BGC Group Updates its Outlook for the Third Quarter of 2024
PR Newswire
NEW YORK, Sept. 30, 2024
NEW YORK, Sept. 30, 2024 /PRNewswire/ -- BGC Group, Inc. (Nasdaq: BGC), today announced that it has updated its outlook for the quarter ending September 30, 2024.
Updated Outlook
BGC expects to be around the high-end of its previously stated outlook ranges for revenue and pre-tax Adjusted Earnings for the third quarter of 2024. The Company's outlook was contained in BGC's financial results press release issued on July 30, 2024, which can be found at http://ir.bgcg.com.
Non-GAAP Financial Measures
The non-GAAP definitions below include references to certain equity-based compensation instruments, such as restricted stock awards and/or restricted stock units ("RSUs"), that the Company has issued and outstanding following its corporate conversion on July 1, 2023. Although BGC is retaining certain defined terms and references, including references to partnerships or partnership units, for purposes of comparability before and after the corporate conversion, such references may not be applicable following the period ended June 30, 2023.
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"; "Liquidity"; and "Constant Currency". 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 operations before income taxes" and "Net income (loss) 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 underlying operating performance 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 related to amortization of RSUs, restricted stock awards, other
equity-based awards, and limited partnership units;
-- 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 and RSU tax accounts. Any
preferred units and RSU tax accounts 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 or dividend. 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, and RSU tax accounts are granted in connection with the
grant of RSUs. The preferred units and RSU tax accounts are granted 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 grants of equity awards, including common stock, RSUs,
restricted stock awards 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; and
-- Charges related to dividend equivalents earned on RSUs and any preferred
returns on RSU tax accounts.
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 stakes in the Company and its subsidiaries and generally receive deferred equity 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 RSUs, restricted stock, limited partnership units (prior to July 1, 2023) as well as other forms of equity-based compensation, including grants of exchangeability into shares of common stock (prior to July 1, 2023), 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.
Compensation charges are also adjusted for certain other cash and non-cash items.
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 and/or cost savings 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;
-- Non-cash GAAP asset impairment charges;
-- Resolutions of litigation, disputes, investigations, or enforcement
matters that are generally non-recurring, exceptional, or unusual, or
similar items that management believes do not best reflect BGC's
underlying operating performance, including related unaffiliated
third-party professional fees and expenses; 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
and/or cost savings plans. Such GAAP items may include charges for
professional fees and expenses, 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 intangible assets
created from acquisitions.
Calculation of Adjustments for Other (income) losses for Adjusted Earnings
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