BGCP - Earnings call transcript Q4 2021

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Operator

Welcome to the BGC Partners, Inc. Fourth Quarter in Full Year 2021 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speakers ' presentation, there will be a question-and-answer session. Please be advised that today's conference call is being recorded. to Chryssicas, the Head about speaker to now Jason today, of would hand conference over your I Investor Relations. please and you, go Thank ahead.

Jason Chryssicas

financial morning. We and presentation Good BGC's these results, XXXX summarizing this everyone. and press earlier morning, results release, issued full-year fourth-quarter

these presentation. Please note XXXX find today's the provided Unless details otherwise find on you press today's call ir.bgcpartners.com. period, results and insurance excluding November its prior-year the the on of quarterly X, stated, with our in at fourth compare release can XXXX. can additional revenue You on and quarter to only investor results compare due sale

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

statements today's are also our businesses GAAP as website that on Fenics regarding on statements. technology-driven We our Platforms. include business offerings and our you undertakes statements to COVID-XX financial by today's pandemic on company's the I include investor And involve business at and the Markets liquidity, law, the except call historical required These about uncertainties. Fenics. effects not with transactions on are company's the forward-looking of Growth that outlook and BGC extraordinary remind information changes forward-looking Fenics ir.bgcpartners.com respect risks Additional and position, call, available results, non-GAAP statements, obligation Any in outlook. to targets and to as our or results buybacks, assume forward-looking discussed refer company's presentation. price. this material and is meaningful any no acquisitions, the update information no call on stock any mentioned Fenics to

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

Howard Lutnick

in fourth our are Operating Good Sean morning you Financial Officer, Windeatt. me improved year Bisgay thank Thank all for for and Steve us conference quarter Chief BGC today our With call. across you, Officer, Jason. and and Chief profitability full joining XXXX metrics BGC's XXXX.

products Fenics euro nearly launched global with by complex. and success, business count and this in initiatives our Additionally, brokerage dollars, entire launched by for and of UST's reducing for the comprehensive share expanding quarter recently the year. market offering, of XXX XXXX, over have end U.S. futures, the expect Futures of the $XXX to FMX expansion U.S. to basis concurrently of to consulting XX%. treasury points Leveraging fourth crypto futures numerous scope by XX% selling insurance share partners, we of Futures after we're clients pleased the we executed strategic so on cover lapsing Fenics and values announce a million, our over to Rates including a UST's were our number

platform our Fenics crypto infrastructure is multibillion-dollar global technologies. state-of-the-art and powered Our by trading

exchange Our the exchanges amongst crypto offerings. an scale lift we leverage plan to derivatives, to we was our futures first permitted cryptocurrency as advantage

million As XXth million. you count on by on completed our our we over units, we fully repurchased bringing of November Since diluted shares know, have sale of in procedure the insurance Xst, reducing redeemed May the we sale and brokerage business gross announced $XX.X XX%. share in $XXX

over full an to continue We industry-leading XXXX. at $XXX the to Fenics business of for higher-margin pace year grow XX% million technology-driven our

quarter, XX% total revenue, by BGC's record For prior excluding the a of the to which improved the first costs. compared XX% next year, insurance net represents revenue

exceed a Fenics take a basis growth factor to I'd XX% post-tax update the you expect like XXXX. quarter BGC revenue of expanding my We on points. quarter, in Fenics XXX key total by margins moment XX% a front-office revenues by and to health. earnings during improving driving higher in to was adjusted productivity,

scan As XX. updating many PET At my I XX% look mid-December, PET I scheduled you and final resolved of to to non-Hodgkin's was in then. a where very had forward I it cancer have doctors happy. But I'm me and that my and very, March, was fall in the made the scan happy lymphoma. chemotherapy very in completed positive with I know, you report diagnosed in January

If the on I'd you'd video details, YouTube. Bisgay. like update that, on both recent With more over Rumble, to turn on website, to or is Steve my like call our provided most

Steven Bisgay

which of included you, Howard revenue. generated and total Thank everyone, million $XXX.X BGC hello insurance of revenue $XX.X million,

insurance, [Indiscernible] X.X%. volumes rates class driven East, business products, secondary plus activity a increased Europe, trading rates brokerage, while during market-wide challenged. across Americas softened increased X.X%. Middle and quarter Shorter cases improvement Overall, X.X%, fourth dislocations, the of by the half excluding by versus with geography while X.X%, X.X% $XXX.X Africa asset the particularly industry-wide European were revenues were and credit, increased and insurance while Buy revenues and first quarter of an decreased year FX, across integration the as our energy by the technology in volumes /Hybrid XX.X% and Pacific Asia By has X.X%, by volumes fourth the Fenics mixed Deeper December. across productivity during solid credit of energy equity ago. and fourth equity-driven Excluding global entire in quarter. quarter in million, and X.X% driven COVID-XX seen X.X%, revenue solutions front-office surges was by the cash and higher business decreased equities the X.X% commodities, respectively. total

volatility highest Average the volumes when only behind record For year, front-office the ever productivity global X.X% to full levels. mark, to crisis XXXX drove second and $XXX,XXX, the increased financial

our profitability and increase. automate to continue we business, we productivity expect As to

of adjusted Fenics million, XX.X% of Fenics Fenics growth -tax an and an improvement increase a generated of XX.X%, had $XXX.X to of of improvement generated performance. Turning of and quarterly pre Fenics of recorded revenue $XX.X an net XX.X%. revenue XX.X%. earnings platforms markets revenue million, margin $XX.X million,

the Moving non-cash. the totaling and of of on due were our which compensation business, sale Insurance to included million, to increased and which one-offs Brokerage expenses, fourth of majority employee expenses sale-related quarter the GAAP charges under $XXX.X XXXX in benefits compensation

These as reductions expense, restrictions COVID-XX geographies of and X.X% across respectively, professional operate. adjusted Our and relaxed expenses. earnings higher partially expense due interest we having selling in many by were by and X.X% other non-compensation offset lower the to and which primarily under promotion decreased charges major the fees, consulting expenses GAAP and

adjusted Moving onto our earnings.

and income $XXX.X basis an pretax EBITDA X.X% an Our improvement represents point XXX of increase $XX.X margin adjusted million, XX.X% We XXX.X%. We from an was XXX-basis expansion million, point fourth of post-tax of increase of recorded million, a adjusted and year. $XX.X of last expansion. generated margin earnings quarter

Turning to share count.

average to million. sequentially Our share X% and count $XXX.X weighted decreased X% year-over-year

spot shares XX.X%, Compared December fully as share BGC's which of Our which decreased to A repurchase $XX.X year. reflected million reflected XXX.X X.X% and year the shares during million million count the to ago, units share $XX.X common by by quarter. shares a during diluted or sequentially XX.X redemption decreased million or shares, diluted spot $XX.X and of repurchased Class the million count fully XXst, shares,

and repurchases of with dividend and well other turn cash a payable $XXX.X XXXX. XXXX. million were was other billion million year. was of over compared distribution million as payable $XXX.X $XXX.X borrowings $XXX call The $XXX.X to that, million the of equivalents Cash liquidity happy in were $XXX.X year-end last reduction unit versus to million with Notes XXst, I'm XXst, payments, reflected as December $X.XXX million with and change As to our and as million December borrowings and our compared million. of those total with $XXX in $X.XXXX capital in share as liquidity compared And Sean. and compared and $XXX.X billion

Sean Windeatt

technology focused is fully-electronic while business, higher-margin at hybrid day, state-of-the-art into billion Fenics revenue Fenics, Fenics Fenics grow its good and strategy Platforms, $X.X on scaling rate. everyone. technology-driven and FMX a Market Steve, driven converting revenue, Thanks, base higher-margin cryptocurrencies. Growth continued voice market-leading including to its our concurrently

Looking at in more Fenics detail.

Our Growth Platforms driven Fenics new market-leading platform. FX, by the Fenics GO. U.S. traders year nearly UST, from across sixfold, growth by revenues improved ADV a treasury and revenue Fenics product driven using ago, XX.X% Lucera, more Fenics Fenics growth, offerings, increased and

Fenics significantly share market basis ADV points nearly over of overall increased in December. outperforming growth market. quarter, XX%, UST had CLOB During Fenics X% the UST fourth XXX the

fourth compounding and ago, FX far to quarter. Lucera's and providing and bill and infrastructure. an increase saw deepest management comprehensive options XX% revenue platform, Lucera trading T-bills Additionally, FX large GO, electronic trading, electronic nearly onboarded growth new of base five-fold pools its the double-digit Fenics a of generated a increased growth liquidity solution. new the by our including overall from year in demand for volume business, saw and the booking, U.S. quarter-over-quarter, subscription bank contracts, FX, global robust the infrastructure the lifestyle recurring revenue launched global Treasury quarter third quarter estimated automates treasury of Fenics and Fenics that peers of clients, business, that which integration software revenue crypto outpaced in ' strong trading ECN Lucera, in trading market. equity platform revenue our MatchBox, driven its market. platform options of world-class our and equity saw institutional threefold a the captured it electronic electronic the cryptocurrency derivative as world's during infrastructure Fenics electronic XX% with highly FX offering its ADV in accelerated as is connectivity ultra-low-latency

new and year. in Additionally, MSCI launched XXXX cryptocurrency options Fenics expects options products in new index to launch GO later the January

FX, XX XXXX. for Fenics Capitalab, generate our provides by options rates, strong generated web delivered a with has MIDFX, and revenues over XX.X% fourth financial signed success platform hedge revenue revenue FX the a to wholesale NDF highly large to Market to a compounding its neutral last improved to recurring businesses hedging and prior than by voice total fourth more for value technology highly the growth and business, a year consolidated exposure, and driving volume the NDF, at Fenics in double Data higher driven growth Markets, quarter. of in Fenics environment. volumes FX hybrid model, continued exchange risks pace. ADV strong year. has that is and versus foreign advanced at reduce internal the a Fenics Data, data eliminated contracts Looking million doubled services Intercompany our efficient, regulatory year had ago. across solid banks Spot multi-dealer across and platform, matching XX% clients a quarter seen during revenue period. contracted versus fully FX services saw into therefore versus and market Fenics Asian This a offering new Fenics continues Direct, grow results. Market platform leading the global data. new $XX.X pipeline double-digit continued platform, revenue which ago. revenue match both robust represents MID the subscription by leading company's in technology, Fenics the market its web-based charges BGC's versus electronic double-digit in Fenics technology year quarter the helps

service technology As convert into we intercompany Markets business to decline. voice hybrid will Fenics naturally revenues continue our revenue,

Markets Fenics far rate. will While at superior revenues increase a

no this we report will longer charge. forward, Going intercompany

voice hybrid hybrid down X.X% voice generated $XXX.X year Fenics Our from due revenues to revenue. last business the conversion of of to million continued

higher-margin We focus revenue automating our our billion hybrid business. $X.X to on continue voice, base Fenics to

other the X.X% excluding latter the with across strength emerging listed more U.S. across days provide outlook same for X% were classes, improvement bonds, excluding compared brokerage of products, quarter approximately rising the offset to rates the along part to brokerage XX first rates, and easing to year, business of first trading Expectations Our last rates than This grew interest rates for expected rates of across leading markets. declines BGC's the asset insurance. inflation in end is government and volatility, of associated of lower businesses quantity U.S. particular our tailwinds with when XXXX, in XXXX, first the now quarter period revenues to turning insurance.

revenue million earnings in Howard X% I'd X.X% the XXXX. million. And with closing generate tax We earnings full XX% $XX.X And total range $XXX million as in $XXX.X range year, revenue. expect million our to adjusted versus year to $XXX.X to to for which be anticipate year that, adjusted between of million million We we earnings, -tax the $XXX compared last insurance million of to $XXX turn of pre remarks. anticipate excludes be to rate back of $XXX for to to like versus XXXX and full

Howard Lutnick

have Sean. the buybacks, you, way $XXX to shareholders returning including in distributions. over proud accomplished we dividends, Thank of XXXX, what in of million and We're

$XXX to growing lowered our BGC's across all debt also We all $XXX by of revenue over million and profitability million top-line over metrics. while Fenics improving

of to price was ratio BGC's As earnings X.X times. XXXX yesterday,

earnings. a reason As buybacks is fundamental for open compared This we'd Operator, distributions. like XX.X over call With that, to peers prioritize and we dividends the with questions. ' Fenics times why

Operator

[Operator Instructions].

Our Richard comes Sandler. of question Repetto first Piper from

is please go Your open, line ahead.

Richard Repetto

team. we're that very morning, Howard the first, the well Howard. and health everything's And front, going Good on happy

First --

Howard Lutnick

you. Thank

Richard Repetto

brokerage is -- --Question welcome. on the you're

first asset question on some brokerage the of at a taking business, just the The classes. look

and year-over-year fourth did the but XXXX. increase energy the is, to of XQ as quarter-to-quarter, us. flat special just benchmarks well I'm give revenue up. rates going question other at look energy, to pretty anyway, trying was going to see pretty you and special rates If grow the trade was color more the the seem lowest as back quarter in in the and rates. that benchmarks CME I brokerage you on were But energy know at and energy can volatile anything

Sean Windeatt

take I energy, -- I if think out on you nothing special. think is start energy I

growth to -- you a been in be area If engine it for and commodities. area growth always has us continues a

specific rates commodities, on quarter flat continue it mean, grow. build area I the and Also, think up and But perspective, nothing as in in overall I that and was rates big as think not well. just here And the quarter. in the have were and Europe an of to from up, the year. on just U.S. we X.X% a rates we but we Asia terms both a fractionally I said, energy franchise. The

factors business of we I of as singled and driving products think our us, market and emerging rates driven in I out broad for rates by our couple spectrum fact performance geography have is of inflation business well. and key the that the a in rates there in really both

Richard Repetto

it. Got

Okay.

regards office the well. fourth all partners I to the who's not on question exchange time to the launch so investing to is Next the back guess to could in great you quarter we in need I'm till hear the who at or exchange wait be making might can same you in partnership what the futures outs, launch, push products that as or

Howard Lutnick

expect quarter before to announce strategic would fourth our partners. We the

coming So than strategic for sure. right, clients, And what that our time complete happened should a our wanted with in you're be offer. they is partners sooner and and opening

to we so, decided them list all. And

do all will our to and our the will have want the that have we model I on incredible that we will positive that capacity do base strategic we dollars, so an and we from client So, partners And U.S. gotten do think do feedback it. of treasury and euro, amount they just features, we for platform. contracts, the is

it. to do technology the have We

the really do have to think connectivity it. the game I mercantile And a create only competitor we're [Indiscernible] town We exchange. in to

Richard Repetto

And and get I'm last led you back little background is and approval, an trying crypto question from what could to the you is Can to on was FMX just the the more a it crypto on approval. got get you recent to what This that? the adjusting. us understand more how that have approved. or offering your comments was bit on give approval while

Howard Lutnick

Sure.

Xchange and back. do and FMX a So clearer, approved was that are DCO while predecessor its to derivatives crypto our were and

years and Futures, that we front -- an making. in you with asset was Exchange. infrastructure the trading in sort the us. us, been clients potential on our So Chicago the multi-billion-dollar And application LCH all it exciting. has engage franchise that the extend partners And approvals, was and up a making motivated have Mercantile in compete just Exchange our in competitor strategic When deeply with again we and Chicago set globally can with years it that in of front. connected that's with and incredibly the the I powerful scale the have a system just to Mercantile really think another electronic Working regulatory of rates is creates to

business compete look, is then the euro to it our treasury clients our product pursue. feel share those so we but really and across watching on to described categories. and If excited dollars we You're it [Indiscernible] futures was with just rates about we And concurrent Merck in Treasury crypto its business U.S. a market, extend seems grow [Indiscernible] those the that can market exciting product historical it, and space. change about can categories

So, we have the infrastructure for it.

for framework We And pretty have I the it. incredibly it's exciting regulatory think us. for

Richard Repetto

together And you. Thank to soon forward Take Howard. it. getting care. look Got

Operator

Instructions]. [Operator

Our next comes [Indiscernible] from Suisse. question of Credit

please open, Your go line ahead. is

Andrew Gutman

update and This Howard glad on to Good the Credit Suisse is hear morning. [Indiscernible] health. with your

Howard Lutnick

much. so Thanks

Andrew Gutman

some potential in XXXX opportunities revenue please of you the Can [Indiscernible]

Sean Windeatt

does rollout or revenues throughout margin much of fee Is be XQ at mix XX% profile? of the growth come will year? it [Indiscernible]? holiday revenue overall step-up how from on the how XXXX the overall And Specifically, the impact Fenics in will a revenue

Howard Lutnick

if business, an and two quarters. next to had respect those the roll-off [Indiscernible] you with expiring our So, over treasury

improve. you the So, our expect the revenue treasury across opportunity should over will quarters, business two next

move Additionally, now partners so beginning over cards market about our had their rate confident three will launched how can this sayers, think a share share we we market are have but we that from whole not launched positive and years. saw. as you us, clients all share nay December, XX% partners Futures and people they've XX% to The Futures I market that strategic sequential quarters. strategic gained been in has would relentless XXXX, market had Imagine we without talking go work. And sayers. in comes bills treasury a If forward in XX% to to in upward. and watched we we and

and I the I these space -- for will say excitement is have time palpable. go future think few holidays as material So, just we improvements us be the -- to to And what think path need into to we as to think don't I futures. Treasuries would the be s just get we it of [Indiscernible]. long will when think will in revenues U.S. I they're they be And a

Andrew Gutman

follow-up with send into contracts opportunity? How XX Thanks. the large expand can will this And you're new growth? just as data 'XX. my that quarter? first You revenue XX market that growing in on step here, a large you how and up signed Is

Howard Lutnick

is long-term and happens pay. those What contracts contracts then you sign

A a contract year Let's say years. in it's four-year four [Indiscernible]. to

data. in just a begun include that offering, have is sell our data we but people So, package. are discussing now Futures to the us with to in treasury

model. see is been an as rates, the compounding what that's think And to growth so, subscription you'll accelerating I key

growth growing, adds existing on top or because you base. as these years get rate your contract three of of and can revenue keep You revenue growing four every just compounding new revenues, accelerate they growing you see,

you just the had XX%. you'll in growth we'll We XXs, then in rate. see the exceed see say it growth growth will think let's XXs, exceed growth I So, see accelerating the

next of data. so, market years, see over will larger an going And And the I they growth to get larger. think couple accelerating you're in rate and

to that multiples opportunities can is You the large. the biggest have. I I And know think what? we get of one

way market it next of our what there's size in could a accelerating we rates therefore, don't two years. the of line times now. expectation three much I data Our And can the have growth is, over is be the think

Andrew Gutman

Thank you.

Operator

Patrick next Raymond from The O'Shaughnessy comes of question James.

to any ahead. Your over go is so ensure hand Please from we're line open. to Patrick's back your line Please locally. line, is the not Unfortunately, Patrick, not open. conclude. connection team you're getting muted I'll

Howard Lutnick

Markets Thank drive for that showed proud was accomplished, conversion And drive of you the to Fenics business the Voice very of what all our will margin. we drive I'm our and metrics continue Fenics us will today. of joining of all Hybrid BGC better. what to

platforms the incredible across will trillion to to and Our building really broad and complex. a Futures in is opportunity of And instruments cryptocurrency the of X.X the inclusion wage both just BGC. someone then growth new grow of for spectrum continue us an outstanding trade scale

future. So, we're our very excited about

over My of very I in forward confident. are you. and weeks. As so happy all to wishes. for I distributions. dividends, you And and and a we can't quarter. cancer-free family update of weeks. for said, made prioritize for we're day great a very going we talking my a They've positive, you couple to your good Thanks look all And to telling to you have forward look next confident. thanks look giving scan, to couple buybacks, a in time very, to But And the your doctors forward supremely wait be

Operator

for This joining. concludes you Thank today's call.

disconnect now lines. may You your

BGC (BGC) 16 Feb 222021 Q4 Earnings call transcript