Business Context and Reporting Period
Company: Newmark Group, Inc. (NMRK)
Filing Type: Form 8-K (Current Report)
Date of Report: November 5, 2021
Reporting Period: Third Quarter ended September 30, 2021
Business Overview: Newmark is a global commercial real estate services firm. This filing announces the issuance of a press release (Exhibit 99.1) detailing financial results for the quarter. The filing primarily serves to incorporate the press release by reference and provides extensive definitions for the Company's non-GAAP financial measures.
Key Financial Metrics
Revenue, Profit, Cash Flow, Margins, Debt, and Liquidity:
The provided text does not contain specific numerical values for revenue, net income, cash flow, margins, debt levels, or liquidity amounts. These figures are contained within the attached press release (Exhibit 99.1), which is incorporated by reference but not included in the source text provided.
Non-GAAP Measures Defined:
The filing details the methodology for the following non-GAAP metrics, which are used by management to evaluate performance:
- Adjusted Earnings: Excludes equity-based compensation, amortization of intangibles, mortgage servicing rights (MSR) amortization, and certain restructuring charges.
- Adjusted EBITDA: Derived from GAAP Net Income, adjusted for taxes, interest, non-cash items, and specific exclusions related to the "Impact of Nasdaq" and the "2021 Equity Event."
- Liquidity: Defined as cash and cash equivalents, marketable securities, and reverse repurchase agreements, less securities lent out and repurchase agreements.
Material Changes and Methodology Updates
The filing outlines significant changes to the calculation of non-GAAP measures effective in the third quarter of 2021:
- Impact of the 2021 Equity Event: Beginning in Q3 2021, the Company excludes GAAP compensation charges related to the 2021 Equity Event (cash paid to independent contractors for withholding taxes and cash redemption of HDUs) from Adjusted Earnings and Adjusted EBITDA. Management views these as non-reflective of ongoing operations.
- Impact of Nasdaq: Due to the acceleration of the Nasdaq Earn-out and related Forward settlements in Q2 2021, the Company now excludes realized gains/losses and mark-to-market adjustments related to Nasdaq shares and variable share forward agreements from Adjusted Earnings and Adjusted EBITDA.
- Originated Mortgage Servicing Rights (OMSRs): Non-cash GAAP gains attributable to OMSRs are excluded from Adjusted Earnings and presented as a separate line item in reconciliations.
Guidance, Outlook, and Risks
Guidance and Outlook:
Newmark anticipates providing forward-looking guidance for GAAP revenues and certain non-GAAP measures. However, the Company explicitly states it does not anticipate providing an outlook for other GAAP results. Management cites the difficulty in forecasting specific GAAP items with precision, including:
- Discretionary equity-based compensation charges.
- Unusual, one-time, or non-recurring items.
- Gains or losses on marketable securities and mark-to-market movements.
- Non-cash asset impairment charges.
- Acquisitions, dispositions, and litigation resolutions.
Risks and Contingencies:
The filing includes a standard disclaimer regarding forward-looking statements. Specific risks mentioned include the potential impact of the COVID-19 pandemic on the Company's business, results, financial position, and liquidity. Actual results may differ materially from expectations.
Investor Verification Checklist
- Review Exhibit 99.1: Verify the actual numerical values for Q3 2021 revenue, Adjusted Earnings, and Adjusted EBITDA in the attached press release, as they are not present in this text.
- Reconciliation Tables: Examine the reconciliation of GAAP Net Income to Adjusted Earnings and Adjusted EBITDA to understand the magnitude of the exclusions (e.g., equity-based compensation, Nasdaq impacts).
- Share Count Impact: Confirm the fully diluted share count used for EPS calculations, noting the exclusion of certain shares related to the 2021 Equity Event.
- Liquidity Position: Review the "Liquidity Analysis" in the press release to assess the sum of cash, marketable securities, and reverse repurchase agreements.
- Dividend Policy: Note that dividends are determined by the Board with reference to post-tax Adjusted Earnings per share.