BGCP - Earnings call transcript Q4 2018

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Operator

Welcome to the BGC Partners, Inc. Fourth Quarter 2018 Earnings Conference Call. My name is Dylam, 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. that is note recorded. Please Instructions] this being conference [Operator over turn I’d to call to now like the Mr. Roy, Relations. Basu Ujjal Vice President of Investor ahead. go Please

Ujjal Basu Roy

Good summarizing fourth release BGC’s morning. financial We press results, quarter and this these XXXX presentation morning. the issued

BGC BGC discontinued You off the XXXX. on subsidiary Newmark November all former to BGC spun held can XXth, its at by of the of update. these of in find shares ir.bgcpartners.com. shares results not as stockholders within year BGC of ended results any Newmark’s all November as did XXXX, through are presented for of Newmark operations consolidated BGC’s the own periods XX, XXXX

for as portion results date XXth, pro-rata XXXX. November items. the to previous of BGC XXXX. Newmark’s BGC Financial results Post-spin through plus BGC Newmark section generally tables present stand-alone post-spin and for the operations and dated provided fourth and stated, Group, would after distribution the also full have Partners results and otherwise year all for the as the presented of are continuing do in not can be financial documents. the the in Xth, reflect financial match to will on referred tables today’s the corporate a spin-off XXXX excluding results Outlook call the are results comparable of not only press BGC release Post-spin defined document in operations consolidated of and results BGC prior quarter occurred Services continuing of Newmark The XXth, this results Unless BGC’s what of distinct BGC segment BGC its corporate to November represented BGC’s results had from XXXX. not financial Company’s included in been segment February

year same call Time results related Newmark XX:XX XXXX released Tuesday, place XXXX, XXth, its took day. fourth Eastern on and on the conference and November financial at full quarter its AM

results the XXXX at the ir.ngkf.com. today’s Newmark’s only of fourth period. provided find earlier on compare details further quarter call with results stated, year Unless quarter can You regarding otherwise fourth the

be Reconciliations Accounting press XXXX under in or complete of release GAAP. non-GAAP in Accepted items. today’s non-GAAP unless refer will may simplifying we see otherwise our this and first on our updated and in such these results adjusted may the of beginning sections terms. of marketable total for XXXX, have cash define securities been in agreements, We liquidity, subsidiaries. only earnings capital total plus that We basis equivalents adjusted Please We not as when, how, results release also which GAAP less non-GAAP agreements. reverse quarter We for Principles, Generally our on refer EBITDA. any referring changes reporting non-controlling to today’s beginning items an to and to also and the stated. call define stockholder’s see partnership of corresponding results to repurchase redeemable and plan reporting cash and securities financed, as with back owned, why repurchase loaned Please press equity securities the including definitions interest, and uses management interest the

on undertakes as of statements. any no update XXXX the electronic and involve required XXA within as Section Section and to forward-looking meaning Exchange by well software today’s historical All as the data, include risks not also the and are amended amended. to that obligation sale brokerage Except market businesses of of that regarding the the law, Act fully our of information products services. Securities our fully XXXX company’s call These Securities are solutions electronic of as Fenics. of you remind forward-looking uncertainties. statements Such are I of Act as offerings statements referred post-trade business XXE the as BGC

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

Howard Lutnick

revenue Windeatt. With an Happy you, earnings share, Officer President, conference qualified translates X.X% of quarter, stock our are and on per and has X% Thank a Chief excellent Board Operating yield quarter price. improvement EBITDA. This Lynn; dividend dividend Officer, Ujjal. XX% Company’s joining declared morning. fourth of in growth, Good BGC’s and $X.XX thank a Chief Valentine’s based you generating Financial yesterday’s per XXXX post-tax Directors The Shaun share. for XX% growth Day, us our closing for BGC today Sean had in call. Interim adjusted me to

of are real of building spin-off completing the our We Newmark proud business the and created we in value our estate shareholders. to

grow we to business, expect electronic With the and to We to Fenics and Lynn. strong turn continue vertical to Shaun insurance our I our our hire acquire returns accretively. to over build call that, shareholders, continue now fully as will deliver

Shaun Lynn

Howard, good and everyone. you, morning, Thank

entirely business, year all business, increase full in led growth foreign our our classes. organic a was in Our in and XX% by revenue our and XX% asset This rates energy exchange commodities. growth across of improvement was virtually XX%

fully XX%. margin XX%, across strong of all high XXXX fully were fourth businesses. its businesses double-digit our revenues by up electronic revenues brokerage business data, while growth Fenics software and generated major for from post-trade increased quarter electronic Our Fenics of the by

revenues. BGC’s quarter We year-on-year was a was we profitable revenue XXXX, the the growth eighth in for percentage and quarter. the trading by producer our once which and as across increase improvement consecutive again Total office data, up overall as expect to increase X% of and increased revenues Fenics initiatives to software to XX% generated continue we XX% led front in for by to invest per This in productivity. a continue new rollout technology, and post-trade. electronic convert were voice grow in and more our business further fully hybrid

our of technology successful hires in is the integration office investment and improvement acquisitions due our ongoing recent additional and Our platform. fund to on to

brokers and salespeople performance part which their continue We organically and and our strategy. acquired we share As profits. Commodities, we GFI, across consistent as not because business recently we and strong increase our roll market to and outnew have CSC sold increase expect with to of our was products Fenics further services CSC’s productivity, lower

growth expect generate from acquisitions. energy both business, organically through further We to and commodities our and

insurance consulting we November, this XXst grown and and insurance year, a brokerage acquisition & now in liquefied which of ship part in intelligence petroleum On BGC’s Ed, broker. with we independent completed we example For natural an of is of business of of gas, January the brokerage liquefied Poten Ed specializing in firm acquisition XXXX gas business, markets. acquired Insurance. entered Partners, Besso Lloyd’s London the tanker

the As earnings and be Ed by per to share invest XXXX. accretive acquisition quarter we continue in to our integrate the to brokerage of anticipate insurance we first vertical,

proud class created the to business. We the to the about another brokerage with Windeatt. I’m opportunity Sean are build now over we are of we happy world value to Newmark, and excited turn call

Sean Windeatt

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

revenues of have Asia-Pacific U.S. the Americas and Africa revenues the from up East XXXX would higher, at revenues up while dollar. but Europe, been $X Fourth Middle quarter Our XX%, least were increased by X%; the revenues by strengthening million XX%. from by were for

With to was a impact compensation X.X%, by driven a similar dollar our respect on quarter to revenues. stronger first have expenses, expect by increased primarily We higher results. which

XXX Our ratio to X.X% approximately to expenses million. quarterly BGC’s compensation non-compensation by XX.X%. improved $XXX.X basis points by decreased

approximately XXX improved of by percentage expenses our revenues. of basis non-compensation revenue, a As XX.X% to points

quarter. the were million overall Our up expenses by to in X.X% $XXX.X

our Moving on earnings. to

Our pre-tax interest earnings subsidiaries in before million. by and $XX.X XX.X% taxes were non-controlling up to

Our the XX% of previous to adjusted tax XX.X%. of approximately rate outlook earnings which was approximately is for XXXX above the for midpoints XX.X%,

rate the year-end. share. on expect between in tax our and in XXXX. change declined with Due of with spin-off This per impact offsetting non-controlling respect BGC’s interest XX% or corporate share to has the of no as We on Newmark, XX% adjusted an to its fully earnings earnings earnings increase in structure diluted count to stay

million. post-tax to by were Our up earnings $XX.X XX.X%

by to per were $X.XX. earnings post-tax up share Our XX.X%

Our in avoid certain count count weighted adjusted XXX.X million million The to for and GAAP. was anti-dilution. diluted equivalents fully excludes for GAAP XXX.X share average average share order share earnings weighted

acquisitions. Going compensation, industry-leading our and employee steps include future greater reduce to issuance. We a This take to share to hires. respect ability to expect retain using may make these of acquisitions, we impact with new attract a steps on number talent or accretive and percentage forward, no anticipate of cash having to

total sheet $XXX per XXXX out to million. $XXX.X $X.XX, compared a to $XXX.X end included net to to expect company facility, grow forward. capital, growth. point shares. to our gains all as to year-end cash was approximately our other approximately XXXX, payable Since as no and invest debt, the our believe count versus acquisitions, have share going I ample diluted common $X,XXX.X to Between and to X% our Newmark, liquidity, liquidity, fully year I’m $XXX.X and $X.XX. Total of compared for gain end, expect related generation borrowings payments our doesn’t we turn compared million value buybacks strong cash now first was of $XX call in liquidity the earlier. changes our million, is revolving With of and to outlook primarily of EBITDA. million we to $XXX BGC sheet, happy have And primarily spin-off like in stock go liquidity $XXX.X as Lynn. back of adjusted due million, balance or times liquid quarter includes over quarter XXXX. to Book a and would Newmark. between resources by X.X Shaun price. This year-over-year that, share capital our meaningful With was million NASDAQ mark-to-market the to credit million, We strong NASDAQ year at a similar was material of as respect balance the We million. decreased X% to Notes

Shaun Lynn

Thank you, Sean.

outlook Turning the first our quarter. to for

million last as full in anticipate range revenues approximately compared first XX% earnings with in of to $XXX We million in adjusted to and earnings million, for the of $XXX.X $XX full XXXX, year $XXX of to rate million to be year. anticipate the of of year We XX.X% the prior as XXXX. in $XXX to generate the We for million expect pre-tax million, compared with range year to the our $XXX tax of period. be the compared between XX% quarter adjusted

that, expect open We of the guidance operator, questions. for end update With to now toward like we’d our call March. to the

Operator

Thank you.

Instructions] will We first the comes O’Neill. question-and-answer Rich Repetto session. Please from go question begin Sandler Our ahead. [Operator now from

Rich Repetto

– share the tax on me, both on first is Howard adjusted excuse morning, basis. and good Yes. team. through Good rate question so and morning the guess I count, an

tax rate. adjusted the think, I on we XX% calculated

see Just that’s to And that usually XX% than higher why correct number? XX%? trying is the whether to the then

Shaun Lynn

Hi, Rich, it’s Shaun.

said we what as the previously, year So prepared XX.X% be would said rate XX.X%. in I in our between and for my guidance the tax notes,

rate our our previous in in So for line with tax year the was XX.X%, came which guidance.

Rich Repetto

jumped jump it And a – Okay. the the to then by due of quarter-over-quarter, count a is percent? couple share acquisitions, that couple over

Shaun Lynn

Yes.

share as some that extra color, by guidance. we with which think X% normal up share to between increase into previous I in our think by the count increase and X%, And we circumstances count was forward. stated X%, line expect our give our I we going issuance was look to the again, share also

Rich Repetto

to just strong the on to revenue I margin on the closer that? And an operating the is gave getting whether when me growth? and I for we outlook see just just guess, might thing guess expect margin, get on last for we’re to – outlook Fenics. operating but you guess, I Okay. update [indiscernible]? trying Fenics, the Just Howard,

Howard Lutnick

I’ll business the Well, minute, about talk about and Shaun, and question don’t [indiscernible]. why you margin answer then his the for a

Shaun Lynn

XXXX. we of growth wanted focusing build package The we capture as data what market is our and XXXX, the that revenue. on overall show that, growth and within growth data, been in really The we Rich, we best vast, overall execution. of it, said in post-trade, the pre-trade have to The on deliver.

been it’s time. exciting an So

performance, to about we’re talk we it think but to Howard going seen leave forward. to the – You’ve revenue I’ll I look how going

Howard Lutnick

about we’ve feel opportunity. scale seen we that Fenics feel really careers, maybe good the our most our that is extraordinary technology. our position, We in So opportunity connectivity, in our of the our space,

advantage feel We have we tools lots market have, do we we the but take do to and to the have to it, – it. and position of

going clarify to think those to to rates the I about amounts, to that’s investment this Make we numbers. that’s together. our and to So come Fenics, margins going will we want to impact how how can, sure, with we want we’re nail talk able its how when detail down our be ready margins, growth impact

we better we putting those with handle the are will And I we’ve we in in on get as So we that, will matter them, out consistent things. examining done revenues keep them think the past. with how come a out

just are business So company. the full and to inside I to plan across what think electronics It But it working fundamental business of great it’s I our opportunity going company. future – opportunity. exciting great, explanation we’re a on platform. be think it’s our the everyone is a and of more going our complete to add to really whole much to to is is And this

Rich Repetto

issue? invest to a accounting just a it update this U.S. issue to subject but say of on I of you strategic determine just maybe I trying just would Howard, So versus change quick more the much sort have. Fenics the little then an And – a And going of to how treasuries? that’s guess, is in you’re all little, a

Howard Lutnick

Okay.

gets say, the would we and view what step the the take I that another you broader. view view mountain, better, up it So bigger time is gets is, yes, gets – each the more happens –

the connectivity clients the quickly, to it provide clients wildly we connect that they in expensive just to our – become, they the to becomes way do do But don’t ever most technologically way of to the it. now less that ability transact world the think more a rail will of become expenses, banks have expense giant can way others I to can a efficiently. these in that our technological connectivity, business have more in operating as that of Just those impressive technologically and of each we continues to want thought attractive something our as to business about using clear, doing clients, them. that our business

it matter think, of is I scaling. a so And

We have the infrastructure.

invest, of to like much how we’re going how up kind of scaling going what scaling where of out things, it’s So in and invest invest it, we infrastructure, do to that deciding infrastructure, that we’re much sales, that.

button show bringing how I growth, we what can we revenue kind think, sales to When much mean, put those things people, that investment really so or things start to down, need you we will need of in that those together. right? you

an accounting I issue than sure. So strategic think it for is more just

rate. U.S. to business, that continue to Okay. grow. is It to And with respect we treasuries, meaningful our growth

are quarter significantly We than is quarter. better growing. the prior Every

right. to continuing think apace. are I very where remains add are we We we feel we doing. clients It about And good third, are and how still

We are club. the third largest

expectation. third. And a or consistent are so are very that we growing And high our and we is to expectations. we way that But above have is growing in

Rich Repetto

Got it.

Howard Okay. and Thank you, team.

Operator

comes Thank you. question James. ahead. from [Operator go from next Our Patrick Instructions] O’Shaughnessy Raymond Please

Patrick O’Shaughnessy

morning. good Hey,

synergies it the of you’re growth point? that it it Ed, accretive spoke to from year? with cost take in it over to to think gets So, I there next be where able at combination out the first of Is you starting to two? quarter the become revenue to that is Are accretive What XXXX. being now going

Shaun Lynn

Well, take let’s synergies. first all, the cost of

and build operationally. we regards look and then and organically it And course a the started it the Of now, very quickly Besso, producers at opportunity public as attractive and into acquiring the make how broker lines organically, with the the been think valued been we the now. much UK quickly and back able super then separate growth within market then synergies maybe to enjoyed ago saw to billion by we’ve alone, across we office we $X significant very attract we that very can came we Newmark to years that two to grow becoming doing company on how which with that we’ve to U.S., Howard investor

comes with expect. Ed, out have the growth Ed that XXXX in been to we So would the regards and company into how

insurance significantly business. I and think behind see grow, within to continues Besso to sits you’re to and to our build going to acquire add XXXX throughout continue us And Ed it. that build,

Howard Lutnick

accretive Ed’s model with exogenous synergies no So XXXX. numbers our produces to

of will numbers. those just additions growth enlarge Our

Patrick O’Shaughnessy

me margin of insurance business? you can Got it. the brokerage profile then as legacy that to brokerage business And inter-dealer the compared remind

Shaun Lynn

But, I’m that. normally we don’t its sorry, give yeah… –

Howard Lutnick

higher mean, slightly business Yeah traditional is financial the , brokerage. than I

So of an I obviously think actually that’s XXXXs, but aim low the into ours.

Patrick O’Shaughnessy

get have the is Switching commodities brokerage fixed if think traditional appreciate that think at fixed pulling to some allocates I so, of And I Goldman certainly from market and presents There headlines to about, Sachs to a be Got you capital it, trading? making. the were that. headwind results. a business. all business? the you lot community that been that services with the shrink talking quarter want to of financial dealers do back dealer about disappointed late fourth it is think sense to going the And Do your income

Shaun Lynn

we’ve to that to and the with flows diversified And We’ve grow always insurance. built regards commercial we’ve to and you’ve and estate is build a we’ve and company and robust to share. headwind seen grow as shifts we’re upgrade and continue in to with build think how I to going into always more years, now offering us of and sorts to that’s seen that take real market within these these our into do withstand our ebbs the over against market which done, is clients marketplace.

We’re commodities. growing in

You’ve seen just by Poten.

and we of relentless will always the across but say whole we out we what basically growth it landscape. continue the have currently, in of we as to see So we be building see Company projected guide, we could our

Howard Lutnick

the wealth grow, of the the high Issuance the getting bigger. the world continues service at is world, is material securities of of financial issuance. transactions to of assets So world, are and all-time raw an

adding enormous be and material headwind global amongst investment service maybe world and something enormous that for a those all a is of And and full right? to works we’ll small, reduced the is, funds evolves sorts is which those what how firm some reduced our ebb right, it, strategically between and issuance, the mix. But technologically research, reduced economy move The is is bank of raw or have a is clients, on scale of plus the they The we’re current particular markets always of players? of bigger, dynamic amongst irrespective value seen dynamic savvy hub how and and ourselves The hedge being not getting large change. fundamental capital, That would said between trade timing think liquidity medium players, proposition long-term, that of discussing things have sales, its see markets. a changing new being exactly that market changing maybe institutions. of particular as How I a type that material. raw the that to these professional And the and a we’ll a headwind. the all that minus, and flow these a all is will we But of advanced of type the trading Shaun So change fortunes, model not. have pride central are maybe growth of market. you of place professionals we providing something those the

think, I plus, long-term, particular of sure, quarter, no little way. So minus, any little course,

Patrick O’Shaughnessy

that it. Howard. to point, And follow-up on then Got

the hybrid makers, voice a Or less more with the So these sources primarily help that benefit? start and both part new that interact traditional of your Fenics Fenics is to liquidity. of as market Does you business?

Howard Lutnick

participate a with majority voice entirely people towards it – or is. does majority them. not they excluding Well, a significant It is It because the electronic.

what good really client way. modifying the in a of it most. it toward us a Fenics heading excites fundamental So part base And is really is

Patrick O’Shaughnessy

profile on A cash using your part of such. it. have impact more incentive, Got your going expect compensation, commentary your margin as that bonuses any we forward? to and question on Should on

Howard Lutnick

answer. the simple That’s No.

Patrick O’Shaughnessy

flip Okay. guess side the And of then coin. I the

X% to count dilution share X% XXXX. to spoke in you So

thinking I reallocate down share of kind there number do or of potential, a the expenditures years to So growth dilution we cash, downside? little kind guess, to dilution XXXX, X% your less slows from the you out As that stock maybe is bit? X%

Sean Windeatt

of said mean, think, we X% of intention. with gave I we as I gave the the it Patrick, X%, range the to highlight we

that I we’re with So range. comfortable think

Howard Lutnick

use that Right. do If if reduce stock acquisition would some that we for we of buyback example, – raise sort we that choose to stock we would a so If amount. it. said material and

other But seeing, you equal, rarely X%. can as we’re equal. So be all all to always things everything X% know

our said but So there are reduce to is a we on going as be lots so it. and to that. on team objective focused the horizon, is We’ve

substantial focused we’re we’re use to it going to reducing have We going make on and generation our cash issuance sure forward.

Patrick O’Shaughnessy

X% X% X% beyond? your equal, already other efforts would does to that reduce more be like issuance? But X% XXXX things Sure. to X% we X% stock all to to and in reflect expect your that to Or

Shaun Lynn

do the to X% is are hope and then today X% we to we No, better, we where just as get lower.

quarter. I scale of here too going reduce to company would that, our So of need it that. mathematically – action we’re going to our on impact But long-term what start can’t and as we this just take I going us sit to say mean, investors to since our to – we issuance and reduce owners to grow. we’re are we in we business we’re strong really – seeing because to we ordinary and to But then that are us it’s next early X%, company produce just based how the the to cash action, and do announced, today, but I we me generation. to it’s take think that’s X% and examine going say for

Patrick O’Shaughnessy

Got it.

been headwind late. has Now, guidance one me. Obviously, And a of the I least. appreciate directional then last from at FX

revenue a I first quarter that dollar also embeds headwind? presume guide, Your

Sean Windeatt

XX, Obviously, and that is guidance. to our sort number we that’s And So included it’s which in be notes, – – does. of same anywhere it’s that in around number. around $X so I as the expect around impact Feb the prepared million, think It said but around we around it QX,

Patrick O’Shaughnessy

very much. Thank Great. you

Howard Lutnick

Okay.

Operator

Thank you.

like questions Please turn time. would further closing This ahead. session. go have to for to over our Shaun at Q&A no call remarks. I concludes Lynn the We this

Shaun Lynn

you Thank you to look again for forward quarter. to next joining us speaking today and we

Howard Lutnick

Thank you.

Operator

ladies and for This the program. attending today’s you, Thank concludes gentlemen conference.

You may day. all disconnect. Good

BGC (BGC) 14 Feb 192018 Q4 Earnings call transcript