Virtu Financial, Inc. has recently released its 10-Q report, providing a detailed insight into its financial condition and operations. The company operates as a financial services firm, offering market making and execution services across various asset classes in 50 countries. In the latest report, Virtu Financial disclosed that its operating expenses increased by $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 same period in 2023. This increase was primarily driven by higher brokerage, exchange, clearance fees, and payments for order flow, net, as well as increased interest and dividends expense and debt issue costs related to debt refinancing, prepayment, and commitment fees.
Brokerage, exchange, clearance fees, and payments for order flow, net, increased by $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 same period in 2023. Communication and data processing expense rose by $3.7 million, or 3.3%, to $117.5 million, primarily due to increased connectivity spending on market data, client connectivity, access ports, and gateways. Employee compensation and payroll taxes increased by $7.5 million, or 3.8%, to $206.5 million, driven by an increase in accrued incentive compensation. Interest and dividends expense also surged by $39.6 million, or 18.8%, to $249.7 million, primarily due to higher interest expense incurred on cash collateral received and an increase in securities lending transactions.
On the liquidity and capital resources front, Virtu Financial reported having $684.8 million in cash and cash equivalents as of June 30, 2024. The company also had borrowings under its prime brokerage credit facilities of approximately $119.3 million, borrowings under its broker dealer facilities of $75.0 million, and long-term debt outstanding in an aggregate principal amount of approximately $1,766.8 million. Based on its current level of operations, the company believes its cash flows from operations, available cash and cash equivalents, and available borrowings under its broker-dealer credit facilities will be adequate to meet its future liquidity needs for the next twelve months.
The 10-Q report also highlighted the company's tax receivable agreements, under which it is required to make payments to certain direct or indirect equity holders of Virtu Financial. These payments are generally equal to 85% of the applicable cash tax savings, if any, that the company realizes as a result of favorable tax attributes. Virtu Financial expects future payments under these agreements to range from approximately $0.1 million to $22.0 million per year over the next 15 years.
Furthermore, the report discussed the regulatory capital requirements imposed on Virtu Financial's subsidiaries in the U.S., Canada, Ireland, the UK, Australia, Hong Kong, and Singapore. These subsidiaries are subject to various regulatory capital requirements and periodic reporting obligations, and failure to comply with these requirements could result in regulatory sanctions or revocation of regulatory licenses.
The market has reacted to these announcements by moving the company's shares 0.3% to a price of $27.97. Check out the company's full 10-Q submission here.
