Business Context and Reporting Period
Company: Newmark Group, Inc. (NMRK)
Filing Type: Form 8-K (Current Report)
Date of Report: February 13, 2020
Reporting Period: Quarter and fiscal year ended December 31, 2019
This filing announces the Company's financial results for the fourth quarter and full year 2019. The detailed financial data is contained in the press release attached as Exhibit 99.1, which is incorporated by reference. The filing primarily serves to disclose the results and define the Company's non-GAAP financial measures.
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 amounts. These figures are located in the attached press release (Exhibit 99.1) and are not explicitly stated in the body of this Form 8-K.
Non-GAAP Measures Defined:
The Company utilizes the following non-GAAP metrics to evaluate performance:
- Adjusted Earnings: Includes "Adjusted Earnings before noncontrolling interests and taxes" and "Post-tax Adjusted Earnings to fully diluted shareholders."
- Adjusted EBITDA: Derived from GAAP Net Income with adjustments for taxes, interest, depreciation, amortization, equity-based compensation, and other non-cash items.
- 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 methodology for reconciling GAAP results to non-GAAP measures, highlighting specific exclusions that management believes do not reflect ordinary operating results:
- Equity-Based Compensation: Adjusted Earnings exclude all GAAP charges related to equity-based compensation, including grants of exchangeability, preferred units, amortization of RSUs, and allocations of net income to limited partnership units.
- Intangibles and Acquisitions: Excludes amortization of intangibles related to acquisitions and non-cash impairment charges on goodwill or assets.
- Mortgage Servicing Rights: Excludes gains on originated mortgage servicing rights (OMSRs) and amortization of mortgage servicing rights (MSRs).
- Restructuring and One-Time Items: Excludes severance charges, lease exit costs, and unusual, one-time, or non-recurring gains/losses.
- Mark-to-Market Adjustments: Excludes unrealized non-cash mark-to-market gains or losses on variable share forward agreements (Nasdaq Forwards) and non-marketable investments.
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, such as equity-based compensation charges, asset impairment charges, and mark-to-market movements on securities.
Risks and Contingencies:
The filing includes a standard disclaimer regarding forward-looking statements, noting that actual results may differ due to risks and uncertainties. Specific risks mentioned include:
- Volatility in equity-based compensation charges determined at management's discretion.
- Unpredictable gains or losses on marketable securities and hedging instruments.
- Non-cash asset impairment charges dependent on period-end valuations.
- Fluid nature of acquisitions, dispositions, and litigation resolutions.
Dividend Policy:
Dividends payable to stockholders are determined by the Board of Directors with reference to post-tax Adjusted Earnings per share.
Investor Verification Checklist
- Review Exhibit 99.1: Verify specific revenue, profit, and cash flow numbers in the attached press release, as they are not listed in this filing text.
- Reconciliation Tables: Examine 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 non-GAAP adjustments.
- Equity Compensation Impact: Assess the specific dollar amount of equity-based compensation excluded from Adjusted Earnings, as this is a significant factor in the Company's tax provision and earnings calculation.
- Liquidity Definition: Confirm the Company's specific definition of "Liquidity" against GAAP cash flow from operations to understand available cash resources.
- Forward-Looking Limitations: Note that the Company will not provide GAAP guidance, requiring investors to model GAAP results based on non-GAAP guidance and historical adjustment trends.