Business Context and Reporting Period
Company: Newmark Group, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: August 2, 2018
Reporting Period: Second Quarter ended June 30, 2018
This filing announces the Company's financial results for the quarter ended June 30, 2018, via a press release attached as Exhibit 99.1. The report details the Company's methodology for calculating non-GAAP financial measures, including "Adjusted Earnings" and "Adjusted EBITDA," which management uses to evaluate operating performance and determine dividends.
Key Financial Metrics
Revenue, Profit, Cash Flow, Margins, Debt, and Liquidity:
The filing text does not provide specific numerical values for revenue, net income, cash flow, margins, debt levels, or liquidity for the quarter ended June 30, 2018. These figures are contained within the attached press release (Exhibit 99.1), which is incorporated by reference but not reproduced in the text of this 8-K.
Non-GAAP Measures Defined:
- Pre-Tax Adjusted Earnings: GAAP income before taxes and noncontrolling interests, excluding non-cash mark-to-market gains/losses, asset impairments, intangible amortization, and allocations to limited partnership units.
- Post-Tax Adjusted Earnings: Pre-tax Adjusted Earnings reduced by a non-GAAP tax provision calculated using statutory rates and specific tax-deductible adjustments.
- Adjusted EBITDA: Net income adjusted for taxes, interest, depreciation, amortization, and non-cash equity charges. Starting Q3 2018, this definition will exclude allocations to limited partnership units.
- Liquidity: Defined as cash and cash equivalents plus unfinanced marketable securities, reverse repurchase agreements, and securities owned, less securities loaned and repurchase agreements.
Material Changes and Strategic Developments
Proposed Spin-Off:
Newmark BGC has advised the Company that it expects to pursue a tax-free distribution (spin-off) of all Newmark Class A and Class B common shares currently owned by BGC Partners, Inc. to BGC stockholders.
- Proposed Ratio: Approximately 0.4647 Newmark common shares for each BGC common share (based on Q2 2018 close).
- Conditions: The spin-off is subject to conditions and BGC board discretion; it may not occur on an expected timeframe or at all.
Compensation Structure:
A significant percentage of fully diluted shares are owned by executives and employees via limited partnership units. The Company issues these units to align interests and provide liquidity. Non-cash charges related to grants of exchangeability are excluded from Adjusted Earnings.
Guidance, Outlook, and Risks
Guidance Policy:
The Company anticipates providing forward-looking guidance for GAAP revenues and certain Adjusted Earnings measures. However, it does not anticipate providing an outlook for GAAP results other than revenue. Management states that certain GAAP items (e.g., mark-to-market movements, asset impairments, litigation resolutions) are difficult to forecast with precision.
Risks and Contingencies:
- Forward-Looking Statements: Actual results may differ due to risks and uncertainties detailed in SEC filings (10-K, 10-Q, 8-K).
- Spin-Off Uncertainty: The proposed distribution by BGC is not guaranteed and depends on board discretion and market conditions.
- Non-GAAP Limitations: Adjusted Earnings and Adjusted EBITDA are not measures of liquidity or free cash flow and should not be viewed as alternatives to GAAP net income.
Investor Verification Checklist
- Exhibit 99.1: Review the attached press release for specific Q2 2018 revenue, earnings, and cash flow figures not present in this 8-K text.
- Spin-Off Status: Monitor BGC Partners, Inc. announcements regarding the timing and finalization of the proposed Newmark share distribution.
- Non-GAAP Reconciliations: Verify the reconciliation tables between GAAP and non-GAAP measures (Adjusted Earnings/EBITDA) in the full earnings release to understand the magnitude of excluded items.
- Share Count Impact: Confirm how the proposed spin-off and unit exchangeability grants affect the fully diluted share count used in per-share calculations.