BGCP - Earnings call transcript Q3 2020

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Operator

Hello, and welcome to the BGC Partners Third Quarter 2020 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. is event this note being recorded. Please now Jason Chryssicas, would like to to over conference the Head turn I of Relations. Investor ahead. go Please

Jason Chryssicas

Good summarizing third release BGC's morning. morning. financial We press results quarter and results these XXXX presentation earlier this the issued

at Unless find know We with results call, on otherwise on stated, these additional Press Release compared you in today's third XXXX quarterly the the results You period. today's find quarter only and details ir.bgcpartners.com. can can our earlier Investor of the Presentation. year provides

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

outlook. our remind market call as that products the website to regarding also businesses company's refer is today's include These our risks businesses of BGC uncertainties, offerings no or statements the statements by at respect these results, forward-looking statements. fully sale pandemic We on forward-looking electronic and and on businesses, are in target include and our to call historical forward Relation's Presentation. solutions company's stock Additional buybacks, information any except COVID-XX and effects results no that on services. our non-GAAP involve post-trade GAAP statements. about not are Any of ordinary the material Investor looking liquidity required call the position, information we as and software obligation our mentioned Any changes and acquisitions, as fully on price. discussed update include to Fenics, I the on as this ir.bgcpartners.com transactions law, data, available outlook meaningful company's undertakes with today's financial you brokerage well electronic to the

on of subsequent special With call happy that, Factors the and Risk Board Chairman such contained on CEO the cause to and Howard XX-K, Form XX-Q of the in reports information forward-looking uncertainties, to, results and statements, additional to could discussion but including, those special note in any these Factors note contained Risk differ I'm over and Lutnick, and SEC to filings turn risks actual of which the BGC with set and see limited updates from Form information a not forward-looking Form Partners. forward-looking For BGC's filings X-K. in now on forth the

Howard Lutnick

and for XXXX our us morning Good quarter for thank joining third you conference call.

with for Steve virtually Officer, excellent Bisgay. Officer, Financial We've me our and investments. Joining Chief this progress call Chief Sean are BGC's Windeatt; today's quarter made to Operating respect our

quarter the offerings, market of two consecutive revenues for profitable electronic and quarter. reached brokerage levels record is for group full-year of share, the Fenics brokerage second the for turn GO, by fourth fully of our XXXX. positioned double-digits to our insurance and newer and Fenics Our UST grew Fenics

macro standalone of XX% our electronic debt the levels X% strong trends drive third record businesses. growth across hardening investments global BGC market quarter come in view us businesses positive comprehensive we've of business. We our and generated share trading, and In revenue You made market; and our issuance, insurance can the fourth see quarter they fundamentals electronic insurance integrated its for will capture of and adoption respectively. well-positioned The these brokerage improvements our leave the through platforms Fenics in to of as accelerated guide.

of where last result market levels the fourth a We our undervalued, earnings current to these is we expect XX% stock As our last view price improvements, in even match as year. this our while stock to quarter, fourth it return earnings, in was quarter over demonstrably below tougher year's environment. XXXX as

So like Sean over Windeatt. to call I'd with to turn that, the

Sean Windeatt

you, Thank day good Howard, and everyone.

Fenics in September. growth Limit generated a up approximately platform, Book substantial year-to-date span an in Our Order volumes offering US overall Fenics our quarter. backdrop offerings a and $XXX macro fully XX% performing, business reached in record our notional US continued with US tightest increase the US newer of is levels million Fenics its just rapidly position GO, primary market challenging XX% compared the grown approximately trading estimated demonstrate the have estimated share high Fenics electronic of saved two Fenics resilience, Treasuries to trading to In year-over-year third and the strength spreads clear Treasuries X% since share market. the markets. to Fenics dealer their two two treasury amongst by January number years, in has to respective Central Treasuries clients Treasuries volumes. XXXX, of in in with by market

As and continued overall market a the our market. outperform client innovations, and strong volumes support, we expect continue to technological of to result share both

Nikkei were ago a since just options Fenics quarter GO XXX volumes year trading XX GO block-sized and respectively. Fenics Fenics trading as in volume. EGBs to these in growth more Fenics previous to Stoxx's surpassed platform We estimate commands options, already now and and XXXX. to plan first its front-month platform of electronic Our we than XX% market XXX Nikkei share year. designed new full record we in Month-to-date and tripled in its Euro classes. leverage GO asset Repos, electronic GO options underpinning time, state-of-the-art these live monthly fully products Stoxx XX October, as this and and went investments short the across over over options our products technology In across NDF, of platform this drive The businesses. scale X% protocols quarter first in the live such Euro introduce has platforms

scalable Algomi of SaaS Algomi. and clients was software, which predominantly grew XX%. Lucera's data, that are businesses, electronic a and lower Connect credit streaming marketplace to days, with performance becoming buy-side Connect access funds contracts aggregated to industry recurring FX and a by for Lucera is their by two Lucera trading post-trade provide fully Our the quickly for strong new the is connectivity as driven revenue, buy-side comprised DC acquisition opposed bank bank provides liquidity. counterparties more the months platform than winning This within significantly a has built infrastructure of client market. and cost. at float to the standard

product, driven share more Margin the XX% its Optimization continued Our capital market by of assets adoption NDF growth. by grew Initial and Match's than

We have solutions of products market-leading and transition and leverage rates pipeline rates data strong a which and new sets, our including FX new and FX innovative LIBOR franchises.

and growth We continue double-digit software to our post-trade businesses. expect across data

over profile profitability As continuously parts margin to our the now to happy call Bisgay. are Steve business, that of I'm to we to significant With continue expected turn electronify improve. and

Steve Bisgay

Thank everyone. you, Sean, hello and

by aerospace X% revenues quarter. a Peak, a quarter grew insurance it's significant driven business milestone Rolls-Royce hires the brokerage client aviation winning achieved and new by this brokerage in during by brokerage insurance as group our Our reinsurance.

and size We expect group newly as top-line over scale. bottom-line next previous insurance growth reached productivity. XX% for business $XX We're over front-office and around BGC's has and million to lines business XXXX XXXX. to by in brokerage profitable quarter increased $XX compared in this to its improve hires be quarter expected million fourth our launched the Furthermore,

Moving to on Fenics.

for million impact in been of and earnings our our continued would Fenics insurance This but brokerage GAAP quarter the BGC's higher quarterly standalone pre-tax business. offerings have $XX.X investment

drive clients we all a insurance and increase $XX our $XX last expand earnings pre-tax our at $XX stand-alone improve we Lucera, equal. our brokerage collectively UST, in to profitability, platforms, in is improvement will offerings, agreements, million else Fenics EBITDA $XX Fenics, businesses, This the continue further includes in our we expected break-even to new expect by optimize and million year. commercial adjusted profitability combined Fenics electronic Fenics least across and improvement of newer higher As quarter. GO, million adjusted what with next above XXXX, in This product overall million and which add

Moving XX.X%; to by Starting Europe, revenues results. geography: quarterly Americas the XX.X%; declined while our our by Middle with declined by XX.X%. Africa revenues by down East Asia-Pacific revenues were and

base remain we on expenses, cost terms focused In to improve our reducing margins. of

of compensation decreased our earnings reduction expenses as lower million commissionable as under Our a program. cost as adjusted well $XX result revenues

tighter on selling obvious the and decreased primarily cost expenses. due as The The promotion well these a in to expenses by during Notes XXXX, as was was pandemic. be lower expenses continued non-compensation selling impact due driven decrease quarter. facility, expenses offset the X.XXX% focus partially interest to promotion in X.XX% million Our in in which $XXX management by less of COVID-XX the expense, Senior increase $XXX and Notes the and interest revolving XXXX credit would of lower Senior on due due million the a expense paid an full of decline

our on earnings. Moving adjusted to

compared million was income $XX.X pre-tax with Our million. $XX.X

share Our per $X.XX or were $XX.X post-tax earnings compared $X.XX with per $XX.X million or share. million

to share count. Turning

third increased under diluted XXX.X X.X% the fully in count share XXXX. weighted to million by earnings Our average adjusted of quarter

X.X% of spot our share of sequentially. count was As XXX.X XXXX, an increase September million, XX,

$XXX.X quarter revolving $XXX.X total to relatively year-end with cash sheet of issuance the count million $XXX.X compared capital down and was $XXX The Senior $XXX.X and million. were as sheet, due million $X,XXX.X to to pay figures expect fully X.XXX% was of credit and of XXXX more balance end use balance with May borrowings our call $X,XXX.X in with September Notes our happy to share diluted approximately compared by minimize reflect million still X.XXX% our back to respect over XXXX, in our of XXX full, XXXX. working compared $XX on I'm X% of XX, acquisitions million. expect We We that, million million the to million million XXXX increase turn other compensation to with tender dilution. liquidity XXXX, respect And movements Senior with Howard. ordinary With and as around due to to capital. Notes facility Notes of payable year-end

Howard Lutnick

Thank you, Steve.

XX fourth for days quarter for the as to with XXXX first outlook trading of were lower of quarter revenues fourth X.X% approximately BGC's year-on-year XXXX. the year of Turning earlier, our compared the a

of We return are beginning to to evidence growth. a see

and fourth of increases XXXX, the Asia-Pacific up have of of For example, trading first regional represent pandemic. XX quarter X% running XX%. first start revenue days in revenues These increased since the in the our the is around Continental Europe our over

of generate we So $XX between to adjusted at total anticipate million the million. that's million. the fourth range to to earnings And of tax $XXX guidance. to XX% our $XX.X that XX% range for XX.X% revenues be anticipate and end be December, of that compares looking million and with earnings the quarter, full-year forward pre-tax to million full-year $XX XXXX will XXXX. expect in for the $XXX.X Beginning compared to we the $XXX adjusted to the rate modifying be compares update in of we we way We and

we an plan or update forward, be the call expect if quarterly we range. either guided above provide range to Going the affirm questions. that, like to to previously our operator, guidance we'd open or results With below for the

Operator

you. Thank

session. We question answer will Instructions]. now [Operator begin and the

Sandler. of Our Repetto comes Please Rich from Piper ahead. first go question

Rich Repetto

Howard Steve. morning, Good Sean and and Yes.

data, down software, first the the XX revenues intercompany post-trade The went a Fenics. question on as So million intercompany. is revenues quoted

been, it's time first down the that's went it XX%. So

think I past quarters. first four been little it's or think below the a in the five million down XX time the

So feedback going give you what's on or color can a little there?

Sean Windeatt

here. It's Sean Rich. Sure,

business moves intercompany -- remember said provides will into in which electronic revenue fully be voice into as fractionally revenue course, revenue remember that secondly, that well. the electronic as that by a into is percentage, the we that electronic definition fully voice it the business or we lower that want from businesses said go we trading the also when as our lower fully happened. that -- And past our fractionally line there what technology You say it's or then is has as the we and the is, will Fenics may of some a becomes for to -- the

Rich Repetto

intercompany us So give Does out isn't I'm -- -- the you electronic can which much as revenue -- revenue, Fenics for in how that feel company sorry the electronic a broken a then anymore. is? that of

Sean Windeatt

is for And there a the, again is so the one. that fee. number two so, platform, to our No, -- charges -- technology intercompany so then that's with Fenics our provides side business two company the parts voice for and where technology

of quarter. revenues revenues is the in as those though, into move if the they our convert down voice go as before, third as become we revenues that voice business fractionally design into businesses brokerage would our our Equally that declined, revenues course, electronic. of revenues, So, discussed aim in our -- declined -- and electronic those we the hybrid electronic

And so line. increases you see electronic revenue in our

those mixture of it's a two. So

Rich Repetto

Okay. last how year. big make question price down All materially. year, I -- also right. stock with And like is difference another earnings is point The then, about to a there's dividend no guess, good par are compared the one on how but is last now you

capital is So know too? see any you've year-end, there policy return that updates we you I update as what the talked a but difference anything can that do that? you have -- us on can -- And on about you

Steve Bisgay

firm of prepared will definitely the cap And part buybacks policy focused. discuss as more planning, to considering next call. you're historically, one aware, But of currently have certainly is policy, we be Board and been our as evaluating is say in conference that return consider The entirely the next dividend at share has but our our we quarter. part Bisgay. capital note will as will Steve it's point to Rich, its we Hey, return where

Rich Repetto

million Okay. net doesn't it guess capturing like the was of downs and year-to-date? than just And cash the or it you on like your and seem all the question last et pay revolver, $XX it's through the walk debt that just is, isn't million $XXX so is I about cetera. whether up I higher wondering looks paid could the down that net cash, you year-to-date debt debt why flows

Steve Bisgay

quarter, certainly We $XX is did significantly million, Well, as of total liquidity our to a it's we up you about well, million have do to up -- up, it's know, million, year-to-date. tender, $XXX XXXX $XXX so entirely that note paid this took of million are that's well. the The coming effectively that due. May for revolver as million We we a pre-funding it. was part $XX a $XX down the

in mind well. case bear the that's as -- that So

Operator

[Operator Instructions].

Our of James. next ahead. Raymond question O'Shaughnessy comes Patrick from go Please

Patrick O'Shaughnessy

To been about $XX million, $XXX distributions off dividends adjusted year-to-date bit different net that have last than lay million morning. directly so on earnings to million $XXX question flow think so been of maybe way, a Hey, around of build by debt Rich, is little I from year-to-date that good more Steve, $XXX from cash it have million. in, increased

of year-to-date? of your flow some the are what So other big uses cash

Steve Bisgay

about it's On that. quarterly roughly CapEx, a definitely of we CapEx. Well, no average question million basis there's $XX-ish

for certainly We have continued that our -- to in towards well, -- turning although we're turning well. a the corner, that. and we're a corner as as we've profitability about on no as the Fenics, question been investment historically And said, business drag, is of had insurance the has also looking bit

to as forward So generation we're shorter much cash forward. looking very planned much going

Patrick O'Shaughnessy

front bonuses And to to business, of some bring it. a paid them on that Got the been speaking up. Has up there brokerage board? lot hiring then signing you've those to done insurance build of you've mentioned folks that

Howard Lutnick

often long-terms sign them upfront producers payments contracts. their when long-term Pat, with we hire have they Yes. big have

has yes, will cash the been here that historically our is grow company. its be able the and be of cash that flow profits and model contributing positive as and model So, turn, to cash those using business own and the to our

million to company a good And to than past it turned period has has be feeling it the was expect, really be years, it's quarter, Steve in we positive literally in XXXX. as quarter but profitable. fourth the we of And now. in So as say investment the be that more $XX been said, will the that significant and few -- fourth in are to that

XXXX will from $XX turn XXXX to of the to an improvement million. from be So XXXX XXXX,

in that we people. continue to invest so can And grow business, these

for the driving. said, you on the now the profits hiring As of business, and talented producers long-term do is that which

So position to I business. think in we're grow excellent an that

Patrick O'Shaughnessy

terms any run of then, just about moderation expectations or good Got your of. our of you expenditures for expect it's thinking right in a year, to to think capital cash we kind it. And higher be as producers modeling upfronts would flow the or next

Sean Windeatt

Okay.

a insurance, run -- our to and of, services business. financial producers, it's -- I think reasonable great rate actually continue-- in to in both think we as we it's our hire continue our that probably in

rate the So of run think it's good being. I for a to think time

Patrick O'Shaughnessy

Fenics then, brought was guys $XX Got that to quarter, an insurance brokerage million. so in expected it. XXXX. And you to up $XX plus Last you relative million business -- that is of incremental an incremental EBITDA provide XXXX

$XX incremental speaking you're did where come that that to this So million from? quarter

Steve Bisgay

numbers expectations the therefore, good expectation Came to from improvements about and our expectation -- two and of next our and we year. improved improvements earnings benefits both those adjusted of from of -- of both for EBITDA insurance upping our our items have improvements both actually, in feel in line

Patrick O'Shaughnessy

insurance on the to brokerage think year. be front that more language remained I the it just that Is because going Fenics for break-even next it's

that So the implies I incremental that insurance specific about to more thinking upside I way? Am guess brokerage. right that is the

Sean Windeatt

correct, absolutely Patrick. is That

I it more insurance is As point. at both is said, but definitely it this

Patrick O'Shaughnessy

Okay. been an how adding weeks guys talked we've few look Would would buy-side J. priorities Obviously, strategically, cash you a guys a connectivity? but Got model? for and your buying connectivity at you announced it. interdealer something cash, at about Moore look this B. acquisition other ICAP Liquidnet to business just buy-side of what's TP historically back. like

Howard Lutnick

manner aggregated to the have use banks, aggregate can attractive aggregator in present then Algomi acquisition from their to I the allows allows to strategic we, that comparatively to all credit the that seeds on which different small talked think we and product the it call, is app an a the banks buy-side in we and have an about clients, granted we made we it which buy-side. stream and

the provision buy-side banks that the growing buy-side, driving And combination to buy-side an aggregator is of the of business. as and our so our way their to of that liquidity

I network, leverages think it it our position, and our bottom-line. our leverages drives

these helping is we're difference had had. to it. The Algomi built the banks a already the think business which all buy-side are banks, driving connected They buy-side and us have that now and the going bank number to to just are on I just we're So clients. the all add with -- connectivity we have substantial didn't pieces we -- we of clients

well combination, So that for think I bodes us. that

I us. like year. acquisition forward I big should And to so, we no, not think our coming to you perform expect admirably think I going But have -- not from should -- expect but us don't and see that we're I over that strategic us have, they perform you a strategy you'll the see with think us think pound you're

Patrick O'Shaughnessy

makes That Okay. sense.

past and fixed all I trading quarter get sales of the totally this big So another banks blowout that. income quarter, had terms in and

their doesn't of effects that because BGC? they correlate revenue going available trading, that. order you in Are and to spreads capital gains think and effects things their other to indirect into on are that revenue terms Your maybe have in thinking be I'm second maybe But optimistic there to BGC necessarily there desks? bank factor banks being any for are beneficial of hiring kind trading into and

Howard Lutnick

Actually, yes.

six that are would feeling wings We have against be volumes during the band horrible, of be paired volumes rubber a ourselves money their when clip. very then and for But clients if back period -- months markets lose horrible would the sort they because would high. they so, banks -- the then later, instance, were just the as always viewed our then

of trades of the bank, they're so scale they the to the when bodes spread which strengthening future. or necessarily math, the feelings, now our by in well but only those don't quarters, money invest have And strengthening trades willing on we blowout their for make

six-month coming make, next we good. tend grew six feel the the good trade months The more so and banks our make, for the lag I more and banks think a are more they good bonds. we from that's makes to So be

Patrick O'Shaughnessy

Was going there they this FX that And your in one volumes or mix stood Fenics And on the a was maybe anything Within then $X being revenues from out is in unusual despite it. the and about think sustainable were me. it to was million quarter one this and I one-time just shift a basically forward? me Got on flat sequential Fenics, basis. was in FX thing the business FX up quarter-over-quarter that -- a basis. revenues positive last

Steve Bisgay

the -- it The is it's good it's There one-time is just there, news latter. nothing there. was in

before, think, part a has us mentioned it's class performed good as we -- and of is asset quarter. this for the strongly I business

Operator

to This over turn for concludes our closing back to Mr. the question-and-answer session. I any Lutnick remarks. like conference would

Howard Lutnick

hope for again New And Year. and talking look forward thank joining stay stay forward and to we next in Well, we And quarter us to everybody. safe look speaking and you you healthy. coming Thanks we the today back you soon.

BGC (BGC) 28 Oct 202020 Q3 Earnings call transcript