NEW
YORK, June 28, 2024 /PRNewswire/ -- BGC Group,
Inc. (Nasdaq: BGC), today announced that it has updated its outlook
for the quarter ending June 30,
2024.
Updated Outlook
BGC reaffirmed its previously
stated outlook ranges for revenue and pre-tax Adjusted Earnings for
the second quarter of 2024. The Company's outlook was contained in
BGC's financial results press release issued on April 30, 2024, which can be found at
http://ir.bgcg.com.
Non-GAAP Financial Measures
The non-GAAP
definitions below include references to certain equity-based
compensation instruments, such as restricted stock awards and/or
restricted stock units ("RSUs"), that the Company has issued and
outstanding following its corporate conversion on July 1, 2023. Although BGC is retaining certain
defined terms and references, including references to partnerships
or partnership units, for purposes of comparability before and
after the corporate conversion, such references may not be
applicable following the period ended June
30, 2023.
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"; "Liquidity"; and "Constant Currency". The definitions of
these terms are below.
Adjusted Earnings Defined
BGC uses non-GAAP
financial measures, including "Adjusted Earnings before
noncontrolling interests and taxes" and "Post-tax Adjusted Earnings
to fully diluted shareholders", which are supplemental measures of
operating results 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) for fully diluted shares", both
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. In
addition, Adjusted Earnings calculations exclude certain gains and
charges that management believes do not best reflect the underlying
operating performance of BGC. Adjusted Earnings is calculated by
taking the most comparable GAAP measures and adjusting for certain
items with respect to compensation expenses, non-compensation
expenses, and other income, as discussed below.
Calculations of Compensation Adjustments for Adjusted
Earnings and Adjusted EBITDA
Treatment of Equity-Based Compensation Line Item for
Adjusted Earnings and Adjusted EBITDA
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. These GAAP equity-based compensation
charges reflect the following items:
- Charges related to amortization of RSUs, restricted stock
awards, other equity-based awards, and limited partnership
units;
- 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 and RSU tax accounts.
Any preferred units and RSU tax accounts 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 or dividend. Preferred units are granted in
connection with the grant of certain limited partnership units that
may be granted exchangeability or redeemed in connection with the
grant of shares of common stock, and RSU tax accounts are granted
in connection with the grant of RSUs. The preferred units and RSU
tax accounts are granted at ratios designed to cover any
withholding taxes expected to be paid. 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 grants of equity awards, including common
stock, RSUs, restricted stock awards 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; and
- Charges related to dividend equivalents earned on RSUs and any
preferred returns on RSU tax accounts.
The amounts of certain quarterly equity-based compensation
charges are based upon the Company's estimate of such expected
charges during the annual period, as described further below under
"Methodology for Calculating Adjusted Earnings Taxes."
Virtually all of BGC's key executives and producers have equity
stakes in the Company and its subsidiaries and generally receive
deferred equity 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 RSUs,
restricted stock, limited partnership units (prior to July 1, 2023) as well as other forms of
equity-based compensation, including grants of exchangeability into
shares of common stock (prior to July 1,
2023), 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.
Compensation charges are also adjusted for certain other cash
and non-cash items.
Certain Other Compensation-Related Adjustments for
Adjusted Earnings
BGC also excludes various other
GAAP items that management views as not reflective of the Company's
underlying performance in a given period from its calculation of
Adjusted Earnings. These may include compensation-related items
with respect to cost-saving initiatives, such as severance charges
incurred in connection with headcount reductions as part of broad
restructuring and/or cost savings plans.
Calculation of Non-Compensation Adjustments for Adjusted
Earnings
Adjusted Earnings calculations may also
exclude items such as:
- Non-cash GAAP charges related to the amortization of
intangibles with respect to acquisitions;
- Acquisition related costs;
- Non-cash GAAP asset impairment charges;
- Resolutions of litigation, disputes, investigations, or
enforcement matters that are generally non-recurring, exceptional,
or unusual, or similar items that management believes do not best
reflect BGC's underlying operating performance, including related
unaffiliated third-party professional fees and expenses; and
- Various other GAAP items that management views as not
reflective of the Company's underlying performance in a given
period, including non-compensation-related charges incurred as part
of broad restructuring and/or cost savings plans. Such GAAP items
may include charges for professional fees and expenses, exiting
leases and/or other long-term contracts as part of cost-saving
initiatives, as well as non-cash impairment charges related to
assets, goodwill and/or intangible assets created from
acquisitions.
Calculation of Adjustments for Other (income) losses for
Adjusted Earnings
Adjusted Earnings calculations
also exclude gains from litigation resolution and certain other
non-cash, non-dilutive, and/or non-economic items, which may, in
some periods, include:
- Gains or losses on divestitures;
- Fair value adjustment of investments;
- Certain other GAAP items, including gains or losses related to
BGC's investments accounted for under the equity method; and
- Any unusual, non-ordinary, or non-recurring gains or
losses.
Methodology for Calculating Adjusted Earnings
Taxes
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; changes in the value of RSUs and/or restricted stock
awards between the date of grant and the date the award vests;
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.
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% of earnings were taxed at global
corporate rates.
Calculations of Pre- and Post-Tax Adjusted Earnings per
Share
BGC's pre- and 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,
when the impact would be anti-dilutive.
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. 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. For more information on any share count adjustments,
see the table titled "Fully Diluted Weighted-Average Share Count
under GAAP and for Adjusted Earnings" in the Company's most recent
financial results press release.
Management Rationale for Using Adjusted
Earnings
BGC's calculation of Adjusted Earnings
excludes the items discussed above because they are either non-cash
in nature, because the anticipated benefits from the expenditures
are not expected to be fully realized until future periods, or
because the Company views results excluding these items as a better
reflection of the underlying performance of BGC's ongoing
operations. Management uses Adjusted Earnings in part to help it
evaluate, among other things, the overall performance of the
Company's business and to make decisions with respect to the
Company's operations.
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
sections of this document and/or in the Company's most recent
financial results press release titled "Reconciliation of GAAP
Income (Loss) from Operations before Income Taxes to Adjusted
Earnings and GAAP Fully Diluted EPS to Post-Tax Adjusted EPS",
including the related footnotes, for details about how 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:
- Provision (benefit) for income taxes;
- Net income (loss) attributable to noncontrolling interest in
subsidiaries;
- Interest expense;
- Fixed asset depreciation and intangible asset
amortization;
- Equity-based compensation and allocations of net income to
limited partnership units and FPUs;
- Impairment of long-lived assets;
- (Gains) losses on equity method investments; and
- Certain other non-cash GAAP items, such as non-cash charges of
amortized rents.
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 section
of this document and/or in the Company's most recent financial
results press release titled "Reconciliation of GAAP Net Income
(Loss) Available to Common Stockholders to Adjusted EBITDA",
including the footnotes to the same, for details about how BGC's
non-GAAP results are reconciled to those under GAAP.
Timing of Outlook for Certain GAAP and 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, 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; and
- Acquisitions, dispositions, and/or resolutions of litigation,
disputes, investigations, or enforcement matters, or similar items,
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, reverse repurchase
agreements (if any), financial instruments owned, at fair value,
less securities lent out in securities loaned transactions and
repurchase agreements (if any). The Company considers liquidity to
be an important metric for determining the amount of cash that is
available or that could be readily available to the Company on
short notice.
For more information regarding Liquidity, see the section of
this document and/or in the Company's most recent financial results
press release titled "Liquidity Analysis", including any footnotes
to the same, for details about how BGC's non-GAAP results are
reconciled to those under GAAP.
Constant Currency Defined
BGC generates a significant
amount of its revenues in non-U.S. dollar denominated currencies,
particularly in the euro and pound sterling. In order to present a
better comparison of the Company's revenues during the period,
which exhibited highly volatile foreign exchange movements, BGC
provides revenues year-over-year comparisons on a "Constant
Currency" basis. BGC uses a Constant Currency financial metric to
provide a better comparison of the Company's underlying operating
performance by eliminating the impacts of foreign currency
fluctuations between comparative periods. Since BGC's consolidated
financial statements are presented in U.S. dollars, fluctuations in
non-U.S. dollar denominated currencies have an impact on the
Company's GAAP results. The Company's Constant Currency metric,
which is a non-GAAP financial measure, assumes the foreign exchange
rates used to determine the Company's comparative prior period
revenues, apply to the current period revenues. Constant Currency
revenue percentage change is calculated by determining the change
in current quarter non-GAAP Constant Currency revenues over prior
period revenues. Non-GAAP Constant Currency revenues are total
revenues excluding the effect of foreign exchange rate movements
and are calculated by remeasuring and/or translating current
quarter revenues using prior period exchange rates. BGC presents
certain non-GAAP Constant Currency percentage changes in Constant
Currency revenues as a supplementary measure because it facilitates
the comparison of the Company's core operating results. This
information should be considered in addition to, and not as a
substitute for, results reported in accordance with GAAP.
About BGC Group, Inc.
BGC Group, Inc. (Nasdaq: BGC) is
a leading global marketplace, data, and financial technology
services company for a broad range of products, including fixed
income, foreign exchange, energy, commodities, shipping, equities,
and now includes the FMX Futures Exchange. BGC's clients are many
of the world's largest banks, broker-dealers, investment banks,
trading firms, hedge funds, governments, corporations, and
investment firms.
BGC and leading global investment banks and market making firms
have partnered to create FMX, part of the BGC Group of companies,
which includes a U.S. interest rate futures exchange, spot foreign
exchange platform and the world's fastest growing U.S. cash
treasuries platform.
For more information about BGC, please visit www.bgcg.com.
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. These
include statements about the Company's business, results, financial
position, liquidity and outlook, which may constitute
forward-looking statements and are subject to the risk that the
actual impact may differ, possibly materially, from what is
currently expected. 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 ("SEC") filings, including, but not limited to, the risk
factors and Special Note on Forward-Looking Information set forth
in these filings and any updates to such risk factors and Special
Note on Forward-Looking Information contained in subsequent reports
on Form 10-K, Form 10-Q or Form 8-K.
Media Contact:
Erica
Chase
+1 212-610-2419
Investor Contact:
Jason Chryssicas
+1 212-610-2426
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SOURCE BGC Group, Inc.