01—Abstract
Summary
Summary of the 10-K filed March 12, 2020. Cited figures are marked; the original filing is the authoritative source.
Vertiv Holdings Co.'s (VRT) 2019 10-K filing provides a detailed look at its executive team, corporate governance structure, and compensation practices as it prepared for its business combination.
The report highlights the extensive experience of its board of directors and executive officers, many of whom have deep backgrounds in industrial technology, private equity, and finance. Key leadership roles are clearly defined, including Executive Chairman David M. Cote and CEO Rob Johnson, with a comprehensive list of other officers overseeing critical functions like finance, operations, and regional management.
The filing also delves into the compensation structure for its named executive officers for the 2019 fiscal year, emphasizing a mix of base salary, annual incentives tied to financial performance (EBITDAR, cash, SG&A, sales growth), and transformational bonuses. Significant focus is placed on long-term incentives, including the "2017 Transaction Exit Bonus Plan," designed to align executive rewards with the company's value growth leading up to potential exit events. The report details the extensive preparation for the upcoming business combination, including the adoption of new incentive plans and offer letters for executive compensation, signaling a transition to a publicly traded entity with a strengthened leadership team and a performance-driven compensation framework.
02—Key points
Key Highlights
- The report details the composition of Vertiv's Board of Directors and executive leadership team, showcasing extensive experience from various industries including industrial technology, private equity, and finance.
- It outlines the compensation structure for Named Executive Officers (NEOs) in 2019, including base salary, annual incentive plan (AIP) bonuses tied to EBITDAR, controllable cash, SG&A, and sales growth, and a "Transformation Bonus Plan" (T-Bonus Plan).
- A significant component of executive compensation involved long-term incentives, specifically the "2017 Transaction Exit Bonus Plan," designed to reward executives based on the appreciation of Vertiv's value.
- The filing discloses upcoming compensation arrangements, including new offer letters for executive officers effective upon the business combination, detailing base salary, annual bonus opportunities, restricted stock units (RSUs), and stock options.
- It highlights the company's commitment to corporate governance through its standing committees (Audit, Compensation, Nominating and Corporate Governance), all composed of independent directors.
- Extensive details are provided on related-party transactions, including those with affiliates of Platinum Equity, founder shares, private placement warrants, and subscription agreements related to the business combination.
- The report clarifies the company's stock ownership guidelines for directors and officers, requiring them to hold a certain multiple of their salary in company stock within five years of appointment.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2019, Vertiv Holdings Co lost $0.03.
- Revenue$4.43B100.0%
- Cost of revenue−$2.98B67.2%
- Gross profit$1.45B32.8%
- Operating costs−$1.25B28.1%
- Operating income$206.1M4.7%
- Interest, other & tax−$346.9M7.8%
- Net income−$140.8M3.2%
04—Financials
Financial Highlights
Figures from 10-KFY2019filed March 12, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $4.43B$4.29B | +3.4% |
| Cost of Revenue | $2.98B$2.87B | +3.9% |
| Gross Profit | $1.45B$1.42B | +2.3% |
| R&D Expenses | $229.40M$198.30M | +15.7% |
| SG&A Expenses | $1.10B$1.22B | −10.1% |
| Operating Income | $206.10M— | — |
| Interest Expense | $310.40M$288.80M | +7.5% |
| Net Income | -$140.80M$5.03M | −2898.8% |
| EPS (Basic) | $-1.19$-2.65 | +55.1% |
| EPS (Diluted) | $-1.19$-2.65 | +55.1% |
| Shares Outstanding (Basic) | 118.26M118.26M | 0.0% |
| Shares Outstanding (Diluted) | 118.26M118.26M | 0.0% |
05—Questions
Frequently Asked Questions
What is the primary focus of Vertiv's executive compensation strategy as described in this 10-K?
Vertiv's executive compensation strategy in 2019 focused on attracting and retaining talented individuals and motivating executives to achieve strong financial returns. This was achieved through a combination of competitive base salaries, annual incentives tied to key financial performance metrics, and long-term incentives designed to link compensation to the company's value growth, particularly in anticipation of its business combination.
How did the business combination impact the executive compensation plans?
The business combination represented a significant transition for Vertiv's compensation structure. The report indicates that compensation structures and plans were reviewed and modified in anticipation of becoming a publicly traded company. This included adopting new incentive plans, formalizing executive offer letters with specific base salaries, bonus opportunities, and equity awards (RSUs and stock options) effective post-combination, and superseding prior agreements.
What were the key performance metrics used for the 2019 annual incentive plan (AIP)?
For the 2019 Annual Incentive Plan (AIP), the performance metrics included company-wide EBITDAR (Earnings Before Interest, Taxes, Depreciation, Amortization, and Rent), controllable cash, SG&A (Selling, General, and Administrative expenses), and sales growth. These metrics were weighted differently for each executive and were used to determine cash bonus payouts.
What role did Platinum Equity play in the company's governance and compensation during 2019?
During 2019, Platinum Equity, through its affiliates and advisory services, played a significant role. Platinum Advisors provided advice on compensation plans and policies, and its representatives served on Vertiv's board of managers. Additionally, compensation decisions for named executive officers were informed by Platinum Advisors' market insights and experience with other portfolio companies. Certain directors were also compensated through advisory fees paid to Platinum Equity.
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