VIRTU FINANCIAL, INC. The Company's Board of Directors and stockholders adopted the 2015 Management Incentive Plan, which became effective upon consummation of the IPO, and was subsequently amended and restated following receipt of approval from the Company's stockholders onJune 30, 2017 . The Amended and Restated 2015 Management Incentive Plan provides for the grant of stock options, restricted stock units, and other awards based on an aggregate of 21,000,000 shares of Class A Common Stock, subject to additional sublimits, including limits on the total option grant to any one participant in a single year and the total performance award to any one participant in a single year. OnNovember 13, 2020 , the Company amended its form award agreement for the issuance of RSUs to provide for the continued vesting of outstanding RSU awards upon the occurrence of a qualified retirement (the "RSU Amendment"). A qualified retirement generally means a voluntary resignation by the participant (i) after five years of service, (ii) the participant attaining the age of 50 and (iii) the sum of the participant's age and service at the time of termination equaling or exceeding 65. Continued vesting is subject to the participant entering into a 2 year non-compete. The RSU Amendment was authorized and approved by the Compensation Committee of the Company's Board of Directors. As a result of the RSU Amendment, currently issued and outstanding RSUs held by the Company's employees, including its executive officers, shall be deemed to be subject to the amended terms of the form award agreement, and any future RSU awards shall also be governed by such amended terms.
On the ITG Closing Date, the Company assumed the Amended and Restated ITG 2007
Equity Plan and the Assumed Awards. As of the ITG Closing Date, the aggregate
number of shares of Class A Common Stock subject to such Assumed Awards was
2,497,028 and the aggregate number of shares of Class A Common Stock that
remained issuable pursuant to the Amended and Restated ITG 2007 Equity Plan was
1,230,406.
34
--------------------------------------------------------------------------------
Table of Contents
Share Repurchase Program
On February 11, 2021 , the Company's Board of Directors authorized the expansion
of the Company's share repurchase program, increasing the total authorized
amount by $70.0 million to $170.0 million in Class A Common Stock and Virtu
Financial Units up to December 31, 2021 . 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. Repurchases are also
permitted to be made under Rule 10b5-1 plans. 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, 2021 , the
Company repurchased approximately 3.7 million shares of Class A Common Stock and
Virtu Financial Units for approximately $97.3 million . As of March 31, 2021 , the
Company has approximately of $72.7 million remaining capacity for future
purchases of shares of Class A Common Stock and Virtu Financial Units under the
program.
Employee Exchanges
During the three months ended March 31, 2021 and 2020, pursuant to the exchange
agreement by and among the Company, Virtu Financial and holders of Virtu
Financial Units, certain current and former employees elected to exchange 91,757
and 724,327 units, respectively in Virtu Financial held directly or on their
behalf by Virtu Employee Holdco LLC ("Employee Holdco") on a one-for-one basis
for shares of Class A Common Stock.
Warrant Issuance
OnMarch 20, 2020 , in connection with and in consideration of the Founder Member's commitments under the Founder Member Loan Facility (as described in Note 8 "Borrowings"), 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 may purchase up to 3,000,000 shares of Class A Common Stock. If at any time during the term of the Founder Member Loan Facility, the Founder Member Loans equal to or greater than$100 million had remained outstanding for a certain period of time specified in the Warrant, the number of shares would have increased to 10,000,000. The Founder Member Loan Facility Term expired onSeptember 20, 2020 without the Company having borrowed any Founder Member Loans thereunder (as described in Note 8 "Borrowings"), and as a result no such increase in the number of shares which may be purchased has occurred or will occur pursuant to the terms of the Warrant. The exercise price per share of the Class A Common Stock issuable pursuant to the Warrant is$22.98 , which in accordance with the terms of the Warrant, is equal to the average of the volume weighted average prices of the Class A Common Stock for the ten (10) trading days followingMay 7, 2020 , the date on which the Company publicly announced its earnings results for the first quarter of 2020. The Warrant may be exercised to purchase up to 3,000,000 shares of the Company's Class A Common Stock on any date afterMay 22, 2020 up to and includingJanuary 15, 2022 . The Warrant and Class A Common Stock issuable pursuant to the Warrant were offered, and will be issued and sold, in reliance on the exemption from the registration requirements of the Securities Act of 1933, as amended (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. The fair value of the Warrant was determined using a Black-Scholes-Merton model, and was recorded as a debt issuance cost within Other Assets on the Condensed Consolidated Statements of Financial Condition and as an increase to Additional paid-in capital on the Condensed Consolidated Statements of Changes in Equity. The balance was amortized on a straight-line basis fromMarch 20, 2020 throughSeptember 20, 2020 , the date on which the Founder Member Loan Facility expired, and recorded as expense within Debt issue cost related to debt refinancing, prepayment and commitment fees in the Condensed Consolidated Statements of Comprehensive Income. 35 -------------------------------------------------------------------------------- Table of Contents Accumulated Other Comprehensive Income (Loss)
The following table presents the changes in Other Comprehensive Income (Loss)
for the three months ended
Three Months Ended March 31, 2021
Amounts
AOCI Beginning recorded Amounts reclassified AOCI Ending
(in thousands) Balance in AOCI from AOCI to income Balance
Net change in unrealized cash flow
hedges gains (losses) (1) $ (33,444) $ 9,273 $ 3,334 $ (20,837)
Foreign exchange translation
adjustment 7,957 (2,165) - 5,792
Total $ (25,487) $ 7,108 $ 3,334 $ (15,045)
(1) Amounts reclassified from AOCI to income are included within Financing interest expense on long-term borrowings on the
Consolidated Statements of Comprehensive Income. As of March 31, 2021 , the Company expects approximately $13.4 million to be
reclassified from AOCI into earnings over the next 12 months. The timing of the reclassification is based on the interest
payment schedule of the long-term borrowings.
Three
Months Ended
Amounts
AOCI Beginning recorded Amounts reclassified AOCI Ending
(in thousands) Balance in AOCI from AOCI to income Balance
Net change in unrealized cash flow
hedges gains (losses) $ - $ (31,785) $ 317 $ (31,468)
Foreign exchange translation
adjustment (647) (5,884) - (6,531)
Total $ (647) $ (37,669) $ 317 $ (37,999) (1) Amounts reclassified from AOCI to income are included within Financing interest expense on long-term borrowings on the Consolidated Statements of Comprehensive Income.
18. Share-based Compensation
Pursuant to the Amended and Restated 2015 Management Incentive Plan as described in Note 17 "Capital Structure", and in connection with the IPO, non-qualified stock options to purchase shares of Class A Common Stock were granted, each of which vests in equal annual installments over a period of four years from grant date and expires not later than 10 years from the date of grant.
The following table summarizes activity related to stock options for the three
months ended
Options Outstanding Options Exercisable
Weighted Average Weighted Average Weighted Average
Exercise Price Per Remaining Exercise Price
Number of Options Share Contractual Life Number of Options Per Share
At December 31, 2019 3,233,779 $ 19.00 5.24 3,233,779 $ 19.00
Granted - - - - -
Exercised (213,129) 15.04 - (213,129) 15.04
Forfeited or expired - - - - -
At March 31, 2020 3,020,650 $ 19.00 4.99 3,020,650 $ 19.00
At December 31, 2020 2,324,152 $ 19.00 4.24 2,324,152 $ 19.00
Granted - - - - -
Exercised (154,372) 19.00 - (154,372) 19.00
Forfeited or expired - - - - -
At March 31, 2021 2,169,780 $ 19.00 3.99 2,169,780 $ 19.00
The expected life was determined based on an average of vesting and contractual
period. The risk-free interest rate was determined based on the yields available
on U.S. Treasury zero-coupon issues. The expected stock price volatility was
determined based on historical volatilities of comparable companies. The
expected dividend yield was determined based on estimated future dividend
payments divided by the IPO stock price. The stock options to purchase shares of
Class A Common Stock were fully vested in 2019.
36--------------------------------------------------------------------------------
Table of
On the ITG Closing Date, the Company assumed the Amended and Restated ITG 2007 Equity Plan and 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 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. As of the ITG Closing Date, the aggregate number of shares of Class A Common Stock subject to such Assumed Awards was 2,497,028 and the aggregate number of shares of Class A Common Stock that remained issuable pursuant to the Amended and Restated ITG 2007 Equity Plan was 1,230,406. The Company filed a Registration Statement on Form S-8 on the ITG Closing Date to register such shares of Class A Common Stock.
Class A Common Stock, Restricted Stock Units and Restricted Stock Awards
Pursuant to the Amended and Restated 2015 Management Incentive Plan as described in Note 17 "Capital Structure", subsequent to the IPO, shares of immediately vested Class A Common Stock, RSUs and RSAs were granted, with RSUs and RSAs vesting over a period of up to 4 years. The fair value of the Class A Common Stock and RSUs was determined based on a volume weighted average price and the expense is recognized on a straight-line basis over the vesting period. The fair value of the RSAs was determined based on the closing price as of the date of grant and the expense is recognized from the date that achievement of the performance target becomes probable through the remainder of the vesting period. Performance targets are based on the Company's adjusted EBITDA for certain future periods. For the three months endedMarch 31, 2021 and 2020, respectively, there were 633,938 and 852,599 shares of immediately vested Class A Common Stock granted as part of year-end compensation. In addition, the Company accrued compensation expense of$5.0 million and$17.1 million for the three months endedMarch 31, 2021 and 2020, respectively, related to immediately vested Class A Common Stock expected to be awarded as part of year-end incentive compensation, which was included in Employee compensation and payroll taxes on the Condensed Consolidated Statements of Comprehensive Income and Accounts payable, accrued expenses and other liabilities on the Condensed Consolidated Statements of Financial Condition.
The following table summarizes activity related to the RSUs (including the Assumed Awards) and RSAs:
© Edgar Online, source
