BGCP - Earnings call transcript Q2 2018

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Operator

Welcome to the BGC Partners Incorporated Second Quarter 2018 Earnings Conference Call. My name is Krystal, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] Please note that this conference is being recorded. the to turn of McGruder, now Relations. Investor will call Jason over Head I Mr. begin. may you McGruder,

Jason McGruder

Good Ujjal release I'm quarter summarizing morning. giving results XXXX BGC's We these financial second issued results morning. press this and presentation a the break today.

at Group, You Newmark consolidate those majority-owned BGC's of can ir.bgcpartners.com. results company's the find publicly-traded these Inc. subsidiary,

Both second Newmark's all scheduled discussed results Newmark include presentation of after BGC's, right involved the control can details year-earlier Newmark the about today for results and Point financial Berkeley XXXX find BGC's the the entities Unless because release control. today's provided Group's transaction well and for on of with financial as have You reorganization at and press under ir.ngkf.com. separate quarter conference of call recast periods the results period. in as today's been stated, call, call otherwise there only results compare

how, Principles, today's and of terms; be earnings sections results Please of only press see results Please sorry GAAP. referring the back when, adjusted why these under items EBITDA. of on complete see in We otherwise our full-year of reconciliation management them. GAAP results of also Accounting also and any not to corresponding Accepted press Generally -- results, results the or for non-GAAP call may financial full-year unless uses We basis release this release the to refer will adjusted and today's an definitions -- on such the stated. to

common prior we we rata excluding and on yesterday's of stock of of occurred. Financial pro are what price another closing the BGC $XX.XX BGC BGC's would spin-off appropriate When or look payment of results for for prior portion corporate $XX.XX basing plus for these BGC a way, had immediately periods each dividend common Partners had to of items. Newmark BGC of BGC for each the of as of the Newmark Newmark Newmark Group. quarter share for The for and would distribution already the received shares X.XXXX dividend share spin-off shareholder share ratio each after of occurred. the Partners. the though annualized of Services had the segment figures Put Newmark spin-offs of occurred second already BGC NASDAQ BGC common refer and as prices the and respect the cannot immediately the Financial X.XXXX. of spin-off brokerage fully ratio in be the our solutions, occur BGC following quarter market where FENICS. to of electronic as offerings All products XXXX to common Newmark, how with the the respect BGC of Newmark spin-off today's the regarding assurance include proposed each distributed as post-trade approximately we results to data, well press tax-free common of if, electronic take "Post-spin results company's will Spin-off for close second when, NASDAQ software are With or place. we services. provide any for Group referred plan segment's the sale and fully of as On been well represents call, BGC." the share businesses would've Services excluding today's of share refer the refinance release to the the Newmark investor results Post-spin company earn-out, and the end includes If like post-spin the of presentation, have of XXXX X.XXXX BGC BGC post-spin may These

today's value Newmark post-spin of of would BGC share ratio, worth for each release see about closed investor which of the for the and Securities $X.XX on update is by forward-looking also only $X.XX BGC XXXX yesterday's as This Such as therefore no presentation means more XX% I forward-looking that XXE XXXX the BGC. in that BGC Please of remind of regarding of BGC the at X.XXXX risks Section having within post-spin the are common obligation Act meaning results business at distribution a and Exchange you as not of Section yield information market statements post-spin Securities law, least of amended Act close, historical are information dividend XXA call any and our press XXXX. $XX.XX. common of the that undertakes statements. receive except uncertainties, stock. on to yesterday amended. Newmark Based statements as required involve the

contained XX-Q a in BGC's risks in filings, not to which to of factors could BGC Form limited statements, results any recent Form most see X-K from differ call Chairman the cause Partners. such and over additional uncertainties XX-K of to SEC filings. happy to Lutnick, the CEO subsequent including, risk contained Form set turn For discussion in our or but actual to and forth updates forward-looking the and factors those Howard now I'm

Howard Lutnick

Chief our Thank our XX%, Operating McMurray, Steve while by quarter you, second consolidated Financial Officer. Officer, conference Revenues and of grew XX%. XX% $XXX earnings were today our Jason. by post-tax business share up XX%, Windeatt; Services and from you joining thank by than our revenues Newmark's more a XXXX grew Lynn; Shaun And to revenues more than Chief BGC's to million, $X.XX. by are Shaun were were With record good up for for us and BGC's President, quarterly morning Financial call. me

XXXX. is that intend towards to year-on-year. which quarter, closing we At progress which consistent end a annualized by planned and declared pleased into yesterday's the our second also Board make for price, our dividend this to stock of translates of yield. $X.XX the to continue Newmark, sequentially I'm We complete spin-off announce X.X%

they XXXX. revenues would consolidated in BGC, let its Post-spin you would the today's the excluding with would look what it Newmark, already BGC of increased or company two of represents of in in about company and as earnings asked spin-off like explained into XX% look had occurred. post-spin pretax me XX% post-spin. by Since have the BGC earnings that businesses many and compares BGC call its breakdown we press post-spin have by the As XXXX, beginning the release, its the

post-spin XX% by increase BGC X% expect pretax improve in year-on-year between XXXX, XX%. revenues for XX% and and and to by earnings to We between

of The Newmark Partners. of full-year at out occurred in dividend of the post-tax earnings of XXXX. the policy immediately BGC XX% the shareholder share, in spin-off end each after would least post-spin paying second have for dividend each post-spin common increasing XXXX, had per share per XXXX, X.XXXX BGC dividend with BGC BGC's of Given $X.XX at of of share expectation paid have least the received would quarter BGC shares adjusted

price. share market at of BGC closing value in XX% so on XX% BGC having Newmark yesterday's worth a at would price a common yesterday's only was post-spin least. means $X.XX close, at receive possibly, closed based policy $XX.XX, results of BGC dividend of our right, the ratio and $X.XX stock at -- This our based the on yesterday's yesterday least of X.XXXX dividend at which common each closing post-spin at distribution of ration, the Newmark

higher. that our would So be at or means dividend XXXX, least for possibly XX%

we Given to for strong improvement XXXX XXXX, in the full-year continue the BGC earnings as post-spin dividends strong as above post-spin will we that and BGC's increase. well outlined in we believe expect

over Newmark; and Newmark's that XX% to revenues XXXX, in earnings XX% compared to Now by pretax same increased by turning timeframe. XXXX increased Newmark's

XX% XX% increase its by For earnings XX% to between to the and XXXX, full-year revenues and Newmark between and grow expects XX%.

we upcoming Due times traded peers off, three between than Newmark attractively very this has value. service Newmark the its to expect publicly faster full and to grown and outperformance continue. is spin two

to its enterprise currently XXXX approximately value X.X its XX peers earnings eight around way. and adjusted compares times more XX to XXXX on that at to traded Newmark following versus peers publically trades times times for that we to to at adjusted got detail times its call priced will XX earnings XX earnings Newmark this for EBITDA

Newmarks Newmark earnings going this forward, each DGCs closing policy share. XX% growth XX% earnings produce of and least of up earnings strong share given thing to anticipated per of dividend policy adjusted BDC paying expect adjusted growth is per out at dividend and We

We the DGC least companies both to dividends by per companies quarter the equivalent $X.XX expect, paid combined currently be to by consolidate. paid at

as these expect increase forward We to going companies grow. dividends

of of returning In agencies dividends directors authorization million. board has $XXX addition increased in form to company's the to cash repurchase the

also board to its authorization Newmark's $XXX million. doubled buyback

the turn I'll call to over that, with So Shaun.

Shaun Lynn

voice business believe gain businesses. technology successful A far and digit XX% is improved and benefit because foreign benefits share services other asset from front growth acquisitions. organic all generated led from voice morning market put thus JX, and revenue investment is the Earnings commodities. both by We hybrid productivity from office This our Howard entirely ongoing of integration continue year-on-year XX% percentage Nineteen and quarter Thank services tradings. We growth from energy is business electronic in and double exchange as foreign financial by and overall and interest that Fully notable foreign financial Sunrise, grew everyone. and to during and desk you, good credit XXXX. continued in that of is and by recent continue to revenues in both cost improvement credit revenue from invest hybrid performance Overall emerging included more as and rate across year-on-year. U.K. exchange FENICS options, margin exchange technology as to percent and data, credit software, XX% products exchange in business foreign technology post-trade Canadian bonds, and rates and electronic than and spot Revenues a higher products we increased to sovereign invest electronic in European. XX% we fully profitable more continue options, and exchange. derivatives. markets with foreign the

Front by to produced while the services $XXX continued trading. have and profitable were billion electronic increase office services. a XX% to revenues earnings segment the quarter in a financial $X.X to additional the row. substantial XX%, per fully second for pretax up avoid revenues expect conversion for in We Overall expansion in as quarter to a productivity quarters XXXX brokerage hybrid six XX% into voice by led year-on-year has was increased of of $XXX million for more million by opportunity year-on-year margin improved financial revenue

productivity. across products and sales broker increased As we were FENICS, or people per services new

to continue market growth. and see We volumes

to $XXX adjusted to earnings press profits. for We to real XX% estate the year-on-year services company while and Steve. placing by expect share a XX% With performance I'm over from Newmark's increased million, call earlier results to market organically revenues, happy quarter respect from and increased to release standalone pretax the turn increased by more as to our Newmark in With million to-date that, revenues strong details. have $XX

Steve McMurray

Shaun everyone. of and revenues consolidated XX.X%. you, hello BGC $XXX.X million, generated quarterly Thank

$XXX.X by revenues Our increased XX.X% East, while revenues XX%. by basis approximately revenues revenues from to the XXX compensation Asia from by expenses compensation points ratio to the company consolidated to the increased expect up increase million. Non-compensation mix lower for of year-on-year. X.X%, points XXX. improved compensation by were percentage than our by quarterly our grew To and XX%, consolidated Middle end ratio the non-compensation in product, Europe, million due XX%, Pacific Americas to Africa and DGCs by by post expenses ASC excluding the increased $XX.X X% X improved was will Newmark more approximately expenses geography would past-trade XX.X% by BGC and expenses

potential were in As our revenue non-compensation XX.X% period. the year XX.X% ago expenses as

Our non-compensation ratio improved were XXX. XX.X% ASC the

in overall related to any compared GAAP. recognizing in XXXX, methodology potential into of XX million. transactions to third Newmark to quarter XXXX unstated protection The third station approximately with adjusted Newmark's XXXX for XXXX report out and the these XXXX. company were as Retains price XXXX quarter the in and and $XX entered quarter income we XXX Our monetization million closing the of per as the earn rates million monetize earnings by or and for NASDAQ have announced on Newmark earn-out of not well of on expected $XXX.X to cash on based GAAP be tax to pre some payments shares expect adjusted $XXX.X share will received the to payments expenses year million transactions $X.X consistent in below as $XXX.X earnouts. the all by each balance it $XX.XX rates income a to XXXX XXXX the consolidated stock recently received flexibility to role EBITDA, third to the million obligation We

at more received does the not to the the shares annually. million additional balance payments expects sheet in continued shares income addition gross $XX yet revenues not fund in worth In generating $XXX to are consolidated consolidated stock million than reflect overtime. because The the by OpEx least monetization and

Now billion. $X XXXX, billion of generated in $X.X revenues gross revenues net approximately

our taxes Moving rates and earnings earnings share to our by to XXXX interest $X.XX. XX% GAAP. share rates. non-GAAP adjusted count grew our million XX.X%. tax weighted quarter is earnings up XX.X% last earnings were $XXX.X rate post-tax that's on to by BGCs was million diluted second the Post-tax up XX.X% $XXX.X our XX.X% $XXX.X of average subsidiaries to pre-tax and by fully earnings tax grew in up per million full-year non-controlling year [indiscernible] estimated In

XXXX due to X, issued $XXX of increased Our use March common share of units in of million a proceeds XXXX first shares during net plus of year-on-year $XX.X newly $XXX.X million count million. proceeds largely the sale limited gross XX, XXXX. of through $XX.X of to the parts million Newmark December quarter BGC purchase the

long-term million companies debt used is improved balance Newmark $XXX consolidated sheet. is to substantially

of equivalents equivalents probably XXX million XXXX to end not after some X.XXX% total million monetization we XXXX define was capital borrowings. close our redeemed use foreign on of in find to interest payable the reported in $XXX.X shares million the year annual the XXXX, end $XXX of $X,XXX.X due combination the non-controlling purchase That's million. and or $XXX.X interest balance which call XX, which earnings is strength else the quarter end X.XXX% approximately coverage, securities since of NASDAQ XXXX can proceeds GAAP we change the of debt-to-equity, to net on Newmarks $XXX.X issued another notes total Total notes positive agreements amortization million or believe due senior be on the the these senior BGC hand will EBITDA, fully that in pay the equity, and expect share million of equal. their net ASC of is largely was to income $X.XX $XXX agreements the increased compared another at to share equity share previously improving loans and We and net cash net $X,XXX.X approximately capital up million financed landing debt-to-adjusted-EBITDA. from be consolidated the securities and balance marketable XXXX proceeds are own, used cash compared $X,XXX.X million million. in XXXX purchase as was spot June diluted reverse of received with was plus that will sheet quarter sheet, of the interest ratio, the we increase the The issuances quarter subsidiaries of securities borrowing part year in lower Newmarks long XXXX, IPO. operating count first to is debt account consolidated the less which million. These the $X.XX payable term adjusted improving and in common and total which $X liquidity the notes improved interest With intents at our cash notes, As cash expense per notes total respect have $X,XXX.X due end

sheet post-spin and for well the standalone. the company With I'm to consolidated as turn over call that, happy back as balance have BGC metrics improved Howard. Newmark for Our to

Howard Lutnick

you, Thank Steve.

quarter third Our consolidated as the follows. outlook for is

XX% adjusted anticipate $XXX to to in between earnings generate year. period. our earnings $XXX.X rate of third the of consolidated with from year. to for XX% to year to range XXXX, XX% the to and of which $XXX compared XX% of million revenues to million, XX% which XX.X% between million compares quarter expect million, the pretax of range tax adjusted last million We million is the the We $XXX We compared as quarter third higher which in approximately in with XX% third anticipate prior of $XXX is $XXX for be and be between last quarter the higher

increase XXXX, year-on-year, by adjusted and For between BGC XX%. to X% grow between expect the and full-year XX% earnings revenues pretax XX% we post-spin and to and

XX%, earnings by For grow by to full-year XXXX, share to per and XX% Newmark increase adjusted XX%. XX% revenues its expects to the its to

the guidance earnings hold hosting please September. XX:XX Estate now until questions, Real Newmark's at and for Gosin so Services and like the we'd I detailed towards to operator, And AM, be Barry update open end call up will expect our that, questions then. your of We please. With call to

Operator

you. question from And from Sandler first Rich Instructions] Thank our [Operator comes Repetto O'Neill.

line open. Your is

Rich Repetto

Yes, Howard. good morning,

Howard Lutnick

morning. Good

Rich Repetto

ratio on it we'll breakout the BGCP the called call on post-spin for I post-spin before, BGCP. BGCP, all stub thanks conversion And it the

Howard Lutnick

a It's name. better

Rich Repetto

It is.

with call cetera. CEO see call et voice broker appear be your problems of, I'm peer the trying the the had your was guidance, I'm synergies, don't just, to difficulties any voice And problems, a it, So fired, of [ph] over broker. at to some the transferable to ICAP ICAP given

get means to to there? trying competitor your what you, to what's comments any Just happening that been

Howard Lutnick

and with the read expected we were them we could cost and market got what deliver had we we mean, we've we acquired and integrate them interest And then and better So, better at happened and told various because our able to we as in numbers integration as we've how none I those the you've to companies, that. performance. understanding seen, companies we them. numbers, of numerous what of exceed bought

that integrate we've technology companies time, technology we good we us. scale that to to part I our capacity performance of the the that and are management as into is back of we is very the office, become think may to I'm and proud factor, a team's into our my the FENICS improve companies over our differentiating at part very technology, company be us. of have acquire. and utilize of of And

our to companies. new that scale to and been investment the to that off allow our why technology and of take then to of grow leverage companies we're them give we a to so and And the technology able key acquire driver integrate technology has ability the

GFI, would. integrate have long savings been and said are we market we others. have we integrated gaining growing to Sunrise, cost delivered understand companies, a and we've we that we a, a time. D, no, C, that's long-standing share. And B, management together So successfully how the

succeeding, growth things. how outstanding, more that Services are read there; we're each seeing our trading happened of volume we rates things lots we to you're and growing, more U.S. of nice read we're growing. And really to these company, that The newspaper our moving Financial are, very how areas interest growing excellent really the prospects. want we're going are for I is in been and how where And if volumes we treasuries. So might the how Treasury good today good we're of about the the the really obviously feel I on is mean, others, but really And be our across about when our the in issue have things don't board, company. comment in market of across feel to have electronic. but the volume newspaper, in of out to really the to It prospects. you business good we're tough proud

Rich Repetto

Got it. for follow-up outlook And, question the on Howard, next or XQ. revenue is I guess the question

If the I are flat seasonality, compared what know it I we somewhere you and believe. And quarter, midpoint, volumes that it's slightly off. up know started this take around to to the

outlook So I on you I guess can just you've XQ. for any you help outlook give post-spin guidance And the revenue for the full-year. -- know BGCP given some won't

So just bridging I that, guess.

Howard Lutnick

and Newmark. about so good that that were distribution post-spin do policy, the we very And you're cash. now concerned. our understand full-year priced doing, the And -- and buy the scale XX%, seems And attractively have prices then now It at of above chose the the produces XX%, performing. if to amounts of you post-spin given We talking at people We dividend XX% to grow from into how our we're a of full-year XXXX, which how us incredibly guidance the that they why minimum the sense to of growth company. even is stock in could have cross didn't well a to BGC, you'd just are guidance of dividend scale for -- good by gave to us there. side policy current be enormous key would and market seems to of our the really rate illogical BGC with for well markets be scope want

the business, how the to of can't tried show, how any I details really are And to show management break I to and great tried the company, it think is confident see divisions so in together for business be we dividend-paying out great of cash company, the successful further. for we and sort to we of upside. a and full-year put both if flow, going them the enormous you're the going

Rich Repetto

believe, very just in debt. -- redeem the release is guess, from Why million $XXX.X Does I the is the question, Newmark? the it, why the additional payments this understood. spin-off I the intend to Howard, question interest proceeds say debt is Got done, shares? all question? Newmark you being that the lower use distribution the guess at to delay you or of, And to Newmark And raise net last is that at earnings of is I

Howard Lutnick

attractive its basically will it's it's able right. the BGC eventually it debt economics and acquiring raise to Well, other mathematically, of use which size is If borrow offering, companies. to want when

increased period interim extra the million. $XXX it size this of for its an million-$XXX So offering

to going we will is to Too great that's need. its the its off money use it. pay a Newmark, own which lower XX% Newmark to for make of dramatically numbers, debt coupons lower which much

back So they'll pay the that when BGC makes Newmark just good. then us money. feel And really spins

so just pay before And And be going to spin, economics Newmark. when which year no the positive the delay expects has BGC. a now, it for back it's the then end separates, to do And it Newmark of they'll short-term basically whatsoever.

is And smart so just economics. this

Rich Repetto

back the get in Howard. I'll queue. Thank you. Thanks, Understood.

Operator

comes our And Patrick from question you. Raymond next Thank O'Shaughnessy James. from

open. is line Your

Patrick O'Shaughnessy

Hey, morning. good

TP to to more some post-spin what question speak your wanted it? up. as the commentary have follow-up their Can of broker ratio especially in looked ICAP are about about calling like on forces we're I compensation market So and commentary. And you their trends compensation first Rich's business, driving

Howard Lutnick

We've seen in seen quarter-over-quarter our to steady that And you've numbers. them declining.

And more capacity the were be I your if make key in electronically. that overall time they in brokers assist the ratio long to part our a your tools a equity course productive And as have part. they and being compensation economics company. ownership course having that of of you key the see company. decline. declining. is compensation this more mean, productive they to to having ratio steady-to-declining steady allows brokers have For the brokers substantial your want to them of The amount is to of to And to significant

And so we have the lowest turnover.

And been have going decline of very That productive the our forward. to expect our we remain compensation brokers that or think Our math I expectation. is those combination ratio electronics. steady means because

Patrick O'Shaughnessy

mechanics Thanks. million Newmark loaning to then When place it. on X% another $XXX.X then, process that just to of down and would Got And that wise? paying follow-up take expect questions that debt. you

Howard Lutnick

call I mean -- approximately a So the takes days. call [indiscernible] XX

that BGC assume year around let's in off issuing near of the Newmark separate the that three the somewhere debt done then to the debt. lend and four now should will its So - that pay money payback. gets and weeks And now. Newmark end BG Then to Newmark. and be And would to between own

So of logically to BGC and economically period debt only need of for do short just that it us it's a didn't the for process. to borrow deal months really it time. cash But But it. that do the it couple was wanted just did.

save by short couple the was use it all the best the just that group to a hundred for of within And thing seemed basis a to as debt the in do that Newmark intend know to intends Newmark to repay end And lend Newmark year term. the it's We we spin. of So Newmark. let smart points.

term. So this is just short only

Patrick O'Shaughnessy

post BGC net spin think have of guys pro an that's leverage was think ratio than and forma And speaking X.X EBITDA. have? for the higher debt I to for out is partners. what times for terms are of it. appropriate the you capacity that do you post-spin a to the lay what you net potentially in where assuming use times, you And your thoughts What this X.X debt any debt EBITDA business, would slide debt, then it be Got

Howard Lutnick

I BGC. think we the have substantial capacity post spin remaining in So, debt

that be dry As really we be something mentioned we would try our grow investment business an to before, that is stay of that business, which that would this se. we grade consider you to grow important of powder not we by consider something watched important per us in. as And significant But the commodities. our the view important. balance we being credit to have Uses therefore, we it's sort

There businesses to see us lots capacity of we to to grow. opportunity an and that there are insurance. for places out grow the are And that grow of have we We have brokerage variety build. there the

You attractive acquisitions, we of extend is and And that. accretively to to have map and watched successfully. do having plan that us continue the dry powder accretive

Patrick O'Shaughnessy

to us turn to little it. clarity on provide to update your FENICS, the business? that to any Got Want plans additional of financials

Howard Lutnick

Our current between end on After Newmark year. strongly are spin best of the execution separate plan the we to are at going of we to details to you the focused of that, look and and of is and the now for that the the way financials start FENICS.

at to best that. hard are is with work trying are start And consider we We when the time to to that. do

you out talk out know, about think party we how separate would So a post you something consider spin FENICS of valuable will, incredibly these if its will that are want will to we so the that people that coming look are BGC as in this to you opportunities -- I have grown. understanding spin of built we post BGC, assets good be but Again just much part are I get for a would great would that detail you and value. for at company us. And these that more can

Patrick O'Shaughnessy

to FENICS electronic U.S. seasonally volumes like a overall. sequentially you seeing in your of FENICS speak you traction with nice assets, spiked slower Looks Solution. volume that some speaking had then uptick those rate you Treasury your can the And are

you seeing in interest increased So that are some solution? customer

Howard Lutnick

We are.

the that June, opening we integrating are platform. rolling of we had in announced we So pipeline the because to opening And of Treasury U.S. business. a clients who our called

the system of Our objective was the best spread. to fastest type have and with data the

so our been far, has exceptional. And data

Gann tight growth We us and plus many really at are substantial on trading spreads testing the so details platform. trading online, are We accounts month. Each at so with coming who plus a have been that month the has over many month are growth the on the are XX% just building been there with incredibly market volume. And feel good.

we to feel we are really you foreign in these similar but all have small month pretty growing numbers these grow XX% we quickly. look, also nice treasuries, as become So And during month, system you when a exchange In speak growth. are really good. XX% - material per month

in Treasuries material Treasury expect player U.S. we so business in U.S. a reasonably to become quick. And

Patrick O'Shaughnessy

Got answering my for you all questions. it. Thank

Operator

question-and-answer Thank would Howard the over turn that you. for now to any like remarks. back to session. conference And Lutnick today's closing conclude does Mr. I

Howard Lutnick

we the look all for joining forward speaking a end you to everyone. look towards quarter. forward today. Thank September. the of day us And And we speaking today. you updating Thanks Have to to will great next both to

Operator

and thank conclude program. for This in you today's Ladies gentlemen, the conference. participating does

disconnect. may all Everyone You day. wonderful have a

BGC (BGC) 2 Aug 182018 Q2 Earnings call transcript