtu’s synergy estimates $10-15mm of exchange and prime broker fee synergies from combining flow Exchange and Brokerage Fee Tiers Virtu and KCG market making activities wi
Slide 11: Rapid Reduction of Deal-Related Leverage
Rapid Reduction of Deal-Related Leverage 12 Long-Term Capital Structure Virtu intends to return to its pre-acquisition capital structure of approximately 2.5x gross debt to EBITDA in 2019 Significant Capital Release Enhanced EBITDA and Free Cash Flow Substantial portion of the debt will be repaid vi
Slide 12: Rapid Reduction of Deal-Related Leverage
Rapid Reduction of Deal-Related Leverage Ce Long-Term Capital Structure Significant Capital Release Enhanced EBITDA and Free Cash Flow '® Virtu intends to return to its pre-acquisition capital structure of approximately 2.5x gross debt to EBITDA in 2019 ( @ Substantial portion of the debt will be re
Slide 13: Summary Pro Forma Financial Combination
Summary Pro Forma Financial Combination 14 LTM Net Revenue2 LTM Adj. EBITDA3 LTM EBITDA Margin % Debt / LTM Adj. EBITDA Pro-forma Pro-forma with full cost savings $387mm $235mm 61% 2.3x $595mm $93mm 16% 5.0x $982mm $328mm 33% 5.1x $940mm $513mm 55% 3.3x Note: Financial data as of latest available 1
Slide 14: Virtu First Quarter 2017 Flash Results
Virtu First Quarter 2017 Flash Results 15 GAAP Measures: Revenues: ($mm) Trading income, net 139.6 $ Interest and dividends income 4.9 Technology Products and Services 2.8 Other revenues (losses) 0.1 Total Revenues 147.3 Total Operating Expenses 123.5 Income before Income Taxes 23.8 Net Income 21.3
Slide 15: Virtu First Quarter 2017 Flash Results
Virtu First Quarter 2017 Flash Results 16 1 Calculated by dividing net income by the sum of Adjusted Net Trading Income and technology services revenue 2 Calculated by dividing Pro-forma Adjusted Net Income by the sum of Adjusted Net Trading Income and technology services revenue 3 Calculated by div
Slide 16: Virtu First Quarter 2017 Flash Results
Virtu First Quarter 2017 Flash Results Reconciliation of Trading income, net to Adjusted Net Trading Income Trading income, net $ 1396 Interest and dividends income 49 Brokerage, exchange and clearance fees, net (528) Interest and dividends expense 32.2) Adjusted Net Trading Income 379.8 Reconciliat