Good day ladies and gentlemen, and welcome to the Virtu Financial annual meeting of stockholders. At this time, it is my pleasure to turn the floor over to your host, Mr. Robert Greifeld. Sir, the floor is yours.
Thank you. Good morning, ladies and gentlemen. I'm Bob Greifeld, chairman of our board of directors, and I will be presiding at this meeting. On behalf of the board and the officers of Virtu Financial, I am pleased to welcome all of you to the 2020 virtual annual meeting of stockholders. It is 9:00 A.M., and in accordance with the amended and restated bylaws of the company, I call to order this annual meeting of stockholders. We hope all of you and your loved ones are safe and healthy, and we appreciate your attending our 2020 meeting. All of our stockholders were mailed the notice of internet availability. Copies of our proxy statement and annual report were mailed to those stockholders who have so requested. Additionally, our proxy statement and annual report are available on the annual meeting website if anyone would like a copy.
Before proceeding to the business of the meeting, I would like to introduce you to the directors and executives of the company, in addition to myself. Doug Cifu, our Chief Executive Officer, is on the call. Michael Viola, William Krueger, John Nixon, Virginia Gambale, and Alex Ioffe, our Executive Vice President and CFO, are on the call. In addition, Steve Cavoli is on the call. Brett Fairclough, our Chief Operating Officer. Mark Rosenthal, EVP of strategy and corporate development. Debbie Belevan, Senior Vice President of IR and communications. Justin Waldie, Secretary, Senior Vice President and General Counsel of the company, will act as secretary of the meeting. John Holler, an independent inspector of elections, has been appointed as inspector of election in accordance with the company's amended and restated bylaws.
Also dialed in today are Dave Marshall of our law firm, Paul, Weiss, as well as Paul Llano, Christa Savino, and Jacqueline Weinstein of PricewaterhouseCoopers. They have served as the company's independent registered public accounting firm for the financial year ended December 31, 2019. If questions arise during the discussion period at the end of the meeting that these professionals should appropriately address, they will be glad to respond. Each of you should have entered the meeting with your control number or dialed in as a guest. We have posted the agenda and the rules of conduct here in the virtual annual meeting. It is our intention to conduct this meeting in accordance with this agenda and the rules. You will note that under item 15 in the agenda, an opportunity is provided for questions and discussions following the meeting.
As stated in the rules of conduct, stockholders should not address the meeting until recognized, and we ask that you restrict any questions or remarks to items on the agenda. Thank you for your cooperation with these rules. Justin will now report on the mailing of the notice of this meeting and the presence of a quorum.
This meeting is held pursuant to a printed notice mailed on April 24, 2020, to each stockholder of record as of April 7, 2020, who is entitled to vote. A list of stockholders entitled to vote at this meeting is available on the portal. All documents concerning the call and notice of this meeting will be filed with the records of the company. There are 120,997,607 shares of Class A Common Stock, 12,162,851 shares of Class C Common Stock, and 60,091,740 shares of Class D Common Stock issued and outstanding and entitled to vote at this meeting. Holders of Class A Common Stock and of Class C Common Stock are entitled to one vote per share, and holders of Class D Common Stock are entitled to 10 votes per share.
We were informed by the inspector of election that there are represented in person or by proxy at least 184,103,889 shares of common stock representing approximately 98.63% of the total voting power entitled to vote at this meeting, and I certify that as required by the company's amended and restated bylaws, the holders of a sufficient number of common stock are present in person or by proxy and that a quorum is therefore present.
Thank you. Because holders of a majority of the shares entitled to vote at this meeting are present in person or by proxy, I hereby declare that a quorum is present at this meeting in accordance with the company's amended and restated bylaws and declare this meeting to be duly convened for purposes of transacting such business as may properly come before it. On behalf of the board of directors of the company, I would like to express my deep appreciation to all stockholders who are attending this meeting and those who were unable to attend but returned their proxies. I'd like to point out that most of you who have returned proxies authorize the person named in the proxy to vote on all proposals coming before the meeting. If you would like to vote at this meeting, please follow the instructions on the website.
If you have already voted by proxy, it will not be necessary to do so unless you wish to change your vote. The next order of business is a description of the matters to be voted upon at today's meeting. At this meeting, the stockholders will be asked to elect four directors to our Board of Directors, each to serve as a Class II director for a term of three years expiring at the annual meeting of stockholders to be held in 2023 and until such director's successor has been elected and qualified. Also, to approve on an advisory basis the compensation of the company's Named Executive Officers as disclosed in the proxy statement for this annual meeting of stockholders.
In addition, we need to ratify the appointment of PricewaterhouseCoopers as our independent registered public accounting firm for the current fiscal year ending December 31, 2020, and finally approve the amendment to the Virtu Financial Amended and Restated 2015 Management Incentive Plan. We will first entertain nominations for directors to be elected by the stockholders of the company as Class II directors. The company has a staggered board comprised of three classes of directors. The terms of the Class II directors expire by their terms at this annual meeting, and each Class II director elected today will hold office for a term of three years expiring at the annual meeting of stockholders to be held in 2023 and until such director successor has been duly elected and qualified. To nominate the persons listed in the proxy statement, I recognize Mr. Fairclough.
Mr. Chairman, I hereby nominate the following persons for election as Class 2 directors of the company to be elected by the holders of common stock: Douglas A. Cifu, Joseph J. Grano, Jr., Robert Greifeld, and John F. Sandner. These nominees are named and described on pages seven through nine of the company's proxy statement filed on Schedule 14A with the United States Securities and Exchange Commission on April 24, 2020.
You have heard the motion. Is there a second?
Second.
A second, and who was that?
Justin Waldy.
Wonderful. Since no other nominations have been made in accordance with the amended and restated bylaws of the company, I hereby declare the nominations closed. The election of the directors is now in order. If any stockholders are voting online, I suggest they do so now. The polls are now closed. After voting has been completed on all matters on the agenda, all ballots will be counted. The next matter being submitted to stockholders for action is the proposal to approve on an advisory basis the 2020 compensation of the company's named executive officers. The company's executive compensation is described on pages 20 to 38 of the company's Proxy Statement. I recognize Mr. Michael Viola to provide the recommendation of the board of directors regarding this matter.
Thank you, Mr. Chairman. The board of directors has unanimously voted to recommend the approval of the compensation of the company's named executive officers. I move for the approval of the compensation paid to the company's named executive officers as disclosed in the proxy statement pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the compensation discussion and analysis, compensation tables, and the related narrative discussion.
You have heard the motion. Is there a second?
Second from Justin Waldie.
Second. Okay. A second from Justin. Justin beats you to the punch. Are there any questions or comments? If any stockholders are voting online, I suggest they do so now. The polls are now closed. After voting has been completed on all matters on the agenda, all ballots will be collected and counted. The next matter being submitted to the stockholders for action is to ratify the appointment of PwC as our independent registered public accounting firm for the fiscal year ending December 31. The audit committee has the responsibility of recommending auditors to be appointed by the board of directors. The committee has recommended PricewaterhouseCoopers, LLP.
The fiscal year that ends on December 31, 2020, will be the third year that PwC has served as our independent registered public accounting firm after having been selected in a competitive request for proposal and bidding process that concluded on June 4, 2018. Alex, would you make a motion?
Yes. Mr. Chairman, I move for the ratification of the appointment of PricewaterhouseCoopers to audit the financial statements of the company for the current fiscal year ending December 31, 2020.
You have heard the motion. Is there a second?
Second.
Okay. Who got the second in for the record?
That was me, Mr. Chairman. Mr. Cifu.
Thank you, Mr. Cifu. Are there any questions or comments? After voting has been completed on all matters on the agenda, all votes will be counted. If any stockholders are voting online, I suggest they do so now. The polls are now closed. The final matter being submitted to stockholders for action is to approve an amendment to the Virtu Financial Amended and Restated 2015 Management Incentive Plan to increase the number of shares authorized for issuance thereunder. The compensation committee has the responsibility of recommending policies related to the compensation and benefits of our directors and employees and administers the issuance of awards under the Virtu Financial Amended and Restated 2015 Management Incentive Plan. The committee has decided to recommend that shareholders vote in favor of the amendment.
The amendment increases the number of shares of the company's Class A Common Stock for future issuance under the company's amended and restated 2015 Management Incentive Plan by 5 million shares to a total of 21 million shares. Our board believes equity compensation plays an important role in our compensation program for retention purposes and to attract new employees by aligning the interest of the participants in our compensation programs with those of shareholders. Therefore, it is essential to have a sufficient number of reserve shares available for issuance under the plan. The board expects the additional 5 million shares to be sufficient funding for approximately three years. Brett, would you like to make a motion?
I would. Mr. Chairman, I move for the approval of the amendment to the Virtu Financial Amended and Restated 2015 Management Incentive Plan.
You have heard the motion. Is there a second?
Second. John Nixon.
John Nixon with a second. Any questions or comments? After voting has been completed on all matters, all votes will be counted. If any stockholders are voting online, I suggest they do so now. I ask that the inspector of elections tally the votes of stockholders present at the meeting together with the votes of stockholders by proxy, then report the number of votes received for and against the business matters presented this morning. The inspector of election has certified that the tally is complete pending online votes, which will be confirmed on the next business day. Before I ask for questions, I want to ask the secretary to report the results of the voting, the preliminary results of the voting.
Thank you, Mr. Chairman. The holders of a majority of the shares of common stock present in person or by proxy at this meeting have voted in favor of the election of Douglas A. Cifu, Joseph J. Grano, Jr., Robert Greifeld, and John F. Sandner as Class 2 directors. The holders of a majority of shares have voted to approve on an advisory basis the compensation of the named executive officers, have voted to ratify the selection of PricewaterhouseCoopers as the company's independent auditors for the fiscal year ending December 31, 2020, and have voted to approve the amendment to the Virtu Financial Amended and Restated 2015 Management Incentive Plan.
I hereby declare, based on these results, that all the nominees for director have been duly elected. The executive compensation of our named executive officers has been approved on an advisory basis. The appointment of PricewaterhouseCoopers as the company's independent registered accounting firm to audit the financial statements of the company and its subsidiaries for fiscal year ending December 31, 2020, has been duly ratified, and the amendment to the Virtu Financial Amended and Restated 2015 Management Incentive Plan has been approved. There being no other business, our meeting is concluded. I would again like to express my sincere appreciation to the stockholders who attended the meeting as well as those who submitted their proxies but were not able to be present online today. The official business is concluded.
We will now have a brief presentation by the company's management, after which we'll have a brief question and answer period. It's my great pleasure to introduce to the audience Douglas A. Cifu, our Chief Executive Officer, who will make a few remarks about the company. F irst, I would like to introduce Ms. Deborah Belevan, SVP of Investor Relations and Communications, who will make a few comments regarding forward-looking statements and non-GAAP figures. Debbie?
Thank you, Mr. Chairman, and just to remind everybody, the following remarks and discussion may include forward-looking statements which represent Virtu's current belief regarding future events and therefore are subject to risks, assumptions, and uncertainties which may be outside the company's control. Please note that our actual results and financial condition may differ materially from what's indicated in these forward-looking statements. It's important to note that any forward-looking statements made on this call are based upon information presently available to the company, and we do not undertake to update or revise any forward-looking statements as new information becomes available. We'd like to refer you to our disclaimers and our year-end earnings release and encourage you to review the description of risk factors contained in our annual report and on Form 10-K and other public filings.
During today's comments, in addition to GAAP results, we may refer to certain non-GAAP measures, including adjusted net trading income, adjusted net income, adjusted EBITDA, and adjusted EBITDA margin. Non-GAAP measures should be considered as supplemental to and not superior to financial measures prepared in accordance with GAAP. You'll find a reconciliation of these GAAP measures to the equivalent GAAP term in the year-end earnings materials with an explanation of why we deem this information to be meaningful, as well as how management uses these measures. And now over to Mr. Cifu.
Great. Good morning, everybody, and thank you, Deborah. As we've communicated previously, 2019 was a transformational year for Virtu. We acquired Investment Technology Group, Inc., a leading provider of agency execution services and broker-neutral offerings, which we completed in Q1 2019, and made significant progress in integrating our firms and exceeding our initial synergy targets. As a combined firm, we now offer a robust suite of end-to-end trading tools and solutions to meet the needs of our global client base in addition to our core market-making business, through which we provide two-sided prices to investors in over 25,000 financial instruments on more than 235 venues in 36 countries. In 2019, we generated total revenues of $1.53 billion, Adjusted Net Trading Income of $974.7 million, Adjusted EBITDA of $431.9 million, Basic and Diluted Earnings Per Share of $0.53, and Normalized Adjusted Earnings Per Share of $0.96.
Our performance reflected an environment of calmer markets, of calmer volumes, and volatility across the marketplace as compared to the prior year, as well as our achievement of cost and revenue synergies in relation to the KCG and ITG acquisitions. The first quarter of 2020 presented a much different picture with extreme levels of volumes and volatility rippling through global markets due to the COVID-19 pandemic. In the response to the crisis, we took swift measures to protect our employees by restricting travel and implementing BCP measures early on and having over 95% of our employees working remotely by mid-March. We have deployed necessary technology to ensure our employees can work efficiently and have also provided financial and personal resources to ease any burdens.
We have also supported the communities in which we live and work by donating funds and personal protective equipment to over 70 organizations in need across our global locations. During the first quarter, we continued to demonstrate our commitment to our clients, providing best-in-class service and assisting them in navigating the challenging markets and analyzing their performance. We also provided much-needed liquidity to global markets, helping to stabilize prices. As a result of the unprecedented environment, the company achieved several record financial metrics during the first quarter, including total revenues of $1 billion, adjusted net trading income of $784.5 million, adjusted EBITDA of $569.7 million, normalized adjusted net income of $400.3 million, basic and diluted earnings per share of $1.80, and normalized adjusted earnings per share of $2.05. We also achieved significant leverage by delivering adjusted EBITDA margin of 72.6%.
As mentioned previously, we have made substantial progress integrating ITG and achieved over 100% of target operating expense synergies by the end of the year. While there is still much uncertainty how the pandemic will evolve and its impact on the global markets for the remainder of the year, we continue to focus on our core mission of delivering value to the markets and to the clients we serve, guided by our core principles of transparency and efficiency. We sincerely appreciate the support of our shareholders and take seriously our role as stewards of capital. We continue to focus on the long-term growth of our business and remain excited at the prospect for Virtu in the future. Bob, I believe we will now take questions. Yes.
Yes. Yeah. We've now come to that part of the agenda for providing general questions and discussion. Anyone wishing to address the meeting should enter their questions online after recognition by the chair or adjournment. Please state your name and city of residence, indicate whether or not you are a stockholder or proxy for a stockholder, and proceed with your question or comment. Thank you.
So the first question comes with no name, and the question is, "What are your thoughts about the SEC's proposals to overhaul NMS with expanded SIP data and Competing Consolidators?
Sure. That's a great question. This is Doug Cifu, CEO. So we have been a leading proponent, and we're on record through the submission of at least two SEC comment letters supportive of the SEC's proposal on competing SIPs and, more importantly, providing some basis for the cost increases that we've seen in proprietary market data. Essentially, our argument has been that the SIP and the proprietary market data feeds of the exchanges really need to be homogenized into a single product. There needs to be a competitive marketplace for those, and there shouldn't be these three disparate monopolies led by the three exchange groups, and that firms like Virtu and other providers can compete to provide that information.
At the end of the day, as I said in my remarks, our firm is all about transparency and fairness, and we think our fundamental premise is that the way that those products have evolved, both from a governance and from a cost perspective, has been fundamentally unfair to us and to the market overall, and it seems as though we have reached the right audience in Washington. The current SEC chairman and the current head of trading and markets at the SEC have been very receptive to those, and so we've been highly supportive of the proposals. There's a new proposal that is pending, as you mentioned, and we put in a comment letter just this week in support of it.
We are guardedly optimistic that the regulations coming out of the SEC will continue to support the dual prongs of transparency and fairness, and ultimately, those benefit our firm, and we think the overall markets in the long term. So great question, and thank you for that.
Thanks, Doug. And second question comes from Howard Tanenbaum. He has a few questions, so I will read each one at a time and answer each one. I have four areas I'd like to ask about. Number one, with nearly $2 billion in debt and financing recent ITG and prior year KCG acquisitions, how has that affected our company's credit rating in addition to having refinanced and taken advantage of lower interest rates? Do you anticipate taking out additional debt in the future or perhaps issue preferred stock, etc.?
Okay. Howard, first of all, I hope you are well. Sad we're not going to get to see you this year, and we owe you a very nice plate of salmon next year because I know you love our spread. So thank you again for your support and for your great questions. So we announced just last week or two that we've actually paid back $188 million of the $2 billion you mentioned of long-term debt. As you did mention, we did incur about $1 billion of debt to purchase ITG and then engage in a number of repricings of that debt so that we brought down the average borrowing cost.
What we have said publicly is, as a result of the outsized performance that we've achieved not only in the first quarter, but we've also announced our preliminary April and May results that we are firmly committed, as we have previously announced, to deleveraging, i.e., paying back a substantial portion of our outstanding indebtedness. Our target leverage ratio, which we publicly talked about, has always been approximately 2 to 1 in terms of Adjusted EBITDA to debt. O n a run-rate basis, if you give effect to the repayment of the $188 million of debt and obviously the approximately $570 million of Adjusted EBITDA that we generated in the first quarter, we're a long way towards that target.
For the remainder of the year, as I've said publicly, we will continue to apply excess cash flow after we pay our stated dividend of $0.24 a share to continue to retire debt. C ertainly, we think we'll retire another $100-$200 million of debt by the end of the year, which will give us a balance of approximately $1.6-$1.65 billion, and then we'll continue that process through the remainder of the year. I think we can be in the financing markets, to answer your question around our credit rating. Our credit rating has been stable with the three agencies that rate us, S&P, Moody's, and Fitch. And so assuming we accomplish what I just laid out, I don't see the need to raise preferred stock because we're generating enough internal cash to pay down our debt.
And then we will have all types of opportunities to refinance or to do other things in 2021 as we continue on this path to deleverage our company. So great question. Deb, was there any further?
Yeah. He has three more questions.
Okay.
If a negative interest rate environment should occur, how should that affect not only our operations but our strategic footprint?
Yeah. So it's a great question, and obviously, we have done business in marketplaces that have negative interest rates, namely Germany, and we've been effectively in a zero-rate environment. I'm not a big fan of those as a macro matter, and I think the Fed and certainly Chairman Secretary Mnuchin have indicated that neither one of them are in favor of negative interest rates. I think it's unlikely that this country would go that way. I think there's two answers to your question. One is a technical one, which is, can our market making and our systems handle negative prices? Right? And the answer to that, as we experienced with crude in April when crude went to a negative price, is yes because we have some experience with that in terms of spread positions and whatnot.
Our trading systems are capable of recognizing and handling negative pricing, and obviously, were interest rates in this country headed in that direction, we would do a thorough set of testing to ensure resiliency around that. That would be my main focus. As a business matter, again, I think negative interest rates are a bad thing, if you will, overall for marketplaces and for the economy. We don't have a robust. It's a very insignificant part of our market-making capability right now, fixed income, and so it would not have a material impact on our results, but it wouldn't be a positive thing for the growth of either the country or for our market making and fixed income. Number three.
Number three, international operations. How has the Brexit exodus affected our operations in Europe, especially in Ireland? And also, how have the events in Hong Kong affected the Asia-Pacific region?
Yeah. So great question. So we have a natural hedge, if you will, operationally in Europe. This was not some great strategic decision that we made. We got lucky because we started, the legacy Virtu firm had started in Ireland in Dublin. As you mentioned, we're regulated by the Central Bank of Ireland, the CBI. And so we can passport in because we are regulated by a member state into other EU countries. O ur main operations are in Dublin, both on the market-making side, and we're registered on the institutional side in Dublin and regulated there, which is great. When we bought ITG, we inherited a nice London office with institutional capabilities. W e have a branch effectively in London that, as a hedge, we can continue to operate and be monitored and surveilled by the FCA.
We don't have to go and set up an office in Amsterdam, etc., like some of the large financial institutions are. So we were in good shape. As far as Asia, you're right. We have a significant footprint in Hong Kong, which is the headquarters, if you will, of our institutional business. We also have an office which is 99% market making in Singapore, and then we have a small institutional sales outpost in Sydney, Australia. And so we're obviously going to monitor the geopolitical events in Hong Kong very closely and really will be guided by what our clients do. I f the large international asset managers all pick up and flee Hong Kong for other jurisdictions, which is obviously a possibility, my instinct is that we would follow them because it's a client-facing business.
If they all went to Singapore, that's a blessing because we have an office in Singapore. If they went to Sydney, same thing. There already are a bunch in Sydney, which is why we have the office, and I don't think there's any other location. I think we're in a good spot there as well. Obviously, we monitor events on the ground for the health and well-being and safety of our employees, but again, we'll follow our clients wherever that business takes us. And number four.
Number four, lastly but not least. In a follow-up from last year's meeting, can you give us an update on our consortium in the alternate stock exchange? I believe he's referring to MEMX. Last year, we had said that we'd expected to be up and running by April, but he hasn't heard anything in the media. An update would be appreciated.
Yes. Boy, Howard, you are a dutiful shareholder. I appreciate your rigor around this, and you are right. So good news is, since we last spoke, we were the driving force behind the formation of this alternate exchange, as you call it. It's called the Members Exchange or MEMX. They have a website. You can go read all about it. And we started it with our friends and competitors at Citadel, and we had initially three banks and four retail partners in the consortium. I guess the story, if you will, of creating a transparent, fair exchange which would compete with the three legacy exchange groups was compelling because we received a lot of inbound interest from large broker-dealers, from other market makers, and indeed from a handful of firms on the buy side.
As a result, I can't remember if it's 16 or 17, but we have a lot of new partners in the consortium, and so literally, it's a who's who of Wall Street. I would venture to guess that close to 90% of the United States equities financial market are investors and members in the exchange. We added Goldman Sachs, J.P. Morgan, Citigroup, Jane Street, Wells Fargo, and I'm sure I am omitting a handful of other firms, but it was really just a—and BlackRock, right, which was just incredible on the buy side. It really is a who's who of Wall Street. I think it is reflective of unhappiness, if you will, and some of the issues that I pointed out in the first question around just fundamental fairness and transparency and cost and all those stuff.
So as an investment matter, I'm guardedly optimistic that it'll turn out to be a great investment for us. M ore importantly, it's a strategic investment for us because it really gives us a seat at the table. We have SEC approval, and we were originally going to launch in April, but because of the pandemic and concern about people going to data centers and all that stuff, we delayed it sensibly to September. T he launch is September 8th or something like that. It's on the website, and I think we're very, very excited about it.
Great. So that's all the questions from Howard. Thanks for your questions, Howard.
Thank you, Howard, and thanks for your support.
As he says, hopefully, we can meet in person next year.
Nothing would make me happier, Howard.
Exactly. Final question. This comes from Jim Angel. He also clarified that he was the one that asked the SIP question at the beginning, and he was just asking, he likes the virtual shareholder meeting format because it's easier to attend, and he was curious how many people are virtually here today. And I can actually answer that. It looks like we have 13 shareholders logged in and 18 guests. T hank you for that question, Jim.
I like it too because I didn't have to get dressed and shaved this morning, so I'm a fan of it as well.
Exactly. Much easier to get to. That being no further questions at this time.
Wonderful. Well, thank you, everybody. First of all, thank you, Bob, for your leadership, and thank you to all my partners, directors, and employees and senior executives for joining. These are difficult times. We hope everybody remains safe and healthy and rest assured that we will continue to be at our posts during our job and hopefully making the financial markets work just a little bit better. T hank you all for your support, and we look forward to seeing you in New York next year. Thank you.
Thank you.