UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2018
OR
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☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Numbers: 001-38329
NEWMARK GROUP, INC.
(Exact name of Registrant as specified in its charter)
|
Delaware |
6531 |
81-4467492 |
|
(State or other Jurisdiction of Incorporation or Organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification Number) |
125 Park Avenue
New York, New York 10017
(212) 372-2000
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
|
Title of Each Class |
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Name of Each Exchange on Which Registered |
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Class A Common Stock, $0.01 par value |
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The NASDAQ Stock Market LLC |
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-Q or any amendment to this Form 10-Q. ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|
Large accelerated filer |
☐ |
|
Accelerated filer |
☐ |
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Non-accelerated filer |
☒ |
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Smaller reporting company |
☐ |
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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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
On November 12, 2018, the registrant had 138,941,979 shares of Class A common stock, $0.01 par value, and 15,840,049 shares of Class B common stock, $0.01 par value outstanding.
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PART I – FINANCIAL INFORMATION |
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ITEM 1. |
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ITEM 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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51 |
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ITEM 3. |
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89 |
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ITEM 4. |
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90 |
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PART II – OTHER INFORMATION |
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ITEM 1. |
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91 |
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ITEM 1A. |
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91 |
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ITEM 2. |
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93 |
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ITEM 3. |
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93 |
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ITEM 4. |
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93 |
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ITEM 5. |
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93 |
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ITEM 6. |
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93 |
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95 |
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1
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this “Form 10-Q”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, which we refer to as the “Securities Act,” and Section 21E of the Securities Exchange Act of 1934, as amended, which we refer to as the “Exchange Act.” Such statements are based upon current expectations that involve risks and uncertainties. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. For example, words such as “may,” “will,” “should,” “estimates,” “predicts,” “possible,” “potential,” “continue,” “strategy,” “believes,” “anticipates,” “plans,” “expects,” “intends,” and similar expressions are intended to identify forward-looking statements.
Our actual results and the outcome and timing of certain events may differ significantly from the expectations discussed in the forward-looking statements. Factors that might cause or contribute to such a discrepancy include, but are not limited to, the factors set forth below:
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• |
our relationship with Cantor, BGC Partners and their respective affiliates and any related conflicts of interest, or litigation, competition for and retention of brokers and other managers and key employees; |
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• |
the timing of the spin-off (defined below) and whether the spin-off will occur at all; |
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• |
limitations on Newmark’s ability to enter into certain transactions in order to preserve the tax-free treatment of the spin-off; |
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• |
our ability to maintain or develop relationships with independently owned offices in our Real Estate Service business; |
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• |
our ability to grow in other geographic regions, including the Berkeley Point Acquisition (defined below) and the separation from BGC; |
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• |
our proposed spin-off from BGC, and the anticipated future affects of such transactions, or growth, and the future impact of any such transactions, relationships or growth on our business and on our financial results on current or future periods, including with respect to any assumed liabilities or indemnification obligations with respect to such transactions, the integration of any completed acquisitions and the use of proceeds of any completed dispositions; |
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• |
market conditions, including trading volume and volatility, potential deterioration of equity and debt capital markets for commercial real estate and related services, and our ability to access the capital markets; |
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• |
pricing, commissions and fees, and market position with respect to any of our products and services and those of our competitors; |
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• |
the effect of industry concentration and reorganization, reduction of customers and consolidation; |
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• |
liquidity, regulatory, and clearing capital requirements and the impact of credit market events; |
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• |
risks associated with the integration of acquired businesses with our other businesses; |
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• |
risks related to changes in our relationships with the Government Sponsored Enterprises (“GSEs”) and Housing and Urban Development (“HUD”), changes in prevailing interest rates and the risk of loss in connection with loan defaults; |
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• |
risks related to changes in the future of the GSEs, including changes in the terms of applicable conservatorships and changes in their origination capabilities; |
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• |
economic or geopolitical conditions or uncertainties, the actions of governments or central banks, including uncertainty regarding the nature, timing and consequences of the U.K. exit from the European Union following the referendum and related rulings, including potential reduction in investment in the U.K., and the pursuit of trade or other related policies by the U.S. and/or other countries and the impact of terrorist acts, acts of war or other violence or political unrest, as well as natural disasters or weather-related or similar events, including recent hurricanes as well as power failures, communication and transportation disruptions, and other interruptions of utilities or other essential services ; |
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• |
the effect on our business, our clients, the markets in which we operate, and the economy in general of recent changes in the U.S. and foreign tax and other laws, potential policy and regulatory changes from the government in Mexico, possible shutdowns of the U.S. government, sequestrations, uncertainties regarding the debt ceiling and the federal budget, and other potential political policies and impasses; |
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• |
the effect on our businesses of worldwide governmental debt issuances, austerity programs, increases or decreases in deficits, and other changes to monetary policy, and potential political impasses or regulatory requirements, including increased capital requirements for banks and other institutions or changes in legislation, regulations and priorities; |
2
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• |
extensive regulation of our businesses and clien ts , changes in regulation relating to commercial real estate and other industries, and risks relating to compliance matters, including regulatory examinations, inspections, investigations and enforcement actions, and any resulting costs, increased financia l and capital requirements, enhanced oversight, fines, penalties, sanctions, and changes to our restrictions or limitations on specific activities, operations, compensatory arrangements, and growth opportunities, including acquisitions, hiring, and new bus inesses, products, or services, as well as risks related to our taking action s to ensure that we and Newmark Holdings are not deemed investment companies under the Investment Company Act of 1940 (the “Investment Company Act”); |
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• |
factors related to specific transactions or series of transactions as well as counterparty failure; |
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• |
costs and expenses of developing, maintaining and protecting our intellectual property, as well as employment and other litigation and their related costs, including related to acquisitions and other matters, including judgments or settlements paid or received and the impact thereof on our financial results and cash flow in any given period; |
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• |
our ability to obtain additional financing, including to refinance our indebtedness, and the risks of the resulting leverage, as well as interest and currency rate fluctuations; |
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• |
certain other financial risks, including the possibility of future losses, indemnification obligations, assumed liabilities, reduced cash flow from operations, increased leverage and the need for short- or long-term borrowings, including from Cantor, or other sources of cash relating to acquisitions, dispositions, or other matters, potential liquidity and other risks relating to our ability to obtain additional financing or refinancing of existing debt on terms acceptable to us, if at all, and risks of the resulting leverage, including potentially causing a reduction in our credit ratings and the associated outlooks and increased borrowing costs, including as a result of the Berkeley Point Acquisition (defined below), as well as interest rate and foreign currency exchange rate fluctuations; |
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• |
risks associated with the temporary or longer-term investment of our available cash, including defaults or impairments on our investments, stock loans or cash management vehicles and collectability of loan balances owed to us by partners, employees, or others; |
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• |
our ability to enter new markets or develop new products or services and to induce customers to use these products or services and to secure and maintain market share; |
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• |
our ability to enter into marketing and strategic alliances and business combinations or other transactions, including acquisitions, dispositions, reorganizations, partnering opportunities and joint ventures, and the integration of any completed transactions; |
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• |
our estimates or determinations of potential value with respect to various assets or portions of our business, including with respect to the accuracy of the assumptions or the valuation models or multiples used; |
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• |
our ability to hire and retain personnel, including brokers, salespeople, managers, and other professionals; |
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• |
our ability to effectively manage any growth that may be achieved, while ensuring compliance with all applicable financial reporting, internal control, legal compliance, and regulatory requirements; |
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• |
our ability to identify and remediate any material weaknesses in our internal controls that could affect our ability to prepare financial statements and reports in a timely manner, control our policies, practices and procedures, operations and assets, assess and manage our operational, regulatory and financial risks, and integrate our acquired businesses and brokers, salespeople, managers and other professionals; |
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• |
the effectiveness of our risk management policies and procedures, and the impact of unexpected market moves and similar events; |
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• |
information technology risks, including capacity constraints, failures, or disruptions in our systems or those of clients, counterparties, or other parties with which we interact, including cybersecurity risks and incidents, compliance with regulations requiring data minimization and protection and preservation of records of access and transfers of data, privacy risk and exposure to potential liability and regulatory focus; |
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• |
our ability to meet expectations with respect to payment of dividends and repurchases of our common stock or purchases of Newmark Holdings limited partnership interests or other equity interests in our subsidiaries, including from BGC Partners, Cantor or our executive officers, other employees, partners and others and the effect on the market for and trading price of our Class A common stock as a result of any such transactions; |
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• |
the fact that the prices at which shares of our Class A common stock are sold in offerings or other transactions may vary significantly, and purchasers of shares in such offerings or other transactions, as well as existing stockholders, may suffer |
3
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significant dilution if the pric e they paid for their shares is higher than the price paid by other purchasers in such offerings or transactions; |
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• |
the effect on the market for and trading price of our Class A common stock and of various offerings and other transactions, including offerings of our Class A common stock and convertible or exchangeable securities, the Separation (defined below), our IPO and the proposed spin-off, our repurchases of shares of our Class A common stock and purchases of Newmark Holdings limited partnership interests or other equity interests in us or in our subsidiaries, any exchanges by Cantor of shares of our Class A common stock for shares of our Class B common stock, any exchanges or redemptions of limited partnership units and issuances of shares of Class A common stock in connection therewith, including in partnership restructurings, our payment of dividends on our Class A common stock and distributions on Newmark Holdings limited partnership interests, convertible arbitrage, hedging, and other transactions engaged in by holders of our outstanding securities, share sales and stock pledge, stock loan, and other financing transactions by holders of our shares or units (including by BGC Partners, Cantor, executive officers, partners, employees or others), including of shares acquired pursuant to our employee benefit plans, unit exchanges and redemptions, partnership restructurings, acquisitions, conversions of our Class B common stock and our other convertible securities, stock pledge, stock loan, or other financing transactions; and |
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• |
other factors, including those that are discussed under “Risk Factors,” to the extent applicable. |
The foregoing risks and uncertainties, as well as those risks and uncertainties set forth in this Quarterly Report on Form 10-Q, may cause actual results and events to differ materially from the forward-looking statements. The information included herein is given as of the filing date of this Form 10-Q with the Securities and Exchange Commission (the “SEC”), and future results or events could differ significantly from these forward-looking statements. We do not undertake to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
4
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other information with the SEC. These filings are available to the public from the SEC’s website at www.sec.gov.
Our website address is www.ngkf.com. Through our website, we make available, free of charge, the following documents as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC: our Annual Reports on Form 10-Q; our proxy statements for our annual and special stockholder meetings; our Quarterly Reports on Form 10-Q; our Current Reports on Form 8-K; Forms 3, 4 and 5 and Schedules 13D filed on behalf of Cantor Fitzgerald, L.P., CF Group Management, Inc., BGC Partners, Inc., our directors and our executive officers; and amendments to those documents. Our website also contains additional information with respect to our industry and business. The information contained on, or that may be accessed through, our website is not part of, and is not incorporated into, this Quarterly Report on Form 10-Q.
5
NEWMARK GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(unaudited)
|
|
|
September 30, 2018 |
|
|
December 31, 2017 |
|
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Assets: |
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|
|
|
|
|
|
|
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Current assets: |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
70,607 |
|
|
$ |
121,027 |
|
|
Restricted cash |
|
|
260,592 |
|
|
|
— |
|
|
Cash segregated under regulatory requirements |
|
|
55,859 |
|
|
|
52,347 |
|
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Marketable securities |
|
|
93,715 |
|
|
|
57,623 |
|
|
Loans held for sale, at fair value |
|
|
1,132,665 |
|
|
|
362,635 |
|
|
Receivables, net |
|
|
390,165 |
|
|
|
210,471 |
|
|
Other current assets (see note 17) |
|
|
53,860 |
|
|
|
20,994 |
|
|
Total current assets |
|
|
2,057,463 |
|
|
|
825,097 |
|
|
Goodwill |
|
|
513,527 |
|
|
|
477,532 |
|
|
Mortgage servicing rights, net |
|
|
405,241 |
|
|
|
392,626 |
|
|
Loans, forgivable loans and other receivables from employees and partners, net |
|
|
275,156 |
|
|
|
209,549 |
|
|
Fixed assets, net |
|
|
72,158 |
|
|
|
64,822 |
|
|
Other intangible assets, net |
|
|
29,354 |
|
|
|
24,921 |
|
|
Other assets (see note 17) |
|
|
368,195 |
|
|
|
278,460 |
|
|
Total assets |
|
$ |
3,721,094 |
|
|
$ |
2,273,007 |
|
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Liabilities, Redeemable Partnership Interest, and Equity: |
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|
|
|
|
|
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|
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Current liabilities: |
|
|
|
|
|
|
|
|
|
Warehouse notes payable |
|
$ |
1,131,792 |
|
|
$ |
360,440 |
|
|
Accrued compensation |
|
|
314,350 |
|
|
|
205,395 |
|
|
Current portion of accounts payable, accrued expenses and other liabilities (see note 27) |
|
|
248,365 |
|
|
|
124,961 |
|
|
Securities loaned |
|
|
8,580 |
|
|
|
57,623 |
|
|
Current portion of payables to related parties |
|
|
397,993 |
|
|
|
34,169 |
|
|
Total current liabilities |
|
|
2,101,080 |
|
|
|
782,588 |
|
|
Long-term debt |
|
|
133,950 |
|
|
|
670,710 |
|
|
Long-term debt payable to related parties |
|
|
300,000 |
|
|
|
412,500 |
|
|
Other long-term liabilities (see note 27) |
|
|
173,633 |
|
|
|
163,795 |
|
|
Total liabilities |
|
|
2,708,663 |
|
|
|
2,029,593 |
|
|
Commitments and contingencies (see note 29) |
|
|
|
|
|
|
|
|
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Redeemable partnership interests |
|
|
24,131 |
|
|
|
21,096 |
|
|
Equity: |
|
|
|
|
|
|
|
|
|
Class A common stock, par value of $0.01 per share: 1,000,000 shares authorized; 138,939 and 138,594 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively |
|
|
1,389 |
|
|
|
1,386 |
|
|
Class B common stock, par value of $0.01 per share: 500,000 shares authorized; 15,840 shares issued and outstanding at September 30, 2018 and December 31, 2017 |
|
|
158 |
|
|
|
158 |
|
|
Additional paid-in capital |
|
|
55,728 |
|
|
|
59,374 |
|
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Retained earnings |
|
|
277,349 |
|
|
|
199,492 |
|
|
Total stockholders’ equity |
|
|
334,624 |
|
|
|
260,410 |
|
|
Noncontrolling interests |
|
|
653,676 |
|
|
|
(38,092 |
) |
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Total equity |
|
|
988,300 |
|
|
|
222,318 |
|
|
Total liabilities, redeemable partnership interest, and equity |
|
$ |
3,721,094 |
|
|
$ |
2,273,007 |
|
The accompanying notes to the unaudited condensed consolidated financial statements are an integral part of these financial statements.
6
NEWMARK GROUP, INC.
(Prior to December 13, 2017 the Combined entities of Newmark Knight Frank)
CONDENSED CONSOLIDAT ED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(unaudited)
|
|
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Three Months Ended September 30, |
|
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Nine Months Ended September 30, |
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2018 |
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2017 |
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2018 |
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2017 |
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Revenues: |
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|
|
|
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|
|
|
|
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|
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Commissions |
|
$ |
319,340 |
|
|
$ |
256,918 |
|
|
$ |
859,908 |
|
|
$ |
701,724 |
|
|
Gains from mortgage banking activities/originations, net |
|
|
51,972 |
|
|
|
45,455 |
|
|
|
132,763 |
|
|
|
164,263 |
|
|
Management services, servicing fees and other |
|
|
147,497 |
|
|
|
95,848 |
|
|
|
423,217 |
|
|
|
269,887 |
|
|
Total revenues |
|
|
518,809 |
|
|
|
398,221 |
|
|
|
1,415,888 |
|
|
|
1,135,874 |
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and employee benefits |
|
|
291,096 |
|
|
|
270,943 |
|
|
|
812,771 |
|
|
|
724,606 |
|
|
Allocations of net income and grant of exchangeability to limited partnership units |
|
|
41,062 |
|
|
|
18,217 |
|
|
|
131,897 |
|
|
|
52,717 |
|
|
Total compensation and employee benefits |
|
|
332,158 |
|
|
|
289,160 |
|
|
|
944,668 |
|
|
|
777,323 |
|
|
Operating, administrative and other |
|
|
84,914 |
|
|
|
52,313 |
|
|
|
240,389 |
|
|
|
159,099 |
|
|
Fees to related parties |
|
|
6,644 |
|
|
|
5,355 |
|
|
|
19,839 |
|
|
|
14,240 |
|
|
Depreciation and amortization |
|
|
25,873 |
|
|
|
29,922 |
|
|
|
68,587 |
|
|
|
71,377 |
|
|
Total operating expenses |
|
|
449,589 |
|
|
|
376,750 |
|
|
|
1,273,483 |
|
|
|
1,022,039 |
|
|
Other income (losses), net: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (loss) |
|
|
93,717 |
|
|
|
77,264 |
|
|
|
99,059 |
|
|
|
75,956 |
|
|
Total other income (losses), net |
|
|
93,717 |
|
|
|
77,264 |
|
|
|
99,059 |
|
|
|
75,956 |
|
|
Income from operations |
|
|
162,937 |
|
|
|
98,735 |
|
|
|
241,464 |
|
|
|
189,791 |
|
|
Interest (expense) income, net |
|
|
(11,509 |
) |
|
|
1,724 |
|
|
|
(35,500 |
) |
|
|
4,239 |
|
|
Income before income taxes and noncontrolling interests |
|
|
151,428 |
|
|
|
100,459 |
|
|
|
205,964 |
|
|
|
194,030 |
|
|
Provision for income taxes |
|
|
35,870 |
|
|
|
1,989 |
|
|
|
53,625 |
|
|
|
3,396 |
|
|
Consolidated net income |
|
|
115,558 |
|
|
|
98,470 |
|
|
|
152,339 |
|
|
|
190,634 |
|
|
Less: Net income (loss) attributable to noncontrolling interests |
|
|
47,321 |
|
|
|
(337 |
) |
|
|
63,366 |
|
|
|
(29 |
) |
|
Net income available to common stockholders |
|
$ |
68,237 |
|
|
$ |
98,807 |
|
|
$ |
88,973 |
|
|
$ |
190,663 |
|
|
Per share data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders (1) |
|
$ |
66,563 |
|
|
$ |
98,807 |
|
|
$ |
87,107 |
|
|
$ |
190,663 |
|
|
Basic earnings per share |
|
$ |
0.43 |
|
|
N/A |
|
|
$ |
0.56 |
|
|
N/A |
|
||
|
Basic weighted-average shares of common stock outstanding |
|
|
155,152 |
|
|
N/A |
|
|
|
155,348 |
|
|
N/A |
|
||
|
Fully diluted earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income for fully diluted shares |
|
$ |
80,038 |
|
|
N/A |
|
|
$ |
104,580 |
|
|
N/A |
|
||
|
Fully diluted earnings per share |
|
$ |
0.43 |
|
|
N/A |
|
|
$ |
0.56 |
|
|
N/A |
|
||
|
Fully diluted weighted-average shares of common stock outstanding |
|
|
185,134 |
|
|
N/A |
|
|
|
185,559 |
|
|
N/A |
|
||
|
(1) |
In accordance with ASC 260, includes a reduction for dividends on preferred stock or units in the amount of $1.7 and $1.9 million, for the three and nine months ended September 30, 2018, respectively. |
The accompanying notes to the unaudited condensed consolidated financial statements are an integral part of these financial statements.
7
NEWMARK GROUP, INC.
(Prior to December 13, 2017 the Combined entities of Newmark Knight Frank)
CONDENSED CONSOLIDAT ED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(unaudited)
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
||||
|
Consolidated net income |
|
$ |
115,558 |
|
|
$ |
98,470 |
|
|
$ |
152,339 |
|
|
$ |
190,634 |
|
|
Comprehensive income, net of tax |
|
|
115,558 |
|
|
|
98,470 |
|
|
|
152,339 |
|
|
|
190,634 |
|
|
Less: Comprehensive income attributable to noncontrolling interests, net of tax |
|
|
47,321 |
|
|
|
(337 |
) |
|
|
63,366 |
|
|
|
(29 |
) |
|
Comprehensive income available to common stockholders |
|
$ |
68,237 |
|
|
$ |
98,807 |
|
|
$ |
88,973 |
|
|
$ |
190,663 |
|
The accompanying notes to the unaudited condensed consolidated financial statements are an integral part of these financial statements.
8
NEWMARK GROUP, INC.
(Prior to December 13, 2017 the Combined entities of Newmark Knight Frank)
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In thousands, except per share amounts)
(unaudited)
|
|
|
Class A Common Stock |
|
|
Class B Common Stock |
|
|
Additional Paid-in Capital |
|
|
Retained Earnings |
|
|
BGC’s Net Investment in Newmark |
|
|
Noncontrolling Interests in Subsidiaries |
|
|
Total |
|
|||||||
|
Balance, January 1, 2017 |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
245,877 |
|
|
$ |
735,899 |
|
|
$ |
2,007 |
|
|
$ |
983,783 |
|
|
Consolidated net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
144,492 |
|
|
|
— |
|
|
|
604 |
|
|
|
145,096 |
|
|
Distributions |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(190,877 |
) |
|
|
— |
|
|
|
(71 |
) |
|
|
(190,948 |
) |
|
Purchase of noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,092 |
|
|
|
(1,092 |
) |
|
|
— |
|
|
Noncontrolling interests in an entity acquired |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
19,146 |
|
|
|
19,146 |
|
|
Debt assumed from BGC |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,387,500 |
) |
|
|
— |
|
|
|
(1,387,500 |
) |
|
Contributions |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
368,418 |
|
|
|
— |
|
|
|
368,418 |
|
|
Transfer of pre initial public offering (“IPO”) capital to redeemable partnership interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(21,096 |
) |
|
|
— |
|
|
|
(21,096 |
) |
|
Issuance of shares in the Separation (Class A common stock, 115,593,787 shares; Class B common stock, 15,840,049 shares) |
|
|
1,156 |
|
|
|
158 |
|
|
|
(245,815 |
) |
|
|
— |
|
|
|
303,187 |
|
|
|
(58,686 |
) |
|
|
— |
|
|
Proceeds from IPO, net of underwriting discounts and other expenses (Class A common stock, 23,000,000 shares) |
|
|
230 |
|
|
|
— |
|
|
|
295,189 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
295,419 |
|
|
Equity-based compensation (Class A common stock, 600,000 shares) |
|
|
— |
|
|
|
— |
|
|
|
10,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
10,000 |
|
|
Balance, December 31, 2017 |
|
$ |
1,386 |
|
|
$ |
158 |
|
|
$ |
59,374 |
|
|
$ |
199,492 |
|
|
$ |
— |
|
|
$ |
(38,092 |
) |
|
$ |
222,318 |
|
|
Consolidated net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
88,973 |
|
|
|
— |
|
|
|
63,366 |
|
|
|
152,339 |
|
|
Cumulative effect of revenue standard adoption |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
16,463 |
|
|
|
— |
|
|
|
2,342 |
|
|
|
18,805 |
|
|
Reduction of earnings distributions |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,144 |
|
|
|
— |
|
|
|
— |
|
|
|
2,144 |
|
|
Dividends to common stockholders |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(27,857 |
) |
|
|
— |
|
|
|
— |
|
|
|
(27,857 |
) |
|
Preferred dividend on exchangeable preferred partnership units |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,866 |
) |
|
|
— |
|
|
|
— |
|
|
|
(1,866 |
) |
|
Equity-based compensation and related issuance (Class A common stock, 327,746 shares) |
|
|
3 |
|
|
|
— |
|
|
|
(4,900 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(4,897 |
) |
|
Contingent Class A common stock to be issued to newly acquired entities |
|
|
— |
|
|
|
— |
|
|
|
3,136 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,136 |
|
|
Unvested restricted stock units |
|
|
— |
|
|
|
— |
|
|
|
539 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
539 |
|
|
BGC's purchase of 16,606,726 exchangeable limited partnership units in Newmark Holdings |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
241,960 |
|
|
|
241,960 |
|
|
Grant of exchangeability, redemption and issuance of limited partnership interests and other noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
93,943 |
|
|
|
93,943 |
|
|
Issuance of exchangeable preferred partnership units in Newmark OpCo |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
322,653 |
|
|
|
322,653 |
|
|
Earning distributions to limited partnership interests, redeemable partnership interests, and other noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(42,962 |
) |
|
|
(42,962 |
) |
|
Issuance of limited partnership units and contingent limited partnership units in connection with acquisitions |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
11,115 |
|
|
|
11,115 |
|
|
Other |
|
|
— |
|
|
|
— |
|
|
|
(2,421 |
) |
|
|
— |
|
|
|
— |
|
|
|
(649 |
) |
|
|
(3,070 |
) |
|
Balance, September 30, 2018 |
|
$ |
1,389 |
|
|
$ |
158 |
|
|
$ |
55,728 |
|
|
$ |
277,349 |
|
|
$ |
— |
|
|
$ |
653,676 |
|
|
$ |
988,300 |
|
|
|
|
For the Three Months Ended September 30, |
|
For the Nine Months Ended September 30, |
||||||||
|
|
|
2018 |
|
|
2017 |
|
2018 |
|
|
2017 |
||
|
Dividends declared per share of common stock |
|
$ |
0.09 |
|
|
N/A |
|
$ |
0.27 |
|
|
N/A |
|
Dividends declared and paid per share of common stock |
|
$ |
0.09 |
|
|
N/A |
|
$ |
0.18 |
|
|
N/A |
The accompanying Notes to the unaudited Condensed Consolidated Financial Statements are an integral part of these financial statements.
9
NEWMARK GROUP INC.
(Prior to December 13, 2017 the Combined entities of Newmark Knight Frank)
CONDENSED CONS OLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
|
|
|
Nine Months Ended September 30, |
|
|||||
|
|
|
2018 |
|
|
2017 |
|
||
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
Consolidated net income |
|
$ |
152,339 |
|
|
$ |
190,634 |
|
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
Gains on originated mortgage servicing rights |
|
|
(65,632 |
) |
|
|
(98,814 |
) |
|
Depreciation and amortization |
|
|
68,587 |
|
|
|
71,377 |
|
|
Nasdaq recognition |
|
|
(85,135 |
) |
|
|
(76,969 |
) |
|
Equity-based compensation and allocations of net income to limited partnership units |
|
|
124,176 |
|
|
|
— |
|
|
Employee loan amortization |
|
|
20,704 |
|
|
|
28,964 |
|
|
Deferred tax provision |
|
|
4,359 |
|
|
|
— |
|
|
Change in fair value of contingent consideration |
|
|
138 |
|
|
|
— |
|
|
Unrealized gains on loans held for sale |
|
|
(461 |
) |
|
|
(507 |
) |
|
Income from an equity method investment |
|
|
(5,000 |
) |
|
|
(945 |
) |
|
Amortization of deferred financing costs |
|
|
667 |
|
|
|
1,068 |
|
|
Provision for uncollectible accounts |
|
|
2,376 |
|
|
|
1,126 |
|
|
Realized gains on marketable securities |
|
|
(1,494 |
) |
|
|
— |
|
|
Unrealized gain on marketable securities |
|
|
(897 |
) |
|
|
— |
|
|
Valuation of derivative asset |
|
|
(6,327 |
) |
|
|
— |
|
|
Loan originations—loans held for sale |
|
|
(5,937,964 |
) |
|
|
(7,314,794 |
) |
|
Loan sales—loans held for sale |
|
|
5,168,394 |
|
|
|
7,726,804 |
|
|
Consolidated net income, adjusted for non-cash and non-operating items |
|
|
(561,170 |
) |
|
|
527,944 |
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
Receivables, net |
|
|
(67,253 |
) |
|
|
(35,709 |
) |
|
Loans, forgivable loans and other receivables from employees and partners |
|
|
(85,127 |
) |
|
|
(35,160 |
) |
|
Other assets |
|
|
(27,092 |
) |
|
|
11,380 |
|
|
Accrued compensation |
|
|
34,918 |
|
|
|
18,751 |
|
|
Accounts payable, accrued expenses and other liabilities |
|
|
69,364 |
|||||