Business Context and Reporting Period
Company: Newmark Group, Inc. (NMRK)
Filing Type: Form 8-K (Current Report)
Date of Report: October 30, 2019
Reporting Period: Quarter ended September 30, 2019
Context: This filing announces the Company's financial results for the third quarter of 2019. The specific financial data is contained in the press release attached as Exhibit 99.1, which is incorporated by reference. The filing primarily defines the Company's non-GAAP financial measures used to evaluate performance.
Key Financial Metrics
The filing text provided defines the methodology for calculating financial metrics but does not contain specific numerical values for revenue, profit, cash flow, margins, debt, or liquidity for the quarter ended September 30, 2019. These figures are located in the referenced Exhibit 99.1 press release.
Defined Non-GAAP Measures:
- Adjusted Earnings: Includes "Adjusted Earnings before noncontrolling interests and taxes" and "Post-tax Adjusted Earnings to fully diluted shareholders." These exclude equity-based compensation, amortization of intangibles, and certain non-cash gains/losses.
- Adjusted EBITDA: Defined as GAAP Net Income adjusted for noncontrolling interests, taxes, OMSR revenue, MSR amortization, depreciation, equity-based compensation, and interest expense.
- Liquidity: Defined as cash and cash equivalents, marketable securities, and reverse repurchase agreements, less securities lent out and repurchase agreements.
Material Changes and Adjustments
The filing details the specific adjustments made to GAAP figures to derive non-GAAP results, which represent material differences in how the Company reports performance:
- Compensation Adjustments: Excludes all GAAP charges for equity-based compensation, including grants of exchangeability, preferred units, amortization of RSUs, and allocations of net income to limited partnership units.
- Non-Compensation Adjustments: Excludes non-cash amortization of intangibles from acquisitions and non-cash gains/amortization related to mortgage servicing rights (OMSRs and MSRs).
- Other Items: Excludes unusual one-time gains/losses, asset impairment charges, and mark-to-market adjustments on variable share forward agreements (Nasdaq Forwards) and non-marketable investments.
Guidance, Outlook, and Risks
Guidance and Outlook:
- The Company anticipates providing forward-looking guidance for GAAP revenues and certain non-GAAP measures from time to time.
- The Company explicitly states it does not anticipate providing an outlook for other GAAP results. Management cites the difficulty in forecasting items such as equity-based compensation charges, mark-to-market movements on securities, asset impairment charges, and litigation resolutions with sufficient precision.
Risks and Contingencies:
- Forward-Looking Statements: The filing includes a standard disclaimer that forward-looking statements involve risks and uncertainties that could cause actual results to differ materially.
- Tax Complexity: The Company notes that tax provisions for Adjusted Earnings are complex due to the mix of corporate and partnership entities, including Unincorporated Business Tax (UBT) in New York City.
- Dividend Discretion: Future dividends are at the discretion of the Board of Directors and are determined with reference to post-tax Adjusted Earnings per share.
Investor Verification Checklist
- Exhibit 99.1 Data: Verify the actual numerical values for Q3 2019 revenue, Adjusted Earnings, and Adjusted EBITDA in the attached press release, as they are not present in the 8-K text.
- Reconciliation Tables: Review the "Reconciliation of GAAP Income to Adjusted Earnings" and "Reconciliation of GAAP Income to Adjusted EBITDA" in the press release to understand the magnitude of excluded items.
- Share Count: Confirm the "Fully Diluted Weighted-Average Share Count" used for EPS calculations, noting the specific inclusions and exclusions of partnership units.
- Liquidity Position: Check the "Liquidity Analysis" in the press release for the specific sum of cash, marketable securities, and reverse repurchase agreements.
- Dividend Declaration: Verify if a dividend was declared for the quarter and the amount per share, as this is determined by the Board based on Adjusted Earnings.