UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 7, 2019

 

BGC Partners, Inc.

(Exact name of Registrant as specified in its charter)

 

 

 

 

Delaware

0-28191

13-4063515

(State or other jurisdiction

of incorporation)

(Commission
File Number)

(I.R.S. Employer
Identification No.)

499 Park Avenue, New York, NY 10022

(Address of principal executive offices)

Registrant’s telephone number, including area code: (212) 610-2200

   

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Class A Common Stock, $0.01 par value

 

BGCP

 

NASDAQ Global Select Market

 


 

Item 2.02. Results of Operations and Financial Condition.

On May 7, 2019, BGC Partners, Inc. (the “Registrant,” “we,” “us,” “BGC Partners,” “BGC,” or the “Company”) issued a press release announcing its financial results for the quarter ended March 31, 2019. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference herein.

Except as indicated below, the information in this Item 2.02 and Exhibit 99.1 attached to this Current Report on Form 8-K are being furnished under Item 2.02 of Form 8-K. Such information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as expressly set forth by specific reference in such filing and as set forth below.

 

The press release 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 in the press release 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 a n 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 ho lders.

 

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. General ly, 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 i n 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 Bus iness 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 consolid ated 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 in come 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 Exhibit 99.1 to this Current Report on Form 8-K 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 Exhibit 99.1 to this Current Report on Form 8-K 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.

 

The information set forth under the heading “Dividend Information” set forth in Exhibit 99.1 to this Current Report on Form 8-K is being filed under Item 2.02 of Form 8-K and shall be deemed incorporated by reference in any filing under the Securities Act, except as expressly set forth by specific reference in such filing. All other information set forth in Exhibit 99.1 is being furnished.


Discussion of Forward-Looking Statements about BGC

Statements in this document and the attached press release 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.



 

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

 

The exhibit index set forth below is incorporated by reference in response to this Item 9.01.



 

EXHIBIT INDEX

 

Exhibit

Number

 

Description

 

 

99.1

 

BGC Partners, Inc. press release dated May 7, 2019

           



 

 

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report on Form 8-K to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

 

 

 

 

 

 

 

 

BGC Partners, Inc.

 

 

 

 

Date: May 7, 2019

 

 

 

By:

 

/s/ Howard W. Lutnick

 

 

 

 

Name:

 

Howard W. Lutnick

 

 

 

 

Title:

 

Chairman of the Board and Chief Executive Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[Signature Page to Form 8-K, dated May 7, 2019, regarding BGC’s first quarter 2019 Earnings Release]

 

Exhibit 99.1

BGC Partners Reports First Quarter 2019 Financial Results

Declares Quarterly Dividend of 14 Cents

Conference Call to Discuss Results Scheduled for 10:00 AM ET Today

 

NEW YORK, NY – May 7, 2019 - BGC Partners, Inc. (NASDAQ: BGCP) (“BGC Partners” or “BGC” or “the Company”), a leading global brokerage and financial technology company, today reported its financial results for the quarter ended March 31, 2019.   

 

Select Results Compared to the Year-Earlier Period 1

BGC’s consolidated results reflect the continuing operations of BGC and exclude 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. 2

 

Highlights of Results from Continuing Operations

(USD millions)

1Q19

1Q18

Change

Revenues

$544.8

$524.8

3.8%

GAAP income (loss) from operations before income taxes

117.1

94.2

24.3%

GAAP net income (loss) for fully diluted shares

90.8

64.8

40.1%

Adjusted Earnings before noncontrolling interest in subsidiaries and taxes

106.2

122.1

(13.1)%

Post-tax Adjusted Earnings

93.5

107.0

(12.6)%

Adjusted EBITDA

160.4

158.0

1.5%

 

Per Share Results from Continuing Operations

1Q19

1Q18

Change

GAAP net income (loss) per fully diluted share

$0.18

$0.14

28.6%

Post-tax Adjusted Earnings per share

$0.18

$0.22

(18.2)%

 

Management Comments

“Our revenues once again improved year-on-year and were up by 4 percent, despite challenging market conditions for many of our clients, lower industry volumes and volatility, and the $14 million foreign exchange headwind to our top-line related to the strengthening U.S. dollar”, said Howard W. Lutnick, Chairman and Chief Executive Officer of BGC. “I am pleased to announce that our board declared a 14 cent qualified dividend for the first quarter. At yesterday’s closing stock price, this translates into a 10.1 percent annualized yield. As we continue to invest in growing our fully electronic Fenics business, 3 hire profitably, and make accretive acquisitions, we expect to deliver strong returns to our shareholders over time.”

 

Shaun D. Lynn, President of BGC, said: “Fenics brokerage revenues increased by 10 percent year-on-year while revenues from our high margin data, software, and post-trade business were up by 19 percent. Overall Fenics net revenues improved by 12 percent and once again increased as a percentage of BGC’s top-line. We expect Fenics to drive the revenue and earnings of the Company as we further invest in excess of $150 million in our platform, convert our voice and hybrid (electronically processed) business to more profitable fully electronic trading, and continue to roll out new products and services. 4

 

1  

U.S. Generally Accepted Accounting Principles is referred to as “GAAP”. “GAAP income before income taxes and noncontrolling interests” and “Adjusted Earnings before noncontrolling interests and taxes” may be used interchangeably with “GAAP pre-tax earnings” and “pre-tax Adjusted Earnings”, respectively. See the sections of this document including “Non-GAAP Financial Measures”, “Adjusted Earnings Defined”, “Reconciliation of GAAP Income (Loss) from Continuing Operations to Adjusted Earnings from Continuing Operations and GAAP Fully Diluted EPS from Continuing Operations to Post-Tax Adjusted EPS from Continuing Operations”,  “Fully Diluted Weighted-Average Share Count for GAAP and Adjusted Earnings from Continuing Operations”, “Adjusted EBITDA Defined”, “Reconciliation of GAAP Income (Loss) from Continuing Operations to Adjusted EBITDA from Continuing Operations”, and “Liquidity Analysis from Continuing Operations”, including any footnotes to these sections, for the complete and updated definitions of these non-GAAP terms and how, when and why management uses them, as well as for the differences between results under GAAP and non-GAAP for the periods discussed herein.

2  

See section titled “Discussion of Financial Results” in this document for information regarding the Spin-Off and BGC’s continuing operations.

3  

For the purposes of this document, all of the Company’s fully electronic businesses may be collectively referred to as “Fenics”. Fenics includes revenues from fully electronic brokerage, as well as data, software, and post-trade services.

4  

The technology investment figure is based on BGC’s average annual total technology-related expenses and fixed asset purchases over the two years ended December 31, 2018, excluding Newmark.

 

Page 1


 

“BGC’s revenue growth included a 16 percent increase in our energy and commodities business, led by the recently completed acquisitions of Poten and Ginga Petroleum, partially offset by the sale of CSC Commodities. During the quarter, we also closed the acquisition of Ed Broking. 5 Ed is now part of BGC's growing insurance brokerage business. Although Ed was not profitable upon acquisition, we expect Ed to be accretive to earnings per share in the first quarter of 2020.”

 

Dividend Information

On May 6, 2019, BGC Partners’ Board of Directors declared a quarterly qualified cash dividend of $0.14 per share payable on June 10, 2019 to Class A and Class B common stockholders of record as of May 24, 2019. The ex-dividend date will be May 23, 2019.

 

Discussion of Financial Results

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. Unless otherwise stated, all the tables and financial results in this document through the Outlook section reflect continuing operations of BGC and will not match the results and tables in the Company’s press release for the first quarter of 2018 dated May 3, 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.

 

Unless otherwise stated, all results provided in this document compare the first quarter of 2019 with the year-earlier periods. Certain reclassifications may have been made to previously reported amounts to conform to the current presentation and to show results on a consistent basis across periods. With the exception of reporting Newmark as a discontinued operation and the previously announced new non-GAAP presentation, any such reclassifications would have had no impact on consolidated revenues or earnings for GAAP and would leave consolidated pre- and post-tax Adjusted Earnings for the prior periods essentially unchanged all else being equal. Certain numbers and percentage changes listed throughout this document may not sum due to rounding.

 

BGC’s “other income” for both GAAP and Adjusted Earnings in the first quarter of 2018 benefited from gains primarily related to Nasdaq shares that were $8.4 million higher than in the current year period. BGC transferred the right to receive the remainder of the Nasdaq earn-out payments to Newmark during the third quarter of 2017. In the first quarters of 2019 and 2018, BGC’s GAAP “other income” included certain non-operating gains of $40.4 million and $20.6 million, respectively, which were excluded when calculating pre-tax Adjusted Earnings. 6 The Company’s results were also impacted by the mix of revenues by services and geography.

 

Online Availability of Investor Presentation and Additional Financial Tables

An investor presentation as well as Excel versions of the tables at the end of this document are available for download http://ir.bgcpartners.com . The Excel tables and presentation contain the results discussed in this document as well as other useful information that may not be contained herein. Those viewing BGC’s

 

5  

See press releases titled “BGC Partners Completes Acquisition of Ed Broking Group Limited” dated February 1, 2019, “BGC Partners Acquires Poten & Partners, a Leading Ship Brokerage and Consulting Company” dated November 16, 2018, and “BGC Partners, Inc. GFI subsidiary expands Asia footprint with acquisition of energy broker Ginga Petroleum” dated March 12, 2019. BGC stopped consolidating the results of CSC Commodities UK Limited after January 4, 2019, and closed its sale on January 18, 2019.

6  

For more information, see footnotes to the “Reconciliation of GAAP Income (Loss) from Continuing Operations to Adjusted Earnings from Continuing Operations and GAAP Fully Diluted EPS from Continuing Operations to Post-Tax Adjusted EPS from Continuing Operations” table later in this document.

 

Page 2


financial results release online should see the link to the tables and presentation near the top of the page at h ttp://ir.bgcpartners.com .

 

Results from Continuing Operations

Overall industry volumes tend to be seasonally strongest in the first calendar quarter of the year, sequentially slower in each of the next two quarters, and slowest in the fourth calendar quarter.

 

Details of Results from Continuing Operations

(USD millions)

1Q19

1Q18

Change

Rates revenues

$163.8

$160.8

1.9%

Equities, insurance, and other asset classes revenues

101.0

97.8

3.3%

Foreign exchange revenues

93.4

99.1

(5.7)%

Credit revenues

85.7

82.1

4.5%

Energy and commodities revenues

69.9

60.1

16.2%

Total brokerage revenues

513.8

499.8

2.8%

Data, software, and post-trade revenues, net of inter-company eliminations

17.9

15.1

18.6%

Interest, fees from related parties, and other revenues

13.1

9.9

32.2%

Total revenues

544.8

524.8

3.8%

 

First quarter 2019 revenues would have been at least $14 million higher, but for the strengthening of the U.S. dollar. This currency headwind was approximately $6 million higher than what the Company had previously guided. Industry-wide equity related volumes were generally lower year-over-year in the first quarter. This decline in activity was offset by the Company’s acquisition of Ed. The increase in energy and commodities revenues from BGC’s acquisitions of Poten and Ginga Petroleum was partially offset by the previously disclosed sale of CSC Commodities.

 

Fenics Results in Continuing Operations

(USD millions)

1Q19

1Q18

Change

Total fully electronic brokerage revenues

$58.8

$53.3

10.4%

Data, software, and post-trade revenues

17.9

15.1

18.6%

Fenics net revenues

76.7

68.4

12.2%

Data, software, and post-trade revenues (inter-company)

16.7

17.6

(4.9)%

Total Fenics revenues

93.4

85.9

8.7%

 

In the table above, revenues for Fenics are broken out from the Results from Continuing Operations. Revenues from inter-company data, software, and post-trade are eliminated upon consolidation.

 

Consolidated Expenses from Continuing Operations 7

 

Consolidated Expenses from Continuing Operations

(USD millions)

1Q19

1Q18

Change

Compensation and employee benefits under GAAP

$288.0

$277.8

3.7%

Equity-based compensation and allocations of net income to limited partnership units and FPUs

12.1

39.4

(69.2)%

Non-compensation expenses under GAAP

169.6

147.4

15.1%

Total expenses under GAAP

469.7

464.6

1.1%

 

 

 

 

Compensation and employee benefits for Adjusted Earnings

287.3

276.5

3.9%

Non-compensation expenses for Adjusted Earnings

153.8

137.8

11.6%

Total expenses for Adjusted Earnings

441.1

414.3

6.5%

 

The increase in the Company’s expenses from the year ago period was primarily driven by interest expense on the $450 million 5.375% Senior Notes due 2023, interest expense related to the $250 million borrowings

 

7  

The line item “Equity-based compensation and allocations of net income to limited partnership units and FPUs” is referred to as “equity-based compensation” for purposes of defining the Company’s non-GAAP results. For the first quarters of 2019 and 2018, GAAP equity-based charges included $4.5 million and $3.8 million, respectively, in allocation of net income to limited partnership units and FPUs, which represents certain BGC employees’ pro-rata portion of net income. For the first quarters of 2019 and 2018, GAAP expenses also included $7.6 million and $35.6 million, respectively, in other equity-based compensation. Please see “Adjusted Earnings Defined” for more information on these aforementioned GAAP charges.

 

Page 3


on BGC’s credit facility, as well as the impact of higher variable compensation and of recent acquisitions and hires. E xpenses under GAAP also included rents incurred for the build-out phase of the Company’s new UK-based headquarters.

 

Taxes and Noncontrolling Interest from Continuing Operations

 

Taxes and Noncontrolling Interest from Continuing Operations

(USD millions)

1Q19

1Q18

Change

GAAP provision for income taxes

$29.9

$21.6

38.7%

Provision for income taxes for Adjusted Earnings

12.0

13.1

(8.0)%

GAAP net income (loss) attributable to noncontrolling interest in subsidiaries

25.3

28.7

(11.7)%

Net income (loss) attributable to noncontrolling interest in subsidiaries for Adjusted Earnings

0.7

2.1

(67.5)%

 

BGC’s continuing operations tax rate for the first quarter of 2019 for Adjusted Earnings was 11.3 percent, which was consistent with the Company’s previously provided full year 2019 outlook of between 11 percent and 12 percent.

 

As a reminder, following the Spin-Off of Newmark, noncontrolling interest under Adjusted Earnings no longer reflects the allocation of income to the pro-rata ownership of certain shares and/or units of BGC. As such, BGC’s noncontrolling interest is expected to decline from the first quarter of 2019 onward.

 

Consolidated Share Count from Continuing Operations 8

 

Consolidated Share Count from Continuing Operations

(USD millions)

1Q19

1Q18

Change

4Q18

Fully diluted weighted-average share count under GAAP

516.1

478.9

7.8%

331.4

Fully diluted weighted-average share count for Adjusted Earnings

516.1

478.9

7.8%

498.5

Fully diluted spot share count under GAAP and Adjusted Earnings

516.1

482.0

7.1%

518.8

 

BGC’s fully diluted spot share count for both GAAP and Adjusted Earnings at the end of the first quarter of 2019 was 2.7 million shares lower compared to the end of the fourth quarter of 2018. BGC has begun to take a number of steps to reduce share issuance, including using a greater percentage of cash with respect to acquisitions, employee compensation, and new hires. The Company anticipates these steps having no impact on its ability to attract and retain industry-leading talent or to make accretive acquisitions. BGC expects its year-end fully diluted spot share count to grow by between 3 percent and 4 percent year-over-year in 2019. The Company’s previous outlook for 2019 year-end fully diluted share count growth was between 5 percent and 6 percent year-over-year. 9 The outlook for 2019 assumes no material acquisitions, buybacks, or meaningful changes to the Company’s stock price. 10 The weighted average count for GAAP and Adjusted Earnings increased year-on-year due in part to the sale of 19.4 million BGC Class A common shares from December 19, 2017, through March 6, 2018 for net proceeds of $270.9 million. $242.0 million of these proceeds were used to purchase 16.6 million newly issued exchangeable limited partnership units of Newmark during the first quarter of 2018, which Newmark used to repay long-term debt. 11 The repayment of pre-existing debt owed to or guaranteed by BGC was part of the requirements for a tax free spin-off of Newmark. Due to the change in corporate structure with respect to the Spin-Off of Newmark, BGC’s noncontrolling interest in subsidiaries declined and its fully-diluted share count increased for all subsequent periods, with no impact on earnings or earnings per share.

 

 

8  

The fully diluted weighted-average share count under GAAP may differ from the fully diluted weighted-average share count for Adjusted Earnings in order to avoid anti-dilution in certain periods; “spot” is used interchangeably with the end-of-period share count.

9  

For more information, see the February 14, 2019 press release titled “BGC Partners Reports Fourth Quarter and Full Year 2018 Financial Results” and the corresponding Securities and Exchange Commission filing on Form 8-K made on the same date.

10  

BGC’s closing price was $5.57 on May 3, 2019. BGC’s year to date volume-weighted average price (“VWAP”) was $5.82 from January 2, 2019 through May 3, 2019. Its VWAP was $7.56 for the full year 2018.

11  

For more information, see the March 7, 2018 press release titled “BGC Partners and Newmark Group to Repay Remaining Balance of $575 million Unsecured Senior Term Loan” and the corresponding Securities and Exchange Commission filing on Form 8-K made on the same date.

 

Page 4


Select Balance Sheet Data 12

 

Select Balance Sheet Data

(USD millions except per share data)

March 31, 2019

December 31, 2018

Cash and cash equivalents

$331.7

$336.5

Liquidity

392.4

410.9

Notes payable and other borrowings

1,008.2

763.5

Book value per share

2.31

2.28

Total capital

903.8

887.9

 

The quarter-end balance sheet figures reflect the Company drawing down $250 million from its $350 million revolving credit facility to finance acquisitions and for general corporate purposes; cash paid with respect to annual employee bonuses; ordinary movements in working capital; and the Company continuing to invest in new revenue-generating hires.

 

Outlook

 

*

BGC anticipates second quarter 2019 revenues of between $515 million and $555 million, compared with $491 million a year earlier.

*

BGC expects Adjusted Earnings before noncontrolling interest in subsidiaries and taxes to be in the range of $89 million and $105 million for the three months ended June 30, 2019, compared with $101.5 million in the prior-year period.

*

BGC anticipates its Adjusted Earnings tax rate to be in the range of approximately 11 percent and 12 percent for the full year 2019.

*

BGC expects its year-end fully diluted share count to grow by between 3 percent and 4 percent year-over-year in 2019.

*

The Company’s outlook assumes no material acquisitions, investments, or share repurchases.

 

BGC Conference Call and Investor Presentation

BGC will host a conference call on the date of this release at 10:00 a.m. ET to discuss these results. A webcast of the call, along with an investor presentation summarizing BGC’s consolidated Adjusted Earnings results, will be accessible via the following:

 

http://ir.bgcpartners.com (an HTML version with Excel financial tables or PDF)

http://ir.bgcpartners.com/news-releases (an HTML version with Excel financial tables or PDF)

http://bgcpartners.com/category/bgc-releases/ (PDF only)

 

A listing of minimum system requirements can be found here:

http://event.on24.com/view/help/ehelp.html?text_language_id=en&fh=true&flashconsole=true&ngwebcast=true

 

A webcast replay of the conference call is expected to be accessible at http://ir.bgcpartners.com within 24 hours of the live call and will be available for 365 days following the call. Additionally, call participants may dial in with the following information:

 

 

12  

Liquidity is the sum of cash and cash equivalents plus marketable securities that have not been financed, reverse repurchase agreements if any, and securities owned, less securities loaned and repurchase agreements. “Cash segregated under regulatory requirements” is not included in liquidity. Total capital is defined as redeemable partnership interest, total stockholders' equity and noncontrolling interest in subsidiaries.

 

Page 5


LIVE CALL:  

Date - Start Time: 5/7/ 2019 at 10:00 a.m. ET

U.S. Dial In: 1- 844-309-0609

International Dial In: 1-574-990-9937

Passcode: 849-7718

 

REPLAY:

Available From – To: 5 /7/2019 1:00 p.m. ET – 5/14/2019 1:00 p.m. ET

U.S. Dial In: 1-855-859-2056

International Dial In: 1-404-537-3406

Passcode: 849-7718

 

(Note: If clicking on the above links does not open up a new web page, you may need to cut and paste the above URLs into your browser's address bar.)

 

Differences between Non-GAAP and GAAP Consolidated Results

As was previously disclosed, the Company has simplified and clarified its presentation of Adjusted Earnings and Adjusted EBITDA. BGC now excludes GAAP charges related to equity-based compensation for Adjusted Earnings rather than expenses with respect to grants of exchangeability and issuance of common stock. In addition, the Company no longer excludes GAAP charges with respect to employee loan amortization and reserves on employee loans when calculating Adjusted EBITDA. BGC has recast its historical non-GAAP financial results for 2018 and 2017 consistent with this new presentation on its investor relations website at http://ir.bgcpartners.com . Furthermore, in order to be more consistent with how other companies present non-GAAP results, the Company has moved the narrative describing the differences between results under Adjusted Earnings and GAAP to the footnotes following the table found later in this document and titled “Reconciliation of GAAP Income (Loss) from Continuing Operations to Adjusted Earnings from Continuing Operations and GAAP Fully Diluted EPS from Continuing Operations to Post-Tax Adjusted EPS from Continuing Operations”.

 

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

 

Page 6


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

 

Page 7


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.

 

 

Page 8


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.

 

 

Page 9


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.

 

Page 10


 

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.

 

Other Items of Note

“Cash segregated under regulatory requirements” increased mainly due to the acquisition of Ed Broking Group.

 

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This standard requires lessees to recognize a right-of-use (“ROU”) asset and lease liability for all leases with terms of more than 12 months. Recognition, measurement and presentation of expenses will depend on classification as a finance or operating lease. The amendments also require certain quantitative and qualitative disclosures. These impacts were approximately $190.2 million and $204.9 million in Total Assets and Total Liabilities, respectively, as of March 31, 2019. For additional information regarding the adoption of ASC 842, please see the section titled “New Accounting Pronouncements” in BGC’s Annual Reports on Form 10-K as filed with the Securities and Exchange Commission.

 

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.

 

Page 11


 

Media Contact:

Karen Laureano-Rikardsen

+1 212-829-4975

 

Investor Contact:

Ujjal Basu Roy or Jason McGruder

+1 212-610-2426

 

 

 

 

 

Page 12


B GC PARTNERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(in thousands, except per share data)

(unaudited)

 

 

 

March 31,

 

 

December 31,

 

 

 

2019

 

 

2018

 

Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

331,668

 

 

$

336,535

 

Cash segregated under regulatory requirements

 

 

196,448

 

 

 

80,243

 

Securities owned

 

 

60,146

 

 

 

58,408

 

Marketable securities

 

 

29,989

 

 

 

32,064

 

Receivables from broker-dealers, clearing organizations, customers and related broker-dealers

 

 

2,007,606

 

 

 

941,866

 

Accrued commissions and other receivables, net

 

 

596,126

 

 

 

516,091

 

Loans, forgivable loans and other receivables from employees and partners, net

 

 

240,283

 

 

 

216,868

 

Fixed assets, net

 

 

169,599

 

 

 

157,169

 

Investments

 

 

36,708

 

 

 

35,403

 

Goodwill

 

 

560,181

 

 

 

504,646

 

Other intangible assets, net

 

 

319,101

 

 

 

298,779

 

Receivables from related parties

 

 

11,229

 

 

 

7,748

 

Other assets

 

 

485,792

 

 

 

246,937

 

Total assets

 

$

5,044,876

 

 

$

3,432,757

 

 

 

 

 

 

 

 

 

 

Liabilities, Redeemable Partnership Interest, and Equity

 

 

 

 

 

 

 

 

Short-term borrowings

 

$

5,133

 

 

$

5,162

 

Repurchase agreements

 

 

4,327

 

 

 

986

 

Securities loaned

 

 

25,068

 

 

 

15,140

 

Accrued compensation

 

 

196,318

 

 

 

195,234

 

Payables to broker-dealers, clearing organizations, customers and related broker-dealers

 

 

1,805,004

 

 

 

769,833

 

Payables to related parties

 

 

38,132

 

 

 

40,155

 

Accounts payable, accrued and other liabilities

 

 

1,058,877

 

 

 

754,819

 

Notes payable and other borrowings

 

 

1,008,231

 

 

 

763,548

 

Total liabilities

 

 

4,141,090

 

 

 

2,544,877

 

Redeemable partnership interest

 

 

25,140

 

 

 

24,706

 

Equity

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Class A common stock, par value $0.01 per share; 750,000 shares authorized; 343,885

 

 

 

 

 

 

 

 

and 341,745 shares issued at March 31, 2019 and December 31, 2018,

 

 

 

 

 

 

 

 

respectively; and 293,382 and 291,475 shares outstanding at

 

 

 

 

 

 

 

 

March 31, 2019 and December 31, 2018, respectively

 

 

3,439

 

 

 

3,417

 

Class B common stock, par value $0.01 per share; 150,000 shares authorized;

 

 

 

 

 

 

 

 

45,884 shares issued and outstanding at March 31, 2019 and

 

 

 

 

 

 

 

 

December 31, 2018, respectively, convertible into Class A common stock

 

 

459

 

 

 

459

 

Additional paid-in capital

 

 

2,210,033

 

 

 

2,208,221

 

Treasury stock, at cost: 50,503 and 50,270 shares of Class A common stock at

 

 

 

 

 

 

 

 

March 31, 2019 and December 31, 2018, respectively

 

 

(315,210

)

 

 

(314,240

)

Retained deficit

 

 

(1,090,585

)

 

 

(1,105,019

)

Accumulated other comprehensive income (loss)

 

 

(23,553

)

 

 

(24,465

)

Total stockholders' equity

 

 

784,583

 

 

 

768,373

 

Noncontrolling interest in subsidiaries

 

 

94,063

 

 

 

94,801

 

Total equity

 

 

878,646

 

 

 

863,174

 

Total liabilities, redeemable partnership interest and equity

 

$

5,044,876

 

 

$

3,432,757

 

 

 

 

Page 13


BGC PARTNERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

 

 

 

 

Three Months Ended March 31,

 

 

 

2019

 

 

2018

 

Revenues:

 

 

 

 

 

 

 

 

  Commissions

 

$

429,520

 

 

$

407,857

 

  Principal transactions

 

 

84,230

 

 

 

91,918

 

Total brokerage revenues

 

 

513,750

 

 

 

499,775

 

 

 

 

 

 

 

 

 

 

  Fees from related parties

 

 

5,795

 

 

 

6,299

 

  Data, software and post-trade

 

 

17,910

 

 

 

15,099

 

  Interest income

 

 

3,665

 

 

 

2,675

 

  Other revenues

 

 

3,631

 

 

 

926

 

Total revenues

 

 

544,751

 

 

 

524,774

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

  Compensation and employee benefits

 

 

288,000

 

 

 

277,847

 

   Equity-based compensation and allocations of net income

 

 

 

 

 

 

 

 

   to limited partnership units and FPUs

 

 

12,141

 

 

 

39,389

 

Total compensation and employee benefits

 

 

300,141

 

 

 

317,236

 

  Occupancy and equipment

 

 

46,002

 

 

 

37,147

 

  Fees to related parties

 

 

2,927

 

 

 

4,051

 

  Professional and consulting fees

 

 

20,005

 

 

 

17,908

 

  Communications

 

 

30,411

 

 

 

31,399

 

  Selling and promotion

 

 

18,402

 

 

 

16,225

 

  Commissions and floor brokerage

 

 

14,618

 

 

 

13,915

 

  Interest expense

 

 

13,198

 

 

 

9,368

 

  Other expenses

 

 

24,015

 

 

 

17,338

 

Total non-compensation expenses

 

 

169,578

 

 

 

147,351

 

Total expenses

 

 

469,719

 

 

 

464,587

 

 

 

 

 

 

 

 

 

 

Other income (losses), net:

 

 

 

 

 

 

 

 

  Gain (loss) on divestiture and sale of investments

 

 

20,054

 

 

 

 

  Gains (losses) on equity method investments

 

 

783

 

 

 

2,624

 

  Other income (loss)

 

 

21,202

 

 

 

31,411

 

Total other income (losses), net

 

 

42,039

 

 

 

34,035

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations before income taxes

 

 

117,071

 

 

 

94,222

 

 

 

 

 

 

 

 

 

 

Provision (benefit) for income taxes

 

 

29,897

 

 

 

21,550

 

Consolidated net income (loss) from continuing operations

 

 

87,174

 

 

 

72,672

 

Consolidated net income (loss) from discontinued operations, net of tax

 

 

 

 

 

24,759

 

Consolidated net income (loss)

 

$

87,174

 

 

$

97,431

 

 

 

 

 

 

 

 

 

 

  Less:  Net income (loss) from continuing operations attributable to

 

 

 

 

 

 

 

 

  noncontrolling interest in subsidiaries

 

 

25,306

 

 

 

28,674

 

  Less:  Net income (loss) from discontinued operations attributable to

 

 

 

 

 

 

 

 

  noncontrolling interest in subsidiaries

 

 

 

 

 

9,983

 

 

 

 

 

 

 

 

 

 

Net income (loss) available to common stockholders

 

$

61,868

 

 

$

58,774

 

 

 

 

 

 

 

 

 

Page 14


BGC PARTNERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

 

Continued

 

 

Three Months Ended March 31,

 

 

 

2019

 

 

2018

 

Per share data:

 

 

 

 

 

 

 

 

Basic earnings (loss) per share from continuing operations

 

 

 

 

 

 

 

 

  Net income (loss) from continuing operations available to common stockholders

 

$

61,868

 

 

$

43,998

 

  Basic earnings (loss) per share from continuing operations

 

$

0.18

 

 

$

0.14

 

  Basic weighted-average shares of common stock outstanding

 

 

338,403

 

 

 

307,728

 

 

 

 

 

 

 

 

 

 

Fully diluted earnings (loss) per share from continuing operations

 

 

 

 

 

 

 

 

  Net income (loss) from continuing operations for fully diluted shares

 

$

90,765

 

 

$

64,771

 

  Fully diluted earnings (loss) per share from continuing operations

 

$

0.18

 

 

$

0.14

 

  Fully diluted weighted-average shares of common stock outstanding

 

 

516,066

 

 

 

478,935

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Page 15


BGC PARTNERS, INC.

RECONCILIATION OF GAAP INCOME (LOSS) FROM CONTINUING OPERATIONS TO ADJUSTED EARNINGS FROM CONTINUING OPERATIONS AND GAAP FULLY DILUTED EPS FROM CONTINUING OPERATIONS TO POST-TAX ADJUSTED EPS FROM CONTINUING OPERATIONS

(in thousands, except per share data)

(unaudited)

 

 

 

Q1 2019

 

 

Q1 2018

 

 

GAAP income (loss) before income taxes from continuing operations

 

$

117,071

 

 

$

94,222

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax adjustments:

 

 

 

 

 

 

 

 

 

Compensation adjustments:

 

 

 

 

 

 

 

 

 

       Equity-based compensation and allocations of net income to

 

 

 

 

 

 

 

 

 

       limited partnership units and FPUs (1)

 

 

12,141

 

 

 

39,389

 

 

       Other compensation charges (2)

 

 

699

 

 

 

1,347

 

 

Total compensation adjustments

 

 

12,840

 

 

 

40,736

 

 

 

 

 

 

 

 

 

 

 

 

Non-compensation adjustments:

 

 

 

 

 

 

 

 

 

       Amortization of intangibles (3)

 

 

7,237

 

 

 

7,216

 

 

       Acquisition related costs

 

 

734

 

 

 

841

 

 

       Rent expense (4)

 

 

2,567

 

 

 

 

 

       Impairment charges

 

 

32

 

 

 

 

 

       Other (5)

 

 

5,160

 

 

 

1,488

 

 

Total non-compensation adjustments

 

 

15,730

 

 

 

9,545

 

 

 

 

 

 

 

 

 

 

 

 

Other income (losses), net adjustments:

 

 

 

 

 

 

 

 

 

       Gain on divestiture

 

 

(20,054

)

 

 

 

 

       Fair value adjustment of investments (6)

 

 

(20,376

)

 

 

(20,578

)

 

       Other net (gains) losses (7)

 

 

983

 

 

 

(1,776

)

 

       Total other income (losses), net adjustments

 

 

(39,447

)

 

 

(22,354

)

 

 

 

 

 

 

 

 

 

 

 

             Total pre-tax adjustments

 

 

(10,877

)

 

 

27,927

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax adjusted earnings from continuing operations

 

$

106,194

 

 

$

122,149

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net income (loss) from continuing operations available to common stockholders

 

$

61,868

 

 

$

43,998

 

 

Allocation of net income (loss) from continuing operations to

 

 

 

 

 

 

 

 

 

non-controlling  interest in subsidiaries (8)

 

 

24,626

 

 

 

26,583

 

 

Total pre-tax adjustments (from above)

 

 

(10,877

)

 

 

27,927

 

 

Income tax adjustment to reflect adjusted earnings taxes (9)

 

 

17,855

 

 

 

8,463

 

 

Post-tax adjusted earnings from continuing operations

 

$

93,472

 

 

$

106,971

 

 

 

 

 

 

 

 

 

 

 

 

Per Share Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP fully diluted earnings (loss) per share from continuing operations

 

$

0.18

 

 

$

0.14

 

 

Less: Allocations of net income (loss) from continuing operations to limited

 

 

 

 

 

 

 

 

 

partnership units, FPUs, and noncontrolling interest in subsidiaries, net of tax

 

 

(0.01

)

 

 

0.01

 

 

Total pre-tax adjustments (from above)

 

 

(0.02

)

 

 

0.06

 

 

Income tax adjustment to reflect adjusted earnings taxes

 

 

0.03

 

 

 

0.02

 

 

Post-tax adjusted earnings per share from continuing operations

 

$

0.18

 

 

$

0.22

 

 

Fully diluted weighted-average shares of common stock outstanding

 

 

516,066

 

 

 

478,935

 

 

Dividends declared per share of common stock

 

$

0.14

 

 

$

0.18

 

 

Dividends declared and paid per share of common stock

 

$

0.14

 

 

$

0.18

 

 

 

 

 

 

 

 

 

 

 

 

Please see footnotes to this table on the next page.

 

 

 

 

 

Page 16


(1) GAAP equity-based compensation charges in the first quarter of 2019 include $4.5 million of allocations of net income to limited partnership units and FPUs. Such charges represent certain BGC employees’ pro-rata portion of net income. In the first quarter of 2018, the comparable GAAP expense was $3.8 million. In the first quarters of 2019 and 2018, GAAP compensation charges included an additional $7.6 million and $35.6 million, respectively, in other charges relating to equity-based compensation.

(2) In the first quarters of 2019 and 2018, GAAP expenses included non-cash charges of $0.4 million and $1.3 million, respectively, related to the amortization of GFI employee forgivable loans granted prior to the closing of the January 11, 2016 back-end merger with GFI. GAAP expenses in the first quarter of 2019 also included acquisition-related compensation expenses of $0.3 million.

(3) Includes non-cash GAAP charges related to the amortization of intangibles with respect to acquisitions.

(4) Includes non-cash charges of amortized rents incurred by the Company during the build-out phase of the Company’s new UK based headquarters.

(5) Includes various other GAAP items.

(6) Includes non-cash gains of $20.4 million and $20.6 million, respectively, related to fair value adjustments of investments held by BGC in the first quarters of 2019 and 2018.

(7) For the first quarters of 2019 and 2018, includes non-cash gains of $0.8 million and $2.6 million, respectively, related to BGC's investments accounted for under the equity method. Also includes net losses of $1.8 million and $0.8 million for various other GAAP items for the first quarters of 2019 and 2018, respectively.

(8) Primarily represents Cantor's pro-rata portion of net income.

(9) BGC's GAAP provision for income taxes from 2016 forward is calculated based on annualized methodology. The Company's GAAP provision for income taxes was $29.9 million and $21.6 million for the first quarters of 2019 and 2018, respectively. The Company includes additional tax-deductible items when calculating the provision for taxes with respect to Adjusted Earnings using an annualized methodology, These include tax-deductions related to equity-based compensation with respect to limited partnership unit exchange, employee loan amortization, and certain net-operating loss carryforwards. The non-GAAP provision for income taxes was adjusted $(17.9) million and ($8.5) million for the first quarters of 2019 and 2018, respectively. As a result, the provision for income taxes with respect to Adjusted Earnings was $12.0 million and $13.1 million for the first quarters of 2019 and 2018, respectively. The calculation of taxes for Adjusted Earnings excluded the effect of the 2017 U.S. Tax Cuts and Jobs Act.

 

Note: Certain numbers may not add due to rounding.

 

 

 

 

 

 

 

 

Page 17


BGC PARTNERS, INC.

FULLY DILUTED WEIGHTED-AVERAGE SHARE COUNT

FOR GAAP AND ADJUSTED EARNINGS FROM CONTINUING OPERATIONS

(in thousands)

(unaudited)

 

 

 

Q1 2019

 

 

Q1 2018

 

 

 

 

 

 

 

 

 

 

 

 

Common stock outstanding

 

 

338,403

 

 

 

307,728

 

 

Limited partnership units

 

 

111,184

 

 

 

104,892

 

 

Cantor units

 

 

52,363

 

 

 

51,815

 

 

Founding partner units

 

 

12,525

 

 

 

12,511

 

 

RSUs

 

 

179

 

 

 

604

 

 

Other

 

 

1,412

 

 

 

1,385

 

 

Fully diluted weighted-average share count for GAAP and Adjusted Earnings continuing operations

 

 

516,066

 

 

 

478,935

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BGC PARTNERS, INC.

LIQUIDITY ANALYSIS FROM CONTINUING OPERATIONS

(in thousands)

(unaudited)

 

  

 

March 31, 2019

 

 

December 31, 2018

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

331,668

 

 

$

336,535

 

Repurchase agreements

 

 

(4,327

)

 

 

(986

)

Securities owned

 

 

60,146

 

 

 

58,408

 

Marketable securities (1)

 

 

4,921

 

 

 

16,924

 

Total liquidity

 

$

392,408

 

 

$

410,881

 

 

(1) As of March 31, 2019 and December 31, 2018, $25.1 million and $15.1 million, respectively, of Marketable securities on our balance sheet were lent out in Securities loaned transactions and therefore are not included as part of our Liquidity Analysis.

 

 

 

Page 18


BGC PARTNERS, INC.

RECONCILIATION OF GAAP INCOME (LOSS) FROM CONTINUING OPERATIONS TO ADJUSTED EBITDA FROM CONTINUING OPERATIONS

(in thousands)

(unaudited)

 

 

 

 

Q1 2019

 

 

Q1 2018

 

 

GAAP Net income (loss) from continuing operations available to common stockholders

 

$

61,868

 

 

$

43,998

 

 

Add back:

 

 

 

 

 

 

 

 

 

Provision (benefit) for income taxes

 

 

29,897

 

 

 

21,550

 

 

Net income (loss) from continuing operations attributable to noncontrolling interest in subsidiaries (1)

 

 

25,306

 

 

 

28,674

 

 

Interest expense

 

 

13,198

 

 

 

9,368

 

 

Fixed asset depreciation and intangible asset amortization

 

 

18,464

 

 

 

17,686

 

 

Impairment of long-lived assets

 

 

357

 

 

 

 

 

Equity-based compensation and allocations of net income to limited partnership units and FPUs (2)

 

 

12,141

 

 

 

39,390

 

 

(Gains) losses on equity method investments (3)

 

 

(783

)

 

 

(2,625

)

 

Adjusted EBITDA from continuing operations

 

$

160,448

 

 

$

158,041

 

 

 

 

 

 

 

 

 

 

 

 

(1) Primarily represents Cantor's pro-rata portion of net income.

(2) Represents BGC employees' pro-rata portion of net income and non-cash and non-dilutive charges relating to equity-based compensation.

(3) Non-cash gains related to BGC's investments accounted for under the equity method.

 

 

 

Page 19


B GC Partners, Inc. Quarterly and Annual Market Activity Report

The following table provides certain volume and transaction count information on BGC Partners’ fully electronic system for the periods indicated.

 

 

 

 

 

 

 

 

 

 

 

 

 

% Change

 

% Change

 

 

 

 

1Q18

 

4Q18

 

1Q19

 

 

Q1'19 vs. Q1'18

 

Q1'19 vs. Q4'18

 

 

Notional Volume (in $US billions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fully Electronic Rates

 

 

2,690

 

 

2,745

 

 

3,791

 

 

 

40.9

%

 

38.1

%

 

Fully Electronic FX

 

 

2,779

 

 

2,608

 

 

2,416

 

 

 

(13.1

%)

 

(7.4

%)

 

Fully Electronic Credit

 

 

597

 

 

383

 

 

493

 

 

 

(17.4

%)

 

28.8

%

 

Fully Electronic Equities & Other

 

 

1

 

 

3

 

 

3

 

 

 

135.1

%

 

32.7

%

 

Total Fully Electronic Volume

 

 

6,067

 

 

5,738

 

 

6,703

 

 

 

10.5

%

 

16.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

HYBRID/ELECTRONICALLY PROCESSED

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Hybrid/Electronically Processed Volume

 

 

74,365

 

 

89,435

 

 

68,826

 

 

 

(7.4

%)

 

(23.0

%)

 

Total Hybrid/Electronically Processed & Fully Electronic Volume

 

 

80,432

 

 

95,173

 

 

75,529

 

 

 

(6.1

%)

 

(20.6

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transaction Count

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fully Electronic Rates

 

 

119,575

 

 

219,247

 

 

249,216

 

 

 

108.4

%

 

13.7

%

 

Fully Electronic FX

 

 

2,519,770

 

 

2,627,112

 

 

2,484,115

 

 

 

(1.4

%)

 

(5.4

%)

 

Fully Electronic Credit

 

 

80,284

 

 

62,298

 

 

74,900

 

 

 

(6.7

%)

 

20.2

%

 

Fully Electronic Equities & Other

 

620

 

 

1,020

 

 

1,941

 

 

 

213.1

%

 

90.3

%

 

Total Fully Electronic Transactions

 

 

2,720,250

 

 

2,909,677

 

 

2,810,172

 

 

 

3.3

%

 

(3.4

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

HYBRID/ELECTRONICALLY PROCESSED

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Hybrid/Electronically Processed Transactions

 

 

1,306,912

 

 

1,190,929

 

 

1,265,463

 

 

 

(3.2

%)

 

6.3

%

 

Total Hybrid/Electronically Processed and Fully Electronic Transactions

 

 

4,027,162

 

 

4,100,606

 

 

4,075,635

 

 

 

1.2

%

 

(0.6

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trading Days

 

62

 

64

 

61

 

 

 

 

 

 

 

 

 

 

 

Note:  “Hybrid/Electronically Processed” is defined as transactions involving some element of electronic trading but executed by BGC's brokers, exclusive of voice-only transactions. “Fully Electronic” involves customer-to-customer trades, free from broker execution. Certain information may have been recast with current estimates to reflect changes in reporting methodology. Such revisions have no impact on the Company’s revenues or earnings.

 

 

 

 

 

Page 20