Discusses Operational Impact of COVID-19
Updates Outlook for First Quarter of 2020
Provides Additional Information with Respect to Its Cash
Position and Dividend Policy
NEW YORK, March 26, 2020 /PRNewswire/ -- BGC Partners,
Inc. (NASDAQ: BGCP) ("BGC Partners" or "BGC" or the "Company"), a
leading global brokerage and financial technology company, today
provided an update on its operations, financial results, and other
relevant financial information.
Management Comments
Howard W. Lutnick, Chairman and
Chief Executive Officer of BGC said: "In these unprecedented and
difficult times, all of us at BGC Partners wish to express sympathy
for all who have been experiencing the pain and stress of this
global health and financial crisis.
"I have never been more proud of our team, who have come
together and worked with extraordinary dedication from remote
locations, all while facing enormous uncertainty. Our employees
across the firm are focused on serving our clients throughout these
most difficult circumstances. It is because of our people that we
continue to operate effectively.
"Our clients are also operating under incredibly challenging
conditions. We are working closer than ever with our clients'
employees, traders, salespeople, technology professionals, and
operational staff in order to maintain their connectivity to our
platforms, and to help them access critical global market
liquidity. We will continue to adapt as conditions change."
Shaun D. Lynn, President of BGC,
added: "We are inspired by the selfless dedication of the health
care workers and first responders during this escalating public
health crisis. Their commitment to others, while compromising their
own safety, serves as an example for all of us to work together to
support one another. As we have in the past, everyone at BGC is
doing all that they can to meet the challenges that we all are
facing while continuing to serve our clients to the best of our
abilities.
"We want to thank our management and staff members who have
worked tirelessly over these past several weeks in order to
maintain BGC's operations. We also want to thank our clients around
the world for their support."
Updated Outlook
Due to the enormous effort on the part of its employees and
clients, BGC believes that it is likely to perform better than it
had expected when it provided its previous outlook. March has been
highly volatile, with significant volumes across numerous global
instruments. The Company's initial outlook was contained in BGC's
financial results press release issued on February 6, 2020, which can be found at
http://ir.bgcpartners.com. BGC expects to release its first quarter
financial results before market open on May
5, 2020. Details will be posted well before the call.
Cash Position and Drawdown
The Company believes that its balance sheet and liquidity remain
strong. Nonetheless, BGC has drawn down an aggregate of
$230 million from its revolving
credit facility since December 31,
2019, for a total of $300
million outstanding. The Company increased this borrowing in
order to preserve financial flexibility given current uncertainty
in the global markets resulting from the COVID-19 pandemic. BGC
notes that it has no meaningful debt maturities due until 2021. The
proceeds from the revolving credit facility may be used for general
corporate purposes.
Future Dividends
Given the ongoing macroeconomic uncertainty, after consultations
with its Board of Directors, BGC expects to reduce its quarterly
dividend to one cent per common
share. This will allow management to prioritize near-term financial
flexibility and bolster its financial position in these uncertain
times. The Board of Directors intends to review the Company's
quarterly cash dividend policy as developments warrant at a future
time. Additionally, BGC Holdings, L.P. also expects to reduce its
distributions of income from the operations of BGC's businesses to
its partners.
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". The definitions of these terms are
below.
Adjusted Earnings Defined
BGC uses non-GAAP financial measures, including "Adjusted
Earnings before noncontrolling interests and taxes" and "Post-tax
Adjusted Earnings to fully diluted shareholders", which are
supplemental measures of operating results used by management to
evaluate the financial performance of the Company and its
consolidated subsidiaries. BGC believes that Adjusted Earnings best
reflect the operating earnings generated by the Company on a
consolidated basis and are the earnings which management considers
when managing its business.
As compared with "Income (loss) from continuing operations
before income taxes" and "Net income (loss) from continuing
operations for fully diluted shares", both prepared in accordance
with GAAP, Adjusted Earnings calculations primarily exclude certain
non-cash items and other expenses that generally do not involve the
receipt or outlay of cash by the Company and/or which do not dilute
existing stockholders. In addition, Adjusted Earnings calculations
exclude certain gains and charges that management believes do not
best reflect the ordinary results of BGC. Adjusted Earnings is
calculated by taking the most comparable GAAP measures and
adjusting for certain items with respect to compensation expenses,
non-compensation expenses, and other income, as discussed
below.
Calculations of Compensation Adjustments for Adjusted
Earnings and Adjusted EBITDA
Treatment of Equity-Based Compensation Line Item for
Adjusted Earnings and Adjusted EBITDA
The Company's Adjusted Earnings and Adjusted EBITDA measures
exclude all GAAP charges included in the line item "Equity-based
compensation and allocations of net income to limited partnership
units and FPUs" (or "equity-based compensation" for purposes of
defining the Company's non-GAAP results) as recorded on the
Company's GAAP Consolidated Statements of Operations and GAAP
Consolidated Statements of Cash Flows. These GAAP equity-based
compensation charges reflect the following items:
- Charges 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 or redeemed
in connection with the grant of shares of common stock at ratios
designed to cover any withholding taxes expected to be paid. This
is an alternative to the common practice among public companies of
issuing the gross amount of shares to employees, subject to
cashless withholding of shares, to pay applicable withholding
taxes.
- GAAP equity-based compensation charges with respect to the
grant of an offsetting amount of common stock or partnership units
with capital accounts in connection with the redemption of
non-exchangeable units, including PSUs and LPUs.
- Charges related to 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 amounts of certain quarterly equity-based
compensation charges are based upon the Company's estimate of
such expected charges during the annual period, as described
further below under "Methodology for Calculating Adjusted Earnings
Taxes."
Virtually all of BGC's key executives and producers have equity
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.
Compensation charges are also adjusted for certain other cash
and non-cash items, including those related to the amortization of
GFI employee forgivable loans granted prior to the closing of the
January 11, 2016 back-end merger with
GFI.
Certain Other Compensation-Related Adjustments for
Adjusted Earnings
BGC also excludes various other GAAP items that management views
as not reflective of the Company's underlying performance in a
given period from its calculation of Adjusted Earnings. These may
include compensation-related items with respect to cost-saving
initiatives, such as severance charges incurred in connection with
headcount reductions as part of broad restructuring plans.
Calculation of Non-Compensation Adjustments for Adjusted
Earnings
Adjusted Earnings calculations may also exclude items such
as:
- Non-cash GAAP charges related to the amortization of
intangibles with respect to acquisitions;
- Acquisition related costs;
- Certain rent charges;
- Non-cash GAAP asset impairment charges; and
- Various other GAAP items that management views as not
reflective of the Company's underlying performance in a given
period, including non-compensation-related charges incurred as part
of broad restructuring plans. Such GAAP items may include charges
for exiting leases and/or other long-term contracts as part of
cost-saving initiatives, as well as non-cash impairment charges
related to assets, goodwill and/or intangibles created from
acquisitions.
Calculation of Adjustments for Other (income) losses for
Adjusted Earnings
Adjusted Earnings calculations also exclude certain other
non-cash, non-dilutive, and/or non-economic items, which may, in
some periods, include:
- Gains or losses on divestitures;
- Fair value adjustment of investments;
- Certain other GAAP items, including gains or losses related to
BGC's investments accounted for under the equity method; and
- Any unusual, one-time, non-ordinary, or non-recurring gains or
losses.
Methodology for Calculating Adjusted Earnings Taxes
Although Adjusted Earnings are calculated on a pre-tax basis,
BGC also reports post-tax Adjusted Earnings to fully diluted
shareholders. The Company defines post-tax Adjusted Earnings to
fully diluted shareholders as pre-tax Adjusted Earnings reduced by
the non-GAAP tax provision described below and net income (loss)
attributable to noncontrolling interest for Adjusted Earnings.
The Company calculates its tax provision for post-tax Adjusted
Earnings using an annual estimate similar to how it accounts for
its income tax provision under GAAP. To calculate the quarterly tax
provision under GAAP, BGC estimates its full fiscal year GAAP
income (loss) from continuing 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 in accordance with applicable tax laws,
increases in such charges have the effect of lowering the Company's
non-GAAP effective tax rate and thereby increasing its post-tax
Adjusted Earnings.
BGC incurs income tax expenses based on the location, legal
structure and jurisdictional taxing authorities of each of its
subsidiaries. Certain of the Company's entities are taxed as U.S.
partnerships and are subject to the Unincorporated Business Tax
("UBT") in New York City. Any U.S.
federal and state income tax liability or benefit related to the
partnership income or loss, with the exception of UBT, rests with
the unit holders rather than with the partnership entity. The
Company's consolidated financial statements include U.S. federal,
state and local income taxes on the Company's allocable share of
the U.S. results of operations. Outside of the U.S., BGC 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 Pre- and Post-Tax Adjusted Earnings per
Share
BGC's pre- and post-tax Adjusted Earnings per share calculations
assume either that:
- The fully diluted share count includes the shares related to
any dilutive instruments, but excludes the associated expense, net
of tax, when the impact would be dilutive; or
- The fully diluted share count excludes the shares related to
these instruments, but includes the associated expense, net of
tax.
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. For more
information on any share count adjustments, see the table titled
"Fully Diluted Weighted-Average Share Count under GAAP and for
Adjusted Earnings from Continuing Operations".
Management Rationale for Using Adjusted Earnings
BGC's calculation of Adjusted Earnings excludes the items
discussed above because they are either non-cash in nature, because
the anticipated benefits from the expenditures are not expected to
be fully realized until future periods, or because the Company
views results excluding these items as a better reflection of the
underlying performance of BGC's ongoing operations. Management uses
Adjusted Earnings in part to help it evaluate, among other things,
the overall performance of the Company's business, 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.
Dividends payable to common stockholders and distributions payable
to holders of limited partnership units are included within
"Dividends to stockholders" and "Earnings distributions to limited
partnership interests and noncontrolling interests," respectively,
in our unaudited, condensed, consolidated statements of cash
flows.
The term "Adjusted Earnings" should not be considered in
isolation or as an alternative to GAAP net income (loss). The
Company views Adjusted Earnings as a metric that is not indicative
of liquidity, or the cash available to fund its operations, but
rather as a performance measure. Pre- and post-tax Adjusted
Earnings, as well as related measures, are not intended to replace
the Company's presentation of its GAAP financial results. However,
management believes that these measures help provide investors with
a clearer understanding of BGC's financial performance and offer
useful information to both management and investors regarding
certain financial and business trends related to the Company's
financial condition and results of operations. Management believes
that the GAAP and Adjusted Earnings measures of financial
performance should be considered together.
For more information regarding Adjusted Earnings, see the
sections of this document and/or the Company's most recent
financial results press release titled "Reconciliation of GAAP
Income (Loss) from Continuing Operations before Income Taxes to
Adjusted Earnings from Continuing Operations and GAAP Fully Diluted
EPS from Continuing Operations to Post-Tax Adjusted EPS from
Continuing Operations", including the related footnotes, for
details about how BGC's non-GAAP results are reconciled to those
under GAAP.
Adjusted EBITDA Defined
BGC also provides an additional non-GAAP financial performance
measure, "Adjusted EBITDA", which it defines as GAAP "Net income
(loss) from continuing operations available to common
stockholders", adjusted to add back the following items:
- Provision (benefit) for income taxes;
- Net income (loss) from continuing operations attributable to
noncontrolling interest in subsidiaries;
- Interest expense;
- Fixed asset depreciation and intangible asset
amortization;
- Equity-based compensation and allocations of net income to
limited partnership units and FPUs;
- Impairment of long-lived assets;
- (Gains) losses on equity method investments; and
- Certain other non-cash GAAP items, such as non-cash charges of
amortized rents incurred by the Company for its new UK based
headquarters.
The Company's management believes that its Adjusted EBITDA
measure is useful in evaluating BGC's operating performance,
because the calculation of this measure generally eliminates the
effects of financing and income taxes and the accounting effects of
capital spending and acquisitions, which would include impairment
charges of goodwill and intangibles created from acquisitions. Such
items may vary for different companies for reasons unrelated to
overall operating performance. As a result, the Company's
management uses this measure to evaluate operating performance and
for other discretionary purposes. BGC believes that Adjusted EBITDA
is useful to investors to assist them in getting a more complete
picture of the Company's financial results and operations.
Since BGC's Adjusted EBITDA is not a recognized measurement
under GAAP, investors should use this measure in addition to GAAP
measures of net income when analyzing BGC's operating performance.
Because not all companies use identical EBITDA calculations, the
Company's presentation of Adjusted EBITDA may not be comparable to
similarly titled measures of other companies. Furthermore, Adjusted
EBITDA is not intended to be a measure of free cash flow or GAAP
cash flow from operations because the Company's Adjusted EBITDA
does not consider certain cash requirements, such as tax and debt
service payments.
For more information regarding Adjusted EBITDA, see the section
of this document and/or the Company's most recent financial results
press release titled "Reconciliation of GAAP Net Income (Loss) from
Continuing Operations Available to Common Stockholders to Adjusted
EBITDA from Continuing Operations", including the footnotes to the
same, for details about how BGC's non-GAAP results are reconciled
to those under GAAP.
Timing of Outlook for Certain GAAP and Non-GAAP Items
BGC anticipates providing forward-looking guidance for GAAP
revenues and for certain non-GAAP measures from time to time.
However, the Company does not anticipate providing an outlook for
other GAAP results. This is because certain GAAP items, which are
excluded from Adjusted Earnings and/or Adjusted EBITDA, are
difficult to forecast with precision before the end of each period.
The Company therefore believes that it is not possible for it to
have the required information necessary to forecast GAAP results or
to quantitatively reconcile GAAP forecasts to non-GAAP forecasts
with sufficient precision without unreasonable efforts. For the
same reasons, the Company is unable to address the probable
significance of the unavailable information. The relevant items
that are difficult to predict on a quarterly and/or annual basis
with precision and may materially impact the Company's GAAP results
include, but are not limited, to the following:
- Certain equity-based compensation charges that may be
determined at the discretion of management throughout and up to the
period-end;
- Unusual, 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, reverse repurchase agreements (if any),
securities owned, and marketable securities, less securities lent
out in securities loaned transactions and repurchase agreements (if
any). The Company considers liquidity to be an important metric for
determining the amount of cash that is available or that could be
readily available to the Company on short notice.
For more information regarding Liquidity, see the section of
this document and/or the Company's most recent financial results
press release titled "Liquidity Analysis from Continuing
Operations", including any footnotes to the same, for details about
how BGC's non-GAAP results are reconciled to those under GAAP.
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 of the Board
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
Information set forth in these filings and any updates to such risk
factors and Special Note on Forward-Looking Information contained
in subsequent reports on Form 10-K, Form 10-Q or Form 8-K.
Media Contact:
Karen
Laureano-Rikardsen
+1 212-829-4975
Investor Contact:
Ujjal Basu
Roy or Jason McGruder
+1 212-610-2426
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