0001564590-18-029398 10-Q 136 20180930 20181114 20181113 NEWMARK GROUP, INC. 0001690680 6531 814467492 DE 1231 10-Q 34 001-38329 181180098 499 PARK AVENUE NEW YORK NY 10022 2128294775 499 PARK AVENUE NEW YORK NY 10022 NRE DELAWARE, INC. 20161122 10-Q 1 nmrk-10q_20180930.htm 10-Q nmrk-10q_20180930.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

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

 

Name of Each Exchange on Which Registered

Class A Common Stock, $0.01 par value

 

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

Non-accelerated filer

 

Smaller reporting company

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.

 

 

 

 

 


 

NEWMARK GROUP, INC.

TABLE OF CONTENTS

 

 

 

 

Page

 

 

 

 

PART I – FINANCIAL INFORMATION

 

 

 

 

 

 

ITEM 1.

FINANCIAL STATEMENTS (unaudited)

 

6

Condensed consolidated Balance Sheets

 

6

Condensed consolidated Statements of Operations

 

7

Condensed consolidated Statements of Comprehensive Income

 

8

Condensed consolidated Statements of Changes in Equity

 

9

Condensed consolidated Statements of Cash Flows

 

10

Notes to condensed consolidated Financial Statements

 

11

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

51

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

89

ITEM 4.

CONTROLS AND PROCEDURES

 

90

 

 

 

 

PART II – OTHER INFORMATION

 

 

 

 

 

 

ITEM 1.

LEGAL PROCEEDINGS

 

91

ITEM 1A.

RISK FACTORS

 

91

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

93

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

 

93

ITEM 4.

MINE SAFETY DISCLOSURES

 

93

ITEM 5.

OTHER INFORMATION

 

93

ITEM 6.

EXHIBITS

 

93

SIGNATURES

 

95

 

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:

 

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;

 

the timing of the spin-off (defined below) and whether the spin-off will occur at all;

 

limitations on Newmark’s ability to enter into certain transactions in order to preserve the tax-free treatment of the spin-off;

 

our ability to maintain or develop relationships with independently owned offices in our Real Estate Service business;

 

our ability to grow in other geographic regions, including the Berkeley Point Acquisition (defined below) and the separation from BGC;

 

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;

 

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;

 

pricing, commissions and fees, and market position with respect to any of our products and services and those of our competitors;

 

the effect of industry concentration and reorganization, reduction of customers and consolidation;

 

liquidity, regulatory, and clearing capital requirements and the impact of credit market events;

 

risks associated with the integration of acquired businesses with our other businesses;

 

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;

 

risks related to changes in the future of the GSEs, including changes in the terms of applicable conservatorships and changes in their origination capabilities;

 

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 ;

 

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;

 

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


 

 

extensive regulation of our businesses and clients, 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 financial 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 businesses, products, or services, as well as risks related to our taking actions to ensure that we and Newmark Holdings are not deemed investment companies under the Investment Company Act of 1940 (the “Investment Company Act”);

 

factors related to specific transactions or series of transactions as well as counterparty failure;

 

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;

 

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;

 

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;

 

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;

 

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;

 

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;

 

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;

 

our ability to hire and retain personnel, including brokers, salespeople, managers, and other professionals;

 

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;

 

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;

 

the effectiveness of our risk management policies and procedures, and the impact of unexpected market moves and similar events;

 

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;

 

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;

 

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


 

 

significant dilution if the price they paid for their shares is higher than the price paid by other purchasers in such offerings or transactions;

 

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

 

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


 

PART I-FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

NEWMARK GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(unaudited)

 

 

 

September 30, 2018

 

 

December 31, 2017

 

Assets:

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

70,607

 

 

$

121,027

 

Restricted cash

 

 

260,592

 

 

 

 

Cash segregated under regulatory requirements

 

 

55,859

 

 

 

52,347

 

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

 

Liabilities, Redeemable Partnership Interest, and Equity:

 

 

 

 

 

 

 

 

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)

 

 

 

 

 

 

 

 

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

 

Retained earnings

 

 

277,349

 

 

 

199,492

 

Total stockholders’ equity

 

 

334,624

 

 

 

260,410

 

Noncontrolling interests

 

 

653,676

 

 

 

(38,092

)

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 CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(unaudited)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 CONSOLIDATED 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 CONSOLIDATED 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

 

 

 

23,762

 

Net cash provided by (used in) operating activities

 

 

(636,360

)

 

 

510,968

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Payments for acquisitions, net of cash acquired and repurchases of noncontrolling interests

 

 

(32,533

)

 

 

2,792

 

Payments to related parties

 

 

 

 

 

(375,000

)

Borrowings from related parties

 

 

 

 

 

375,000

 

Proceeds from the sale of marketable securities

 

 

51,433

 

 

 

 

Investment in cost method investments

 

 

(22,500

)

 

 

 

Purchases of fixed assets

 

 

(10,786

)

 

 

(13,333

)

Purchase of mortgage servicing rights

 

 

(2,124

)

 

 

(577

)

Net cash provided by (used in) investing activities

 

 

(16,510

)

 

 

(11,118

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from warehouse notes payable

 

 

5,937,964

 

 

 

7,314,794

 

Principal payments on warehouse notes payable

 

 

(5,166,612

)

 

 

(6,913,030

)

Proceeds from BGC's purchase of exchangeable limited partnership units in Newmark Holdings

 

 

241,960

 

 

 

 

Proceeds from issuance of exchangeable preferred partnership units

 

 

265,569

 

 

 

 

Payments to related parties

 

 

(130,500

)

 

 

(1,327,295

)

Borrowings from related parties

 

 

368,495

 

 

 

577,812

 

Pre-acquisition distributions relating to the BPF acquisition

 

 

 

 

 

(66,782

)

Repayment of long-term debt

 

 

(536,760

)

 

 

 

Securities loaned

 

 

(49,043

)

 

 

 

Earnings distributions

 

 

(23,139

)

 

 

(71

)

Dividends to common stockholders

 

 

(27,858

)

 

 

 

Payments for IPO offering costs

 

 

(8,870

)