NEW YORK, Dec. 20, 2018 /PRNewswire/ -- BGC Partners, Inc.
(NASDAQ: BGCP) ("BGC Partners", "BGC", or the "Company"), a leading
global brokerage and financial technology company, today announced
that it had updated its outlook for full year 2018. This outlook
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,
2018.1
Updated Outlook
BGC expects its post-spin results
excluding Newmark for the full-year 2018 to be around the midpoint
of its previously stated outlook for revenues and pre-tax Adjusted
Earnings for the full-year 2018. This post-spin outlook was
contained in BGC's financial results press release issued on
October 25, 2018, which can be found
at http://ir.bgcpartners.com. BGC has filed pro forma GAAP results
for historical periods excluding the results of Newmark, and will
report its post-spin GAAP and non-GAAP results on the same basis
for the fourth quarter and full year 2018.2 The
Company's full year post-spin outlook for 2018 compared with 2017
was as follows:
- For the full year 2018, the Company expected post-spin BGC
revenues to increase by between 9.5 and 11.5 percent year-on-year,
compared to $1.8 billion in
2017.
- BGC anticipated 2018 pre-tax post-spin BGC Adjusted Earnings to
grow by between 29.5 and 33.5 percent, compared to $299.6 million in 2017.
The outlook for post-spin BGC's fourth quarter 2018 results
compared with a year earlier is therefore as follows:
- For the fourth quarter of 2018, the Company expected post-spin
BGC revenues of between $445 million
and $475 million, an increase of
between 3 and 10 percent compared to $432
million in the fourth quarter of 2017.
- BGC anticipated pre-tax post-spin BGC Adjusted Earnings of
between $80 million and $92 million in the fourth quarter of 2018, an
increase of between 38 and 59 percent compared to $57.9 million in the fourth quarter of 2017.
Post-spin BGC's fourth quarter 2018 results were impacted by the
unexpected market closure on December
5 due to the National Day of Mourning honoring former
President George H.W. Bush.
In addition, BGC now anticipates its post-spin Adjusted Earnings
effective tax rate to be in the range of approximately 11.0 percent
to 11.8 percent for the full year of 2018, compared with 3 percent
for full-year 2017. As was previously disclosed, the provision for
income taxes under Adjusted Earnings for the fourth quarter and
full year 2017 for consolidated BGC was lower due to an increase in
grants of exchangeability related to the Company's long-term
efforts to retain executives and partners across Financial Services
and Real Estate Services.
Dividend Policy
Given BGC's expectation of earnings
growth and historical dividend policy of paying out at least 75
percent of post-tax Adjusted Earnings per share, post-spin BGC
expects to pay a dividend of approximately 14 cents per share for the fourth quarter of
2018, subject to approval from the Board of Directors ("Board").
The Company expects to maintain its post-spin
quarterly dividend of 14 cents
per share in 2019. This 14 cents,
combined with Newmark's quarterly dividend of 9 cents multiplied by the 0.463895 distribution
ratio,3 would have been approximately equal to the
quarterly dividend of 18 cents per
share paid by BGC for each quarter of 2017 and 2018. Therefore, the
aggregate dividend received by an investor continuing to own BGC
and Newmark shares post-spin would be approximately equal to the
annualized dividend of 72 cents per
share paid by BGC for 2017 and 2018.
Potential Reverse Split
The Company is considering a
reverse stock split of BGC common stock, units, and other share
equivalents in the first quarter of 2019, subject to Board
approval, at a yet to be determined ratio.
BGC's fully-diluted and float-adjusted market capitalizations
decreased on December 3, 2018 as a
result of the spin-off of Newmark. Prior to the spin-off, BGC's
ownership stake in Newmark made up a significant portion of the
Company's valuation. The reverse stock split, if undertaken, would
be intended solely to increase the per share trading price of BGC's
common stock, improve its liquidity, and facilitate its
trading.
Simplifying Non-GAAP Reporting Beginning in
2019
Beginning with the first quarter of 2019, the Company
expects to simplify its definitions of Adjusted Earnings and
Adjusted EBITDA in order to be more consistent with how many other
companies report their non-GAAP results, including various
financial services, financial data, and financial technology firms
as well as companies in a variety of industries with Up-C
structures similar to the structure of BGC.
Specifically, the Company plans to no longer report "grants of
exchangeability to limited partnership units". Instead, BGC
anticipates adding back all equity-based compensation in
calculating Adjusted Earnings and Adjusted EBITDA. The amount added
back each period is expected to match the line item "Equity-based
compensation and allocations of net income to limited partnership
units" as reported for GAAP in the Company's statements of cash
flows. The Company also expects to begin periodically providing an
annual outlook for share or unit issuances expected as a result of
its ongoing equity-based compensation.
All share equivalents that are part of the Company's stock-based
compensation plan, including RSUs, REUs, and other units, have
always been included in the fully diluted share count when issued.
Therefore, compensation charges recorded under GAAP for these share
equivalents have always been non-cash and non-dilutive. These
anticipated changes will not impact BGC's outlook for the fourth
quarter or results for the fourth quarter or full year 2018, as
they will be implemented for the first time when the Company
reports its results for the three months ended March 31, 2019. At that time, BGC expects to
issue recast non-GAAP results for 2018 and 2017 consistent with
this new methodology.
Adjusted Earnings Defined
BGC Partners 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. The following definitions have been
updated to reflect only BGC's continuing operations.
As compared with "income (loss) from continuing operations
before income taxes", and "net income (loss) from continuing
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 continuing operations before income taxes
and noncontrolling interest in subsidiaries, excluding items such
as:
- Non-cash asset impairment charges, if any;
- Allocations of net income to limited partnership units;
- Non-cash charges related to the amortization of intangibles
with respect to acquisitions; and
- Non-cash charges relating to grants of exchangeability to
limited partnership units that reflect the value of the shares of
common stock into which the unit is exchangeable when the unit
holder is granted exchangeability not previously expensed in
accordance with GAAP.
Virtually all of BGC's key executives and producers have
partnership or equity stakes in the Company and receive deferred
equity or limited partnership units as part of their compensation.
A significant percentage of the Company's fully diluted shares are
owned by its executives, partners and employees. The Company issues
limited partnership units and grant exchangeability to unit holders
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.
When the Company issues limited partnership units, the shares of
common stock into which the units can be ultimately exchanged are
included in BGC's fully diluted share count for Adjusted Earnings
at the beginning of the subsequent quarter after the date of grant.
BGC includes such shares in the Company's fully diluted share count
when the unit is granted because the unit holder could be granted
the ability to exchange their units into shares of common stock in
the future. Generally, unit holders are expected to be paid a pro
rata distribution based on BGC's calculation of Adjusted Earnings
per fully diluted share. Non-cash charges with respect to grants of
exchangeability reflect the value of the shares of common stock
into which the unit is exchangeable when the unit holder is granted
exchangeability not previously expensed in accordance with GAAP.
The amount of non-cash charges relating to grants of
exchangeability the Company uses to calculate pre-tax Adjusted
Earnings on a quarterly basis is based upon the Company's estimate
of expected grants of exchangeability to limited partnership units
during the annual period, as described further below under
"Adjustments Made to Calculate Post-Tax Adjusted Earnings."
Additionally, Adjusted Earnings calculations exclude certain
unusual, one-time, non-ordinary or non-recurring items, if any.
These items are excluded from Adjusted Earnings because the Company
views excluding such items as a better reflection of the ongoing
operations of BGC. BGC's definition of Adjusted Earnings also
excludes certain gains and charges with respect to acquisitions,
dispositions, or resolutions of litigation. Management believes
that excluding such gains and charges also best reflects the
ongoing performance of BGC.
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. The
Company defines post-tax Adjusted Earnings as pre-tax Adjusted
Earnings reduced by the non-GAAP tax provision described below and
Adjusted Earnings attributable to noncontrolling interest in
subsidiaries.
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 continuing operations before income taxes
and noncontrolling interests in subsidiaries and the expected
inclusions and deductions for income tax purposes, including
expected grants of exchangeability to limited partnership units
during the annual period. The resulting annualized tax rate is
applied to BGC's quarterly GAAP income (loss) from
continuing 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 non-cash charges with respect to grants of exchangeability;
certain charges related to employee loan forgiveness; certain net
operating loss carryforwards when taken for statutory purposes;
certain charges related to tax goodwill amortization; and
deductions with respect to charitable contributions. 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 previously described 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's effective tax rate on
pre-tax Adjusted Earnings is 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 non-cash charges relating to the
grants of exchangeability to limited partnership units. Because the
non-cash charges relating to the grants of exchangeability are
deductible in accordance with applicable tax laws, increases in
exchangeability have the effect of lowering the Company's non-GAAP
effective tax rate and thereby increasing its post-tax Adjusted
Earnings.
Management uses post-tax Adjusted Earnings in part to help it
evaluate, among other things, the overall performance of the
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 operates
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.
Adjusted Earnings Attributable to Noncontrolling Interest in
Subsidiaries
Adjusted Earnings attributable to
noncontrolling interest in subsidiaries is calculated based on the
relevant noncontrolling interest existing on the balance sheet
date. Noncontrolling interest will reflect the pro-rata ownership
of certain shares and/or units of BGC.
Calculations of Post-Tax Adjusted Earnings per Common
Share
BGC's Post-Tax Adjusted Earnings per common 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
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 common 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 common
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 post-tax Adjusted Earnings per common
share.
The declaration, payment, timing and amount of any future
dividends payable by the Company will be at the discretion of its
Board of Directors.
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
Adjusted Earnings measures and the GAAP measures of financial
performance should be considered together.
BGC anticipates providing forward-looking guidance for GAAP
revenues and for certain Adjusted Earnings 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, are difficult to forecast with
precision before the end of each period. The Company therefore
believes that it is not possible to forecast GAAP results or to
quantitatively reconcile GAAP results to non-GAAP results with
sufficient precision unless BGC makes unreasonable efforts. The
items that are difficult to predict on a quarterly basis with
precision and which can have a material impact on the Company's
GAAP results include, but are not limited, to the following:
- Allocations of net income and grants of exchangeability to
limited partnership units, which are determined at the discretion
of management throughout and up to the period-end;
- The impact of 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; and
- Acquisitions, dispositions and/or resolutions of litigation,
which are fluid and unpredictable in nature.
See BGC's most recent financial results press release and
investor presentations titled "Reconciliation of GAAP income (loss)
to Adjusted Earnings", "Differences between Consolidated Results
for Adjusted Earnings and GAAP", "Reconciliation of BGC Partners,
Inc. Consolidated to Post-Spin BGC Partners, Inc. for Revenues",
and "Reconciliation of BGC Partners, Inc. Consolidated to Post-Spin
BGC Partners, Inc. for Pre-Tax Adjusted Earnings" for more
information on BGC's non-GAAP results and BGC's post-spin
results.
About BGC Partners, Inc.
BGC Partners is a leading
global brokerage and financial technology company. BGC's Financial
Services 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, expected
dividend levels, the potential reverse stock split, or BGC's
non-GAAP financial measures 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
set forth in these filings and any updates to such risk factors
contained in subsequent Forms 10-K, Forms 10-Q or Forms 8-K.
Media Contact:
Karen
Laureano-Rikardsen
+1 212-829-4975
Investor Contacts:
Ujjal Basu
Roy or Jason McGruder
+1 212-610-2426
1 This includes 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.
2 Beginning in the fourth quarter of 2018,
Newmark's historical financial results for periods prior to the
Spin-Off will be reflected in BGC's consolidated financial
statements as discontinued operations. Stand-alone results for BGC
Partners excluding Newmark Group may be referred to as results from
"continuing operations" or "post-spin BGC." Post-spin BGC can also
be defined as the results for BGC's Financial Services segment plus
its pro-rata portion of corporate items. For more information on
BGC's GAAP results excluding Newmark, see the filing on Form 8-K/A
filed after market close on December 6,
2018 as well as BGC's third quarter 2018 financial results
press release dated October 25, 2018.
Please see additional reconciliation tables in the Company's
investor presentation available on the Company's website at
http://ir.bgcpartners.com.
3 On November 30,
2018, stockholders of BGC Partners Class A common stock
received 0.463895 of a share of Newmark Class A common stock in the
Distribution for every one share of BGC Partners Class A common
stock held. 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.
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SOURCE BGC Partners, Inc.