bgcp-10q_20180930.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

Commission File Numbers: 0-28191

 

BGC Partners, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

13-4063515

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

499 Park Avenue, New York, NY

10022

(Address of principal executive offices)

(Zip Code)

(212) 610-2200

(Registrant’s telephone number, including area code)

 

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 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 the definitions 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 6, 2018, the registrant had 295,198,541 shares of Class A common stock, $0.01 par value, and 34,848,107 shares of Class B common stock, $0.01 par value, outstanding.

 

 

 


BGC PARTNERS, INC.

TABLE OF CONTENTS

 

 

 

Page

PART I—FINANCIAL INFORMATION

 

 

 

 

ITEM 1

Financial Statements (unaudited)

6

 

 

 

 

Condensed Consolidated Statements of Financial Condition—At September 30, 2018 and December 31, 2017

6

 

 

 

 

Condensed Consolidated Statements of Operations—For the Three and Nine Months Ended September 30, 2018 and September 30, 2017

7

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss)—For the Three and Nine Months Ended September 30, 2018 and September 30, 2017

8

 

 

 

 

Condensed Consolidated Statements of Cash Flows—For the Nine Months Ended September 30, 2018 and September 30, 2017

9

 

 

 

 

Condensed Consolidated Statements of Changes in Equity—For the Year Ended December 31, 2017

11

 

 

 

 

Condensed Consolidated Statements of Changes in Equity—For the Nine Months Ended September 30, 2018

12

 

 

 

 

Notes to Condensed Consolidated Financial Statements

13

 

 

 

ITEM 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

72

 

 

 

ITEM 3

Quantitative and Qualitative Disclosures About Market Risk

138

 

 

 

ITEM 4

Controls and Procedures

141

 

 

 

PART II—OTHER INFORMATION

 

 

 

 

ITEM 1

Legal Proceedings

142

 

 

 

ITEM 1A

Risk Factors

142

 

 

 

ITEM 2

Unregistered Sales of Equity Securities and Use of Proceeds

143

 

 

 

ITEM 3

Defaults Upon Senior Securities

143

 

 

 

ITEM 4

Mine Safety Disclosures

143

 

 

 

ITEM 5

Other Information

143

 

 

 

ITEM 6

Exhibits

144

 

 

 

SIGNATURES

145

 

 

 


SPECIAL NOTE ON FORWARD-LOOKING INFORMATION

This Quarterly Report on Form 10-Q (“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 and may impact either or both of our operating segments:

 

market conditions, including trading volume and volatility, potential deterioration of equity and debt capital markets and 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;

 

our relationships and transactions with Cantor Fitzgerald, L.P. and its affiliates, which we refer to as “Cantor,” including Cantor Fitzgerald & Co., which we refer to as “CF&Co,” and Cantor Commercial Real Estate Company, L.P., which we refer to as “CCRE,” as well as those with our publicly traded subsidiary, Newmark Group, Inc., which owns our Real Estate Services business and which we refer to as “Newmark,” any related conflicts of interest or litigation, any impact of Cantor’s results on our credit ratings and associated outlooks, any loans to or from us, Newmark or Cantor, the Berkeley Point Acquisition (defined below) from and our investment in Real Estate LP (defined below) with CCRE, CF&Co’s acting as our sales agent or underwriter under our controlled equity or other offerings, Cantor’s holdings of our debt securities, CF&Co’s acting as a market maker in our debt securities, CF&Co’s acting as our financial advisor in connection with potential business combinations, dispositions, or other transactions, our participation in various investments, stock loans or cash management vehicles placed by or recommended by CF&Co, and any services provided by or to or other arrangements with CCRE;

 

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

 

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 businesses, 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 new 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;

 

extensive regulation of our businesses and customers, changes in regulations relating to financial services companies, 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 or restrictions or limitations on specific activities, operations, compensatory arrangements, and growth opportunities, including acquisitions, hiring, and new businesses, products, or services;

 

factors related to specific transactions or series of transactions, including credit, performance, and principal risk, trade failures, counterparty failures, and the impact of fraud and unauthorized trading;

2


 

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 capacities;

 

costs and expenses of developing, maintaining, and protecting our intellectual property, as well as employment and other litigation and their related costs, including judgments or settlements paid or received and the impact thereof on our financial results and cash flows in any given period;

 

certain financial risks, including the possibility of future losses, reduced cash flows from operations, increased leverage and the need for short- or long-term borrowings, including from Cantor, the ability of us or Newmark to refinance our respective indebtedness, 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, trading desks, marketplaces, or services for existing or new customers and to induce such customers to use these products, trading desks, marketplaces, or services and to secure and maintain market share;

 

our ability to enter into marketing and strategic alliances and business combinations or other transactions in the financial services, real estate, and other industries, including acquisitions, tender offers, dispositions, reorganizations, partnering opportunities and joint ventures, and our ability to maintain or develop relationships with independently owned offices in our Real Estate Services business and our ability to grow in other geographic regions, including the Berkeley Point Acquisition and the Separation (defined below), the Newmark IPO (defined below) and our proposed spin-off of shares of Newmark owned by us, the anticipated benefits of any such transactions, relationships or growth and the future impact of any such transactions, relationships or growth on our other businesses and our financial results for current or future periods, the integration of any completed acquisitions and the use of proceeds of any completed dispositions, and the value of and any hedging entered into in connection with consideration received or to be received in connection with such dispositions and any transfers thereof;

 

the timing of the spin-off of the shares we own in Newmark to our stockholders and whether the distribution 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 estimates or determinations of potential value with respect to various assets or portions of our businesses, 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 expand the use of technology for hybrid and fully electronic trading in our product and service offerings;

 

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 the clients, counterparties, exchanges, clearing facilities, 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;

3


 

the fact that the prices at which shares of our Class A common stock are sold in one or more of our controlled equity offerings or in other offerings or other transactions or the price of shares in Newmark that we own may vary significantly, and purchasers of shares in such offerings or other transactions, as well as existing stockholders, may suffer significant dilution if the price they paid for their shares is higher than the price paid by other purchasers in such offerings or transactions;

 

our ability to meet expectations with respect to payments of dividends and distributions and repurchases of shares of our Class A common stock and purchases or redemptions of limited partnership interests of BGC Holdings, L.P., which we refer to as “BGC Holdings,” or other equity interests in us or any of our other subsidiaries, including Newmark and its subsidiaries, including from Cantor, our executive officers, other employees, partners, and others, and the net proceeds to be realized by us from offerings of our shares of Class A common stock; and

 

the effect on the market for and trading price of our Class A common stock and Newmark’s Class A common stock and of various offerings and other transactions, including our controlled equity and other offerings of our Class A common stock and convertible or exchangeable securities, the Separation, the Newmark IPO and the proposed spin-off of shares of Newmark owned by us, our repurchases of shares of our Class A common stock and purchases of BGC Holdings limited partnership interests or other equity interests in us or in our subsidiaries, including Newmark and its 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 BGC Holdings limited partnership interests, convertible arbitrage, hedging, and other transactions engaged in by holders of our outstanding debt or other securities, share sales and stock pledge, stock loan, and other financing transactions by holders of our shares (including by Cantor 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 distributions from Cantor pursuant to Cantor’s distribution rights obligations and other distributions to Cantor partners, including deferred distribution rights shares.

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. The Company does 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.bgcpartners.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-K; 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 with respect to our securities filed on behalf of Cantor, CF Group Management, Inc. (“CFGM”), our directors and our executive officers; and amendments to those documents. Our website also contains additional information with respect to our industry and businesses. 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

BGC PARTNERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(in thousands, except per share data)

(unaudited)

 

 

 

September 30, 2018

 

 

December 31, 2017

 

Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

364,399

 

 

$

634,333

 

Restricted cash

 

 

260,592

 

 

 

 

Cash segregated under regulatory requirements

 

 

150,427

 

 

 

162,457

 

Securities owned

 

 

75,911

 

 

 

33,007

 

Marketable securities

 

 

152,485

 

 

 

208,176

 

Loans held for sale, at fair value

 

 

1,132,665

 

 

 

362,635

 

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

 

 

2,770,378

 

 

 

745,402

 

Mortgage servicing rights, net

 

 

405,241

 

 

 

392,626

 

Accrued commissions and other receivables, net

 

 

885,597

 

 

 

620,039

 

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

 

 

466,919

 

 

 

335,734

 

Fixed assets, net

 

 

216,131

 

 

 

189,347

 

Investments

 

 

164,892

 

 

 

141,788

 

Goodwill

 

 

979,627

 

 

 

945,582

 

Other intangible assets, net

 

 

293,980

 

 

 

311,021

 

Receivables from related parties

 

 

6,864

 

 

 

3,739

 

Other assets

 

 

406,188

 

 

 

343,826

 

Total assets

 

$

8,732,296

 

 

$

5,429,712

 

Liabilities, Redeemable Partnership Interest, and Equity

 

 

 

 

 

 

 

 

Short-term borrowings

 

$

4,995

 

 

$

6,046

 

Short-term borrowings from related parties

 

 

80,000

 

 

 

 

Repurchase agreements

 

 

198

 

 

 

 

Securities loaned

 

 

66,318

 

 

 

202,343

 

Warehouse notes payable

 

 

1,131,792

 

 

 

360,440

 

Accrued compensation

 

 

545,004

 

 

 

432,733

 

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

 

 

2,505,198

 

 

 

607,580

 

Payables to related parties

 

 

67,816

 

 

 

40,988

 

Accounts payable, accrued and other liabilities

 

 

1,067,516

 

 

 

942,917

 

Notes payable and other borrowings

 

 

1,323,030

 

 

 

1,650,509

 

Total liabilities

 

 

6,791,867

 

 

 

4,243,556

 

Commitments, contingencies and guarantees (Note 23)

 

 

 

 

 

 

 

 

Redeemable partnership interest

 

 

50,270

 

 

 

46,415

 

Equity

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

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

   343,690 and 306,218 shares issued at September 30, 2018 and December 31,2017,

   respectively; and 293,512 and 256,968 shares outstanding at September 30, 2018 and

   December 31, 2017, respectively

 

 

3,438

 

 

 

3,063

 

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

   34,848 shares issued and outstanding at September 30, 2018 and December 31, 2017,

   convertible into Class A common stock

 

 

348

 

 

 

348

 

Additional paid-in capital

 

 

2,116,514

 

 

 

1,763,371

 

Contingent Class A common stock

 

 

35,734

 

 

 

40,472

 

Treasury stock, at cost: 50,178 and 49,250 shares of Class A common stock at September 30, 2018

   and December 31, 2017, respectively

 

 

(313,427

)

 

 

(303,873

)

Retained deficit

 

 

(798,717

)

 

 

(859,009

)

Accumulated other comprehensive income (loss)

 

 

(21,553

)

 

 

(10,486

)

Total stockholders’ equity

 

 

1,022,337

 

 

 

633,886

 

Noncontrolling interest in subsidiaries

 

 

867,822

 

 

 

505,855

 

Total equity

 

 

1,890,159

 

 

 

1,139,741

 

Total liabilities, redeemable partnership interest, and equity

 

$

8,732,296

 

 

$

5,429,712

 

 

The accompanying Notes to the unaudited Condensed Consolidated Financial Statements

are an integral part of these financial statements.

6


BGC PARTNERS, INC.

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

 

$

671,318

 

 

$

582,106

 

 

$

1,998,237

 

 

$

1,704,998

 

Principal transactions

 

 

73,360

 

 

 

75,766

 

 

 

250,266

 

 

 

241,869

 

Gains from mortgage banking activities/originations, net

 

 

51,972

 

 

 

45,455

 

 

 

132,764

 

 

 

164,263

 

Real estate management and other services

 

 

101,881

 

 

 

60,798

 

 

 

305,880

 

 

 

163,017

 

Servicing fees

 

 

34,948

 

 

 

29,057

 

 

 

96,207

 

 

 

80,729

 

Fees from related parties

 

 

7,128

 

 

 

7,173

 

 

 

19,989

 

 

 

20,129

 

Data, software and post-trade

 

 

16,547

 

 

 

13,776

 

 

 

47,016

 

 

 

40,185

 

Interest income

 

 

15,946

 

 

 

11,726

 

 

 

37,060

 

 

 

40,909

 

Other revenues

 

 

4,154

 

 

 

1,171

 

 

 

6,557

 

 

 

3,023

 

Total revenues

 

 

977,254

 

 

 

827,028

 

 

 

2,893,976

 

 

 

2,459,122

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and employee benefits

 

 

517,865

 

 

 

495,145

 

 

 

1,576,706

 

 

 

1,438,129

 

Allocations of net income and grant of exchangeability to

   limited partnership units and FPUs

 

 

67,919

 

 

 

48,446

 

 

 

239,696

 

 

 

161,876

 

Total compensation and employee benefits

 

 

585,784

 

 

 

543,591

 

 

 

1,816,402

 

 

 

1,600,005

 

Occupancy and equipment

 

 

58,193

 

 

 

51,962

 

 

 

165,405

 

 

 

153,102

 

Fees to related parties

 

 

9,743

 

 

 

4,380

 

 

 

27,394

 

 

 

16,389

 

Professional and consulting fees

 

 

33,491

 

 

 

24,486

 

 

 

86,490

 

 

 

69,047

 

Communications

 

 

31,693

 

 

 

33,290

 

 

 

100,686

 

 

 

97,816

 

Selling and promotion

 

 

30,850

 

 

 

26,828

 

 

 

93,599

 

 

 

81,503

 

Commissions and floor brokerage

 

 

15,382

 

 

 

10,410

 

 

 

45,100

 

 

 

31,316

 

Interest expense

 

 

33,472

 

 

 

24,425

 

 

 

88,051

 

 

 

69,678

 

Other expenses

 

 

69,706

 

 

 

55,600

 

 

 

204,604

 

 

 

148,262

 

Total expenses

 

 

868,314

 

 

 

774,972

 

 

 

2,627,731

 

 

 

2,267,118

 

Other income (losses) , net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain (loss) on divestiture and sale of investments

 

 

 

 

 

4

 

 

 

 

 

 

561

 

Gains (losses) on equity method investments

 

 

1,344

 

 

 

2,147

 

 

 

9,999

 

 

 

3,986

 

Other income (loss)

 

 

108,776

 

 

 

88,195

 

 

 

141,908

 

 

 

97,928

 

Total other income (losses), net

 

 

110,120

 

 

 

90,346

 

 

 

151,907

 

 

 

102,475

 

Income (loss) from operations before income taxes

 

 

219,060

 

 

 

142,402

 

 

 

418,152

 

 

 

294,479

 

Provision (benefit) for income taxes

 

 

56,756

 

 

 

31,854

 

 

 

108,427

 

 

 

55,084

 

Consolidated net income (loss)

 

$

162,304

 

 

$

110,548

 

 

$

309,725

 

 

$

239,395

 

Less: Net income (loss) attributable to noncontrolling

   interest in subsidiaries

 

 

42,018

 

 

 

29,019

 

 

 

95,462

 

 

 

68,121

 

Net income (loss) available to common stockholders

 

$

120,286

 

 

$

81,529

 

 

$

214,263

 

 

$

171,274

 

Per share data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) available to common stockholders (1)

 

$

118,864

 

 

$

81,529

 

 

$

212,677

 

 

$

171,274

 

Basic earnings (loss) per share

 

$

0.36

 

 

$

0.28

 

 

$

0.67

 

 

$

0.60

 

Basic weighted-average shares of common

   stock outstanding

 

 

327,932

 

 

 

288,308

 

 

 

319,027

 

 

 

286,200

 

Fully diluted earnings (loss) per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) for fully diluted shares

 

$

171,720

 

 

$

127,495

 

 

$

310,922

 

 

$

266,001

 

Fully diluted earnings (loss) per share

 

$

0.35

 

 

$

0.28

 

 

$

0.64

 

 

$

0.59

 

Fully diluted weighted-average shares of common stock

   outstanding

 

 

487,636

 

 

 

457,341

 

 

 

482,711

 

 

 

451,348

 

 

(1)

In accordance with ASC 260, includes a reduction for dividends on preferred stock or units.

 

The accompanying Notes to the unaudited Condensed Consolidated Financial Statements

are an integral part of these financial statements.

 

7


BGC PARTNERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Consolidated net income (loss)

 

$

162,304

 

 

$

110,548

 

 

$

309,725

 

 

$

239,395

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(1,809

)

 

 

5,134

 

 

 

(10,186

)

 

 

16,186

 

Available for sale securities

 

 

 

 

 

457

 

 

 

 

 

 

1,148

 

Total other comprehensive income (loss), net of tax

 

 

(1,809

)

 

 

5,591

 

 

 

(10,186

)

 

 

17,334

 

Comprehensive income (loss)

 

 

160,495

 

 

 

116,139

 

 

 

299,539

 

 

 

256,729

 

Less: Comprehensive income (loss) attributable to noncontrolling interest in

   subsidiaries, net of tax

 

 

42,389

 

 

 

29,845

 

 

 

94,051

 

 

 

70,492

 

Comprehensive income (loss) attributable to common stockholders

 

$

118,106

 

 

$

86,294

 

 

$

205,488

 

 

$

186,237

 

 

The accompanying Notes to the unaudited Condensed Consolidated Financial Statements

are an integral part of these financial statements.

 

 

8


BGC PARTNERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

 

Nine Months Ended September 30,

 

 

 

2018

 

 

2017

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Consolidated net income (loss)

 

$

309,725

 

 

$

239,395

 

Adjustments to reconcile consolidated net income (loss) to net cash provided by

   (used in) operating activities:

 

 

 

 

 

 

 

 

Fixed asset depreciation and intangible asset amortization

 

 

65,683

 

 

 

61,201

 

Amortization of mortgage servicing rights, net

 

 

55,141

 

 

 

53,001

 

Employee loan amortization and reserves on employee loans

 

 

23,714

 

 

 

43,227

 

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

   units and FPUs

 

 

238,409

 

 

 

185,135

 

Deferred compensation expense

 

 

5,553

 

 

 

7,265

 

Gain on originated mortgage servicing rights

 

 

(65,632

)

 

 

(98,814

)

Unrealized losses (gains) on loans held for sale

 

 

(461

)

 

 

(507

)

Loan originations - loans held for sale

 

 

(5,937,964

)

 

 

(7,314,794

)

Loan sales - loans held for sale

 

 

5,168,395

 

 

 

7,726,805

 

Losses (gains) on equity method investments

 

 

(9,999

)

 

 

(3,986

)

Amortization of discount (premium) on notes payable

 

 

3,437

 

 

 

(1,912

)

Unrealized loss (gain) on marketable securities

 

 

35

 

 

 

(23,038

)

Unrealized loss (gain) on derivative asset

 

 

(6,327

)

 

 

 

Impairment of fixed assets, intangible assets and investments

 

 

2,568

 

 

 

8,499

 

Deferred tax provision (benefit)

 

 

9,748

 

 

 

2,263

 

Recognition of earn-out

 

 

(85,135

)

 

 

(76,969

)

Realized losses (gains) on marketable securities

 

 

(12,448

)

 

 

(1,222

)

Change in estimated acquisition earn-out payables

 

 

(2,009

)

 

 

5,946

 

Forfeitures of Class A common stock

 

 

(1,219

)

 

 

(672

)

Loss (gain) on other investments

 

 

(38,972

)

 

 

 

Other

 

 

 

 

 

(556

)

Consolidated net income (loss), adjusted for non-cash and non-operating items

 

 

(277,758

)

 

 

810,267

 

Decrease (increase) in operating assets:

 

 

 

 

 

 

 

 

Reverse repurchase agreements

 

 

 

 

 

54,659

 

Securities owned

 

 

(42,904

)

 

 

3,236

 

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

   broker-dealers

 

 

(1,962,994

)

 

 

(1,789,576

)

Mortgage servicing rights, net

 

 

 

 

 

(506

)

Accrued commissions and other receivables, net

 

 

(154,269

)

 

 

(99,138

)

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

 

 

(156,185

)

 

 

(82,549

)

Receivables from related parties

 

 

(2,636

)

 

 

(3,566

)

Other assets

 

 

(37,676

)

 

 

(17,586

)

Increase (decrease) in operating liabilities:

 

 

 

 

 

 

 

 

Repurchase agreements

 

 

198

 

 

 

1,803

 

Securities loaned

 

 

(136,025

)

 

 

135,070

 

Accrued compensation

 

 

26,262

 

 

 

(37,275

)

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

   broker-dealers

 

 

1,897,839

 

 

 

1,731,395

 

Payables to related parties

 

 

26,828

 

 

 

(6,493

)

Accounts payable, accrued and other liabilities

 

 

61,266

 

 

 

89,176

 

Net cash provided by (used in) operating activities

 

$

(758,054

)

 

$

788,917

 

 

The accompanying Notes to the unaudited Condensed Consolidated Financial Statements

are an integral part of these financial statements.

 

9


BGC PARTNERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS—(Continued)

(in thousands)

(unaudited)

 

 

 

 

Nine Months Ended September 30,

 

 

 

2018

 

 

2017

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchases of fixed assets

 

$

(25,656

)

 

$

(28,998

)

Capitalization of software development costs

 

 

(38,487

)

 

 

(27,841

)

Purchase of equity and cost method investments

 

 

(23,099

)

 

 

(101,623

)

Proceeds from equity method investments

 

 

10,064

 

 

 

243

 

Payments for acquisitions, net of cash and restricted cash acquired

 

 

(33,573

)

 

 

(22,270

)

Advances to related parties

 

 

 

 

 

(375,000

)

Repayments from related parties

 

 

 

 

 

375,000

 

Purchase of mortgage servicing rights

 

 

(2,124

)

 

 

 

Proceeds from sale of marketable securities

 

 

153,251

 

 

 

7,849

 

Capitalization of trademarks, patent defense and registration costs

 

 

 

 

 

(295

)

Net cash (used in) provided by investing activities

 

$

40,376

 

 

$

(172,935

)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Repayments of notes payable and other borrowings

 

$

(970,160

)

 

$

(7,060

)

Issuance of long-term debt and collateralized borrowings, net of deferred issuance costs

 

 

639,241

 

 

 

998,817

 

Proceeds from warehouse notes payable

 

 

5,937,964

 

 

 

7,314,793

 

Repayments on warehouse notes payable

 

 

(5,166,612

)

 

 

(6,913,030

)

Proceeds from issuance of exchangeable preferred partnership units in

   Newmark Partners, L.P.

 

 

266,093

 

 

 

 

Advances from related parties

 

 

 

 

 

291,000

 

Repayments to related parties

 

 

 

 

 

(981,000

)

Earnings distributions

 

 

(182,731

)

 

 

(89,537

)

Redemption and repurchase of limited partnership interests

 

 

(29,421

)

 

 

(34,113

)

Dividends to stockholders

 

 

(176,228

)

 

 

(148,094

)

Repurchase of Class A common stock

 

 

(9,806

)

 

 

(14,557

)

Cancellation of restricted stock units in satisfaction of withholding tax requirements

 

 

(647

)

 

 

(52

)

Proceeds from issuance of Class A common stock, net of costs

 

 

327,624

 

 

 

 

Loan from related parties

 

 

80,000

 

 

 

 

Acquisition of Berkeley Point

 

 

 

 

 

(871,814

)

Pre-acquisition distribution from Berkeley Point to CCRE

 

 

 

 

 

(66,782

)

Proceeds from short-term borrowings

 

 

 

 

 

6,313

 

Payments on acquisitions earn-outs

 

 

(11,180

)

 

 

(12,211

)

Net cash (used in) provided by financing activities

 

 

704,137

 

 

 

(527,327

)

Effect of exchange rate changes on cash and cash equivalents, Restricted cash and Cash

   segregated under regulatory requirements

 

 

(7,831

)

 

 

3,853

 

Net (decrease) increase in cash and cash equivalents, Restricted cash and Cash segregated

   under regulatory requirements

 

 

(21,372

)

 

 

92,508

 

Cash and cash equivalents, Restricted cash and Cash segregated under regulatory

   requirements at beginning of period

 

 

796,790

 

 

 

593,435

 

Cash and cash equivalents, Restricted cash and Cash segregated under regulatory

   requirements at end of period

 

$

775,418

 

 

$

685,943

 

Supplemental cash information:

 

 

 

 

 

 

 

 

Cash paid during the period for taxes

 

$

38,438

 

 

$

32,136

 

Cash paid during the period for interest

 

 

71,413

 

 

 

68,331

 

Supplemental non-cash information:

 

 

 

 

 

 

 

 

Issuance of Class A common stock upon exchange of limited partnership interests

 

 

127,322

 

 

 

74,013

 

Issuance of Class A and contingent Class A common stock and limited partnership

   interests for acquisitions

 

 

19,732

 

 

 

14,232

 

Distribution from Berkeley Point to CCRE

 

 

 

 

 

2,993

 

Shares received for Nasdaq earn-out

 

 

85,135

 

 

 

76,969

 

 

The accompanying Notes to the unaudited Condensed Consolidated Financial Statements

are an integral part of these financial statements.

 

 

10


BGC PARTNERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the Year Ended December 31, 2017

(in thousands, except share amounts)

 

 

 

BGC Partners, Inc. Stockholders

 

 

 

 

 

 

 

 

 

 

 

Class A

Common

Stock

 

 

Class B

Common

Stock

 

 

Additional

Paid-in

Capital

 

 

Contingent

Class A

Common

Stock

 

 

Treasury

Stock

 

 

Retained

Deficit

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

 

Noncontrolling

Interest in

Subsidiaries

 

 

Total

 

Balance, January 1, 2017

 

$

2,925

 

 

$

348

 

 

$

1,662,615

 

 

$

42,472

 

 

$

(288,743

)

 

$

(212,858

)

 

$

(23,199

)

 

$

449,980

 

 

$

1,633,540

 

Consolidated net income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

51,475

 

 

 

 

 

 

30,254

 

 

 

81,729

 

Other comprehensive gain, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,713

 

 

 

2,139

 

 

 

14,852

 

Equity-based compensation, 570,944 shares

 

 

6

 

 

 

 

 

 

1,370

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

761

 

 

 

2,137

 

Dividends to common stockholders