Business Context and Reporting Period
Company: Newmark Group, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: December 20, 2018
Event: Regulation FD Disclosure regarding an updated outlook for the full year of 2018.
Key Financial Metrics
This filing serves as a disclosure of a press release and does not contain specific numerical values for revenue, profit, cash flow, margins, debt, or liquidity. The document focuses on the methodology for calculating non-GAAP financial measures used by management to evaluate performance.
- Pre-Tax Adjusted Earnings: Defined as GAAP income from operations before taxes and noncontrolling interests, excluding unrealized mark-to-market gains/losses on Nasdaq Forwards, non-cash asset impairments, allocations to limited partnership units, amortization of intangibles, and non-cash charges related to grants of exchangeability.
- Post-Tax Adjusted Earnings: Calculated by applying a non-GAAP tax provision to Pre-Tax Adjusted Earnings. This provision accounts for tax-deductible non-cash charges, such as grants of exchangeability, which can lower the effective tax rate.
- Adjusted EBITDA: Defined as Net income (loss) for fully diluted shares adjusted for taxes, noncontrolling interest, interest expense, depreciation, amortization, and various non-cash charges including equity-based compensation and mortgage servicing rights (OMSRs/MSRs).
Material Changes
The filing announces that Newmark has updated its outlook for the full year of 2018. The specific quantitative changes to the outlook are not detailed in this text but are contained in the attached press release (Exhibit 99.1).
Guidance, Outlook, and Management Commentary
Guidance Strategy: Management anticipates providing forward-looking guidance for GAAP revenues and certain Adjusted Earnings measures. However, the Company does not anticipate providing an outlook for GAAP results other than revenue.
Rationale: Management states that certain GAAP items excluded from Adjusted Earnings are difficult to forecast with precision before the end of each period. These unpredictable items include:
- Allocations of net income and grants of exchangeability to limited partnership units.
- Impact of marketable securities and mark-to-market movements (including Nasdaq Forwards).
- Non-cash asset impairment charges.
- Acquisitions, dispositions, and litigation resolutions.
Management Use of Metrics: Adjusted Earnings and Adjusted EBITDA are used to evaluate operating performance, make operational decisions, and determine dividends and distributions. Management emphasizes that these non-GAAP measures should not be viewed as alternatives to GAAP net income or as indicators of liquidity.
Investor Verification Checklist
- Review the attached press release (Exhibit 99.1) for the specific numerical values of the updated 2018 full-year outlook.
- Verify the reconciliation tables in the press release to understand the quantitative difference between GAAP results and Adjusted Earnings/Adjusted EBITDA.
- Assess the impact of "Nasdaq Forwards" and mark-to-market adjustments on the company's reported volatility.
- Confirm the treatment of limited partnership unit allocations and grants of exchangeability in the fully diluted share count.
- Examine the company's ability to forecast GAAP results given the exclusion of unpredictable items like asset impairments and litigation resolutions.