NEW YORK, June 27, 2019 /PRNewswire/ -- BGC Partners, Inc.
(NASDAQ: BGCP) ("BGC Partners" or "BGC" or "the Company"), a
leading global brokerage and financial technology company, today
announced that it has updated its outlook for the quarter ending
June 30, 2019.1
Updated Outlook
BGC's revenues and pre-tax Adjusted
Earnings for the second quarter of 2019 are now expected to be
above the mid-point of the range of its previously stated guidance.
This outlook was contained in BGC's financial results press release
issued on May 7, 2019, which can be
found at http://ir.bgcpartners.com.
Non-GAAP Financial Measures
This document contains
non-GAAP financial measures that differ from the most directly
comparable measures calculated and presented in accordance with
Generally Accepted Accounting Principles in the United States ("GAAP"). Non-GAAP financial
measures used by the Company include "Adjusted Earnings before
noncontrolling interests and taxes", which is used interchangeably
with "pre-tax Adjusted Earnings"; "Post-tax Adjusted Earnings to
fully diluted shareholders", which is used interchangeably with
"post-tax Adjusted Earnings"; "Adjusted EBITDA"; and "Liquidity."
These terms are defined later in this document. All non-GAAP
results discussed herein are comparable to and reconciled with the
most directly comparable GAAP figures from BGC's continuing
operations.
Equity-based Compensation and Allocations of Net Income to
Limited Partnership Units and FPUs
BGC has changed the GAAP
line item formerly known as "Allocations of net income and grant of
exchangeability to limited partnership units and FPUs and issuance
of common stock" to "Equity-based compensation and allocations of
net income to limited partnership units and FPUs" in the Company's
condensed consolidated statements of operations. The change
resulted in the reclassification of amortization charges related to
equity-based awards such as REUs and RSUs from GAAP "Compensation
and employee benefits" to "Equity-based compensation and
allocations of net income to limited partnership units and FPUs".
This change in presentation had no impact on the Company's GAAP
"Total compensation and employee benefits" nor GAAP "Total
expenses". Certain reclassifications have been made to previously
reported amounts to conform to the current presentation.
These GAAP equity-based compensation charges reflect the
following items:
- Charges with respect to grants of exchangeability, which
reflect the right of holders of limited partnership units with no
capital accounts, such as LPUs and PSUs, to exchange these units
into shares of common stock, or into partnership units with capital
accounts, such as HDUs, as well as cash paid with respect to taxes
withheld or expected to be owed by the unit holder upon such
exchange. The withholding taxes related to the exchange of certain
non-exchangeable units without a capital account into either common
shares or units with a capital account may be funded by the
redemption of preferred units such as PPSUs.
- Charges with respect to preferred units. Any preferred units
would not be included in the Company's fully diluted share count
because they cannot be made exchangeable into shares of common
stock and are entitled only to a fixed distribution. Preferred
units are granted in connection with the grant of certain limited
partnership units that may be granted exchangeability at ratios
designed to cover any withholding taxes expected to be paid by the
unit holder upon exchange. This is an alternative to the common
practice among public companies of issuing the gross amount of
shares to employees, subject to cashless withholding of shares, to
pay applicable withholding taxes.
- GAAP equity-based compensation charges with respect to the
grant of an offsetting amount of common stock or partnership units
with capital accounts in connection with the redemption of
non-exchangeable units, including PSUs and LPUs.
- Charges related to amortization of RSUs and limited partnership
units.
- Charges related to grants of equity awards, including common
stock or partnership units with capital accounts.
- Allocations of net income to limited partnership units and
FPUs. Such allocations represent the pro-rata portion of post-tax
GAAP earnings available to such unit holders.
The Company's Adjusted Earnings and Adjusted EBITDA measures
exclude all GAAP charges included in the line item "Equity-based
compensation and allocations of net income to limited partnership
units and FPUs" (or "equity-based compensation" for purposes of
defining the Company's non-GAAP results) as recorded on the
Company's GAAP Consolidated Statements of Operations and GAAP
Consolidated Statements of Cash Flows. BGC had formerly excluded
all charges related to the previous line item "Allocations of net
income and grant of exchangeability to limited partnership units
and FPUs and issuance of common stock".
Virtually all of BGC's key executives and producers have equity
or partnership stakes in the Company and its subsidiaries and
generally receive deferred equity or limited partnership units as
part of their compensation. A significant percentage of BGC's fully
diluted shares are owned by its executives, partners and employees.
The Company issues limited partnership units as well as other forms
of equity-based compensation, including grants of exchangeability
into shares of common stock, to provide liquidity to its employees,
to align the interests of its employees and management with those
of common stockholders, to help motivate and retain key employees,
and to encourage a collaborative culture that drives cross-selling
and revenue growth.
All share equivalents that are part of the Company's
equity-based compensation program, including REUs, PSUs, LPUs,
HDUs, and other units that may be made exchangeable into common
stock, as well as RSUs (which are recorded using the treasury stock
method), are included in the fully diluted share count when issued
or at the beginning of the subsequent quarter after the date of
grant. Generally, limited partnership units other than preferred
units are expected to be paid a pro-rata distribution based on
BGC's calculation of Adjusted Earnings per fully diluted share.
Other Items with Respect to Non-GAAP Results
In
addition, Adjusted Earnings calculations exclude certain unusual,
one-time, non-ordinary or non-recurring items, if any, as well as
certain gains and charges with respect to acquisitions,
dispositions, or resolutions of litigation. The Company views
excluding such items as a better reflection of the ongoing
operations of the Company.
Adjusted Earnings Defined
BGC uses non-GAAP financial
measures including, but not limited to, "pre-tax Adjusted Earnings"
and "post-tax Adjusted Earnings", which are supplemental measures
of operating results that are used by management to evaluate the
financial performance of the Company and its consolidated
subsidiaries. BGC believes that Adjusted Earnings best reflect the
operating earnings generated by the Company on a consolidated basis
and are the earnings which management considers when managing its
business.
As compared with "income (loss) from operations before income
taxes" and "net income (loss) from operations per fully diluted
share", all prepared in accordance with GAAP, Adjusted Earnings
calculations primarily exclude certain non-cash items and other
expenses that generally do not involve the receipt or outlay of
cash by the Company and/or which do not dilute existing
stockholders, as described below. In addition, Adjusted Earnings
calculations exclude certain gains and charges that management
believes do not best reflect the ordinary results of BGC.
Adjustments Made to Calculate Pre-Tax Adjusted
Earnings
BGC defines pre-tax Adjusted Earnings as GAAP
income (loss) from operations before income taxes, excluding items
such as:
- Non-cash earnings or losses related to the Company's
investments under the equity method
- Non-cash GAAP asset impairment charges, if any;
- Non-cash GAAP charges related to the amortization of
intangibles with respect to acquisitions;
- Unusual, one-time, non-ordinary, or non-recurring items;
and
- Equity-based compensation.
The amount of charges relating to equity-based compensation the
Company uses to calculate pre-tax Adjusted Earnings on a quarterly
basis is based upon the Company's estimate of such expected charges
during the annual period, as described further below under
"Adjustments Made to Calculate Post-Tax Adjusted Earnings".
Adjustments Made to Calculate Post-Tax Adjusted
Earnings
Although Adjusted Earnings are calculated on a
pre-tax basis, BGC also reports post-tax Adjusted Earnings to fully
diluted shareholders. The Company defines post-tax Adjusted
Earnings to fully diluted shareholders as pre-tax Adjusted Earnings
reduced by the non-GAAP tax provision described below and net
income (loss) attributable to noncontrolling interest for Adjusted
Earnings.
The Company calculates its tax provision for post-tax Adjusted
Earnings using an annual estimate similar to how it accounts for
its income tax provision under GAAP. To calculate the quarterly tax
provision under GAAP, BGC estimates its full fiscal year GAAP
income (loss) from operations before income taxes and
noncontrolling interests in subsidiaries and the expected
inclusions and deductions for income tax purposes, including
expected equity-based compensation during the annual period. The
resulting annualized tax rate is applied to BGC's quarterly GAAP
income (loss) from operations before income taxes and
noncontrolling interests in subsidiaries. At the end of the annual
period, the Company updates its estimate to reflect the actual tax
amounts owed for the period.
To determine the non-GAAP tax provision, BGC first adjusts
pre-tax Adjusted Earnings by recognizing any, and only, amounts for
which a tax deduction applies under applicable law. The amounts
include charges with respect to equity-based compensation; certain
charges related to employee loan forgiveness; certain net operating
loss carryforwards when taken for statutory purposes; and certain
charges related to tax goodwill amortization. These adjustments may
also reflect timing and measurement differences, including
treatment of employee loans; changes in the value of units between
the dates of grants of exchangeability and the date of actual unit
exchange; variations in the value of certain deferred tax assets;
and liabilities and the different timing of permitted deductions
for tax under GAAP and statutory tax requirements.
After application of these adjustments, the result is the
Company's taxable income for its pre-tax Adjusted Earnings, to
which BGC then applies the statutory tax rates to determine its
non-GAAP tax provision. BGC views the effective tax rate on pre-tax
Adjusted Earnings as equal to the amount of its non-GAAP tax
provision divided by the amount of pre-tax Adjusted Earnings.
Generally, the most significant factor affecting this non-GAAP
tax provision is the amount of charges relating to equity-based
compensation. Because the charges relating to equity-based
compensation are deductible in accordance with applicable tax laws,
increases in such charges have the effect of lowering the Company's
non-GAAP effective tax rate and thereby increasing its post-tax
Adjusted Earnings.
Management uses Adjusted Earnings in part to help it evaluate,
among other things, the overall performance of the Company's
business, to make decisions with respect to the Company's
operations, and to determine the amount of dividends payable to
common stockholders and distributions payable to holders of limited
partnership units.
BGC incurs income tax expenses based on the location, legal
structure and jurisdictional taxing authorities of each of its
subsidiaries. Certain of the Company's entities are taxed as U.S.
partnerships and are subject to the Unincorporated Business Tax
("UBT") in New York City. Any U.S.
federal and state income tax liability or benefit related to the
partnership income or loss, with the exception of UBT, rests with
the unit holders rather than with the partnership entity. The
Company's consolidated financial statements include U.S. federal,
state and local income taxes on the Company's allocable share of
the U.S. results of operations. Outside of the U.S., BGC is
expected to operate principally through subsidiary corporations
subject to local income taxes. For these reasons, taxes for
Adjusted Earnings are expected to be presented to show the tax
provision the consolidated Company would expect to pay if 100
percent of earnings were taxed at global corporate rates.
Calculations of Post-Tax Adjusted Earnings per
Share
BGC's Post-tax Adjusted Earnings per share
calculations assume either that:
- The fully diluted share count includes the shares related to
any dilutive instruments, but excludes the associated expense, net
of tax, when the impact would be dilutive; or
- The fully diluted share count excludes the shares related to
these instruments, but includes the associated expense, net of
tax.
The share count for Adjusted Earnings excludes certain shares
and share equivalents expected to be issued in future periods but
not yet eligible to receive dividends and/or distributions. Each
quarter, the dividend payable to BGC's stockholders, if any, is
expected to be determined by the Company's Board of Directors with
reference to a number of factors, including post-tax Adjusted
Earnings per share. BGC may also pay a pro-rata distribution of net
income to limited partnership units, as well as to Cantor for its
noncontrolling interest. The amount of this net income, and
therefore of these payments per unit, would be determined using the
above definition of Adjusted Earnings per share on a pre-tax
basis.
The declaration, payment, timing and amount of any future
dividends payable by the Company will be at the discretion of its
Board of Directors using the fully diluted share count.
Other Matters with Respect to Adjusted Earnings
The
term "Adjusted Earnings" should not be considered in isolation or
as an alternative to GAAP net income (loss). The Company views
Adjusted Earnings as a metric that is not indicative of liquidity,
or the cash available to fund its operations, but rather as a
performance measure. Pre- and post-tax Adjusted Earnings, as well
as related measures, are not intended to replace the Company's
presentation of its GAAP financial results. However, management
believes that these measures help provide investors with a clearer
understanding of BGC's financial performance and offer useful
information to both management and investors regarding certain
financial and business trends related to the Company's financial
condition and results of operations. Management believes that the
GAAP and Adjusted Earnings measures of financial performance should
be considered together.
For more information regarding Adjusted Earnings, see the
certain sections and tables of this document and/or the Company's
most recent financial results press release in which BGC's non-GAAP
results are reconciled to those under GAAP.
Adjusted EBITDA Defined
BGC also provides an
additional non-GAAP financial performance measure, "Adjusted
EBITDA", which it defines as GAAP "Net income (loss) available to
common stockholders", adjusted to add back the following items:
- Interest expense;
- Provision (benefit) for income taxes;
- Fixed asset depreciation and intangible asset
amortization;
- Impairment charges;
- Net income (loss) attributable to noncontrolling interest;
- Equity-based compensation;
- Non-cash earnings or losses related to the Company's
investments under the equity method.
The Company's management believes that its Adjusted EBITDA
measure is useful in evaluating BGC's operating performance,
because the calculation of this measure generally eliminates the
effects of financing and income taxes and the accounting effects of
capital spending and acquisitions, which would include impairment
charges of goodwill and intangibles created from acquisitions. Such
items may vary for different companies for reasons unrelated to
overall operating performance. As a result, the Company's
management uses this measure to evaluate operating performance and
for other discretionary purposes. BGC believes that Adjusted EBITDA
is useful to investors to assist them in getting a more complete
picture of the Company's financial results and operations.
Since BGC's Adjusted EBITDA is not a recognized measurement
under GAAP, investors should use this measure in addition to GAAP
measures of net income when analyzing BGC's operating performance.
Because not all companies use identical EBITDA calculations, the
Company's presentation of Adjusted EBITDA may not be comparable to
similarly titled measures of other companies. Furthermore, Adjusted
EBITDA is not intended to be a measure of free cash flow or GAAP
cash flow from operations because the Company's Adjusted EBITDA
does not consider certain cash requirements, such as tax and debt
service payments.
For more information regarding Adjusted EBITDA, see the certain
sections and tables of this document and/or the Company's most
recent financial results press release in which BGC's non-GAAP
results are reconciled to those under GAAP.
Outlook for Non-GAAP Items
BGC anticipates providing
forward-looking guidance for GAAP revenues and for certain non-GAAP
measures from time to time. However, the Company does not
anticipate providing an outlook for other GAAP results. This is
because certain GAAP items, which are excluded from Adjusted
Earnings and/or Adjusted EBITDA, are difficult to forecast with
precision before the end of each period. The Company therefore
believes that it is not possible for it to have the required
information necessary to forecast GAAP results or to quantitatively
reconcile GAAP forecasts to non-GAAP forecasts with sufficient
precision without unreasonable efforts. For the same reasons, the
Company is unable to address the probable significance of the
unavailable information. The relevant items that are difficult to
predict on a quarterly and/or annual basis with precision and
may materially impact the Company's GAAP results include, but are
not limited, to the following:
- Certain equity-based compensation charges that may be
determined at the discretion of management throughout and up to the
period-end;
- Unusual, one-time, non-ordinary, or non-recurring items;
- The impact of gains or losses on certain marketable securities,
as well as any gains or losses related to associated mark-to-
market movements and/or hedging. These items are calculated using
period-end closing prices;
- Non-cash asset impairment charges, which are calculated and
analyzed based on the period-end values of the underlying assets.
These amounts may not be known until after period-end;
- Acquisitions, dispositions and/or resolutions of litigation,
which are fluid and unpredictable in nature.
Liquidity Defined
BGC may also use a non-GAAP measure
called "liquidity". The Company considers liquidity to be comprised
of the sum of cash and cash equivalents plus marketable securities
that have not been financed, reverse repurchase agreements, and
securities owned, less securities loaned and repurchase agreements.
The Company considers this an important metric for determining the
amount of cash that is available or that could be readily available
to the Company on short notice.
About BGC Partners, Inc.
BGC Partners is a leading
global brokerage and financial technology company. BGC's offerings
include fixed income securities, interest rate swaps, foreign
exchange, equities, equity derivatives, credit derivatives,
commodities, futures, and structured products. BGC provides a wide
range of services, including trade execution, broker-dealer
services, clearing, trade compression, post trade, information, and
other services to a broad range of financial and non-financial
institutions. Through brands including Fenics, BGC Trader,
Capitalab, Lucera, and Fenics Market Data, BGC offers financial
technology solutions, market data, and analytics related to
numerous financial instruments and markets. BGC, BGC Trader, GFI,
Fenics, Fenics Market Data, Capitalab, and Lucera are
trademarks/service marks and/or registered trademarks/service marks
of BGC Partners, Inc. and/or its affiliates.
BGC's customers include many of the world's largest banks,
broker-dealers, investment banks, trading firms, hedge funds,
governments, corporations, and investment firms. BGC's Class A
common stock trades on the NASDAQ Global Select Market under the
ticker symbol "BGCP". BGC Partners is led by Chairman and Chief
Executive Officer Howard W. Lutnick.
For more information, please visit http://www.bgcpartners.com. You
can also follow BGC at https://twitter.com/bgcpartners,
https://www.linkedin.com/company/bgc-partners and/or
http://ir.bgcpartners.com/Investors/default.aspx.
Discussion of Forward-Looking Statements about BGC
Statements in this document regarding BGC that are not historical
facts are "forward-looking statements" that involve risks and
uncertainties, which could cause actual results to differ from
those contained in the forward-looking statements. Except as
required by law, BGC undertakes no obligation to update any
forward-looking statements. For a discussion of additional risks
and uncertainties, which could cause actual results to differ from
those contained in the forward-looking statements, see BGC's
Securities and Exchange Commission filings, including, but not
limited to, the risk factors and Special Note on Forward-Looking
Statements set forth in these filings and any updates to such risk
factors and Special Note on Forward-Looking Statements contained in
subsequent Forms 10-K, Forms 10-Q or Forms 8-K.
Media Contact:
Karen
Laureano-Rikardsen
+1 212-829-4975
Investor Contact:
Ujjal Basu
Roy or Jason McGruder
+1 212-610-2426
1 The outlook reflects the continuing operations
of BGC and excludes the results of its former subsidiary Newmark
Group, Inc. (NASDAQ: NMRK) ("Newmark"), as all the shares of
Newmark held by the Company were spun off (the "Spin-Off" or
"Distribution") to stockholders of BGC on November 30, 2018. The Spin-Off included the
shares of Newmark Class A and Class B common stock owned by BGC, as
well as the shares of Newmark common stock into which the limited
partnership units of Newmark Holdings, L.P. and Newmark Partners,
L.P. owned by BGC were exchanged prior to and in connection with
the Spin-Off. For more information, see the press release titled
"BGC Partners Announces Completion of Spin-Off of Newmark" dated
November 30, 2018, and the related
filing on Form 8-K filed before market open on December 6, 2018. The financial results from
continuing operations of BGC do not present a distinct corporate
segment and are generally comparable to the stand-alone results for
BGC Partners excluding Newmark Group, referred to as "post-spin
BGC" in previous documents. Post-spin BGC represented what BGC
financial results would have been had the Spin-Off of Newmark
occurred prior to the Distribution date of November 30, 2018. Post-spin BGC can also be
defined as the results for BGC's Financial Services segment plus
its pro-rata portion of corporate items.
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