BGCP - Earnings call transcript Q1 2022

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Operator

Welcome to the BGC Partners, Inc.

First Quarter 2022 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 is being recorded. hand Head conference of to today, your like Chryssicas, Jason Investor now over to the speaker I'd Relations. Thank you ahead. and please go

Jason Chryssicas

and after the issued We close. results the good quarter market summarizing you presentation yesterday financial and press BGC's results these XXXX release Thank first morning.

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

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

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

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

Howard Lutnick

hybrid first which and morning margins revenue I Operating Chief business. pace industry-leading Good the and thanks conference quarter. grow at Sean first the XXXX Fenics representing me of us quarter during BGC's have revenue Officer, for on Fenics and call. Windeatt. Bisgay, our to year-over-year Chief Jason. our to reflects you, BGC's increased joining expansion, adjusted XX% Thank of continued margin Steve Officer, today improve, earnings Financial Xth technology-driven conversion quarter voice the higher-margin consecutive BGC's with into of represented our our overall an continue

a partnering which building swaps. and state-of-the-art leading FMX, efficient base a will with U.S. with interest cross futures our rate dollar FMX new across margining progress U.S. We futures deliver combines continue rate UST's platform platform, to platform. - and business Fenics U.S.. interest comprehensive the out significant LCH, make treasury

in currently create and competitive Our to a is offering monopolistic the futures U.S. objective enormous market. interest rate

We the the of wholesale the leveraging of be asset exchanges custodians liquidity and this to across clients, largest offering, global infrastructure includes added the are to XX connected additional electronic Lucera trading digital throughout expansion market-makers strong on a comprehensive deepest cryptocurrency of is capital to participants ecosystem, the our to which Lucera's and the pools class. cryptocurrency crypto also year. now currency of with network venues, markets connect world's our progressing pipeline

are Additionally, electronic and we expanding our cryptocurrency globally. capabilities execution hybrid voice

ever to trade its example, BGC on added the pricing offerings, and award cryptocurrency analytics, winning options Bitcoin CME. for micro brokered Case its block also distribution which options quarter, first of the clients software. first During new leverages

you is crypto Fenics and platform of our BGC multibillion a wanna I along your a to to along made in state-of-the-arts thank report by difference. cryptocurrencies way. am opportunities global really -dollar Xst infrastructure XXXX. powered cancer-free FMX all technology. and March the you I'm say happy represent Our as note, as that scale It On trading and for for big the they personal support extraordinary I of

that, about would my over update to most I'll you turn video details my If recent on our or YouTube. on is health, on more And Steve. the Rumble website available like with call

Steve Bisgay

Rising and volumes short-duration the the activity rates higher first Total trading profits. over trading interest of in $XX and of volatility compared were Howard X.X% last lower by X.X% dollar. due bar volumes $XXX.X the drove the hello industry-wide to up Energy have strengthening generated higher U.S. would mixed as last million during everyone. insurance. excluding year year, quarter. commodity Overall revenue been volatility across higher for or were rates you, million, revenue global U.S. total complex. BGC Thank slightly over to

$XX curve long-term significantly cash sheet quarter. as And $X reserve However, billion the rates industries rates balance a BGC's inflation. as be business grew the and unwinds of of the volumes month. rates to of flattening this well-positioned trillion while in and pace to inversion and per an eventual pace U.S. a yield markets acclimates and rising medium our continues at interest grew the

during energy half the drove Americas of while latter and as X.X%, commodities this Africa, by to By and revenue and Middle We and to our first rates, year. to X.X% productivity geography entire Pacific X.X% tailwinds expect Europe, the East, X.X% in by insurance, By business of continue Technology revenues business front to last while X.X% X.X%, X.X% by increased class, Asia X.X%, excluding integration across quarter. decreased by increased FX, respectively. both compared equities, begin year. Deeper office higher on the credit Fenics and decreased rates

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

quarterly next Now, Growth generated of an improvement an earnings quarter Fenics XX.X%, margin improvement million, Platforms generated first of $XXX.X of revenue of XX.X% of points. million, XXX pre had XX.X%. of The basis -tax an adjusted to performance. revenue Fenics improvement increase of of revenue markets an turning recorded a $XX.Xmillion, $XXX.X XX.X%. Fenics and

on expenses. Moving to

Our benefits the under adjusted insurance XXXX in first of brokerage compensation of to and employee sale initiatives. business both the the earnings and quarter GAAP due and reduction decreased cost

Our ago. over versus basis of adjusted XXX a revenue year was XX.X%, was which total earnings a points lower percentage compensation as

sale lower decreased non-compensation driven and brokerage Our occupancy the business of earnings respectively, well X.XX% due our geographies lower under higher relaxed adjusted to by have by GAAP and insurance as as which by major charges as and expenses equipment selling COVID-XX expense and across and were restrictions of promotion expenses. we interest communications offset the operate. These many reductions X.X% in partially expense

earnings. Moving on our adjusted to

We million, Our $XXX.X recorded pre -tax increase Returning down an income post-tax of and XXX first point generated XXX of X.X% was X%. with XX.X%. to EBITDA count. basis adjusted a basis a $XXX.X earnings to margin share We $XXX.X quarter-adjusted expansion. million margin point expansion million of

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

by of X.X%. spot to share $XX.X $XXX.X as fully by shares. count March spot fully million to sequentially count BGC's increased a million share shares or diluted diluted year XXst, Our Compared ago, X.X% decreased

have In commissions quarter. year-end December the been $X,XXX.X Cash As was XXXX, and as as our clients. were U.S., uses were of $XXX.X year-end $XXX.X and first those and imposed first bonuses, as slower the capital between payments, sanctions have million XXXX. payments with February commissions equivalents liquidity for $X,XXX.X cash $XXX.X and Total XXXX. with compared timing as with $XXX.X million EU compared countries million earned counter the the other differences Russian fourth XXXX. year-end Notes in in Cash million. quarter greatest from borrowings the million million and compared liquidity XXst, tax payable of million and seasonally collected $XXX.X of quarter. was ceased we with versus trading other $XXX.X of change XXst, a reflects our million busier UK, The parties on result, in historically March seasonally

both our from of context, parties. Russian derive less X% branch we than total sanctioned revenue For and Moscow counter

connection reserved receivables turn I'm sanctioned with $X As trades happy unsettled that, to BGC XXst, with of in over March entities. the has and Sean. call with And million to Russians

Sean Windeatt

Thanks, at Steve higher-margin good day, to market-leading Fenics, and grow technology-driven a business, continued our everyone. rate.

voice fully-electronic strategy cryptocurrencies. while concurrently into Fenics higher-margin including Revenues, Our revenue the billion Fenics focused hybrid company's $X.X state-of-the-art driven and converting Markets its is base technology Platforms, FMX on Fenics scaling Growth

the detail, U.S. XX.X% offerings, Fenics market-leading over across Fenics driven more FX, product growth, by Treasuries, platform. revenue Treasury at year U.S. Fenics increased new GO. from Looking ago, Fenics more revenues improved UST platform using traders Fenics growth in driven and our by Fenics and Lucera, XX% a ADV

quarter, XX% XXX outperforming share During approximately the first growth XX% Fenics had increased Fenics points UST UST, year-over-year the basis in the overall first CLOB of quarter. ADV market market. to

two quarter, growth all as infrastructure revenue large strong will providing and existing Lucera as which on by platform, investment XX% was growth pools business As clients. of liquidity its deepest adding transact the of driven improving Lucera, UST the crypto continued paying of XXXX. connectivity the new This infrastructure. relationships, cryptocurrency to software end expansion the its customers drive on-boarding with and world's to are trajectory the is growth first revenue banks, world-class Fenics year-over-year. far our global throughout

as the cryptocurrency platform, options and share drove Fenics GO, HSCEI Fenics liquidity increased strong FX, well double-digit revenue from revenue our an outpaced latency electronic During quarter, FX generating fold across both market added growth year. venues and of by gains XX% trading last five driven MatchBox, providers. ago, its higher overall versus had record platform, trading saw KOSPI a the FX market. year electronic a ECN XX growth, as options. our ultra-low connectivity index quarter peers the first global integration Fenics and to which volume Lucera additional FX

Fenics and Data as double-digit double-digit capture and the mid options revenue Asian which ago. at to the web FX a XX% data data. growth NDX. platform strong highly market hedging continued versus regulatory subscription FX year strong mid Revenues FX, by the Fenics continues by delivered business higher and Capitalab global XX.X% match helps to recurring risk-neutral demand XXXX. contracted to prior this its and to Looking compounding year NDF and on solid model, month market Direct, generate leading Data out its large for 's foreign rolling first March heightened share quarter, with business, record first Markets. FX rates, FX XXX% clients record versus Data, platform. the Fenics products volatility a throughout in Fenics Market platform to attracted with risk volume packages revenue reduce highly over during period. versus ' and ago. XXXX nearly total Fenics exposure, driving platform, Spot our revenue revenue has credit, the for Fenics driven improved new value ADV FX growth banks growth increasing FX year XX% a signed as across service wholesale year-over-year. XX across efficient, quarter marked a doubled Market look Market additional continue volume grew multi-dealer rates see hedge volume exchange contracts which driving Fenics

complex business Voice/Hybrid the Commodity of quarter, in double-digit down X.X% first energy growth environmental continued generated BGC's of the BGC's Our and X.X% the solid due million, business last Voice/Hybrid revenue. by across driven revenues business. $XXX.X leading grew including conversion Energy year to to from Markets Fenics

due Our by to business the market challenging X.X% medium Rates primarily long-term rates across and declined products. conditions

dealer maturity Rate industries, than down Primary years by volumes Treasuries XX% Interest year. maturities with volumes, while were less volumes XX%. example, were For SEF years compared for for improved down Swap six and three U.S. XX% greater to last

trading Now days outlook. XXXX, BGC's for year second X.X% quarter the revenues XX same the approximately were turning period excluding to our the quarter, last insurance. compared to first second lower of when

the turn U.S.. dollars. changes to volumes just euros, anticipate our that, the we adjusted to be be to to of for X.X% quarter, revenue. full-year U.S. to XXXX. year, compared expect million of and We of of the -tax back dollar full-year call the I'd And million, last Because in earnings BGC excludes million anticipate of $XX which recent to of strengthening would of rate significant $XXX balance guidance. ourselves XXXX euros, over we generate how the reduced $XX.X be portion its versus pre million didn't between million We to tax $XX.X the the remain million million total if $XXX revenue the in it revenues XX% range and our revenues of in dollar insurance in of million, like earnings versus a with below to revenue the present company X% Howard. to $XXX as range midpoint in $XX of strengthening for The $XXX the were the change the generates

Howard Lutnick

Thank Sean. you,

important continues to business, our expansion. our We continuing to are margin which make Fenics progress drive growing

that, We are and will conversion finally, roll Futures to by Board -- initiatives, offering. comprehensive the a call proceed With excited value applicable and for shareholders. including the end of We open determine drive BGC Operator, to the our of our Directors of second our launch, cryptocurrency whether are our expect to to both we the out about happy questions. for corporate near-term our we're FMX these believe initiatives And committees with upcoming quarter. that continued

Operator

Thank [Operator have we do Instructions] much. you very couple a of And questions.

Credit Gautam Suisse. from comes question first from Our Sawant

with Your line your Please open. go ahead is question. now

Gautam Sawant

is you for to also and thank cancer-free doing Gautam. that great well. my This And taking Howard. you're morning. It's Good questions. Hey, hear

Howard Lutnick

Thank too. me Really you. for good

Gautam Sawant

you expand mixed in volumes could the million their first above $XX please you punching weight that can how revenues headwind, that We could FX Can perspective where into on understand businesses the your and and translates macroeconomic through the Revenue pressured? the but it were XQ have and quarter guidance? walk are firm be

Howard Lutnick

Sure.

rising the to and rising trade. are aggressively, it where for figure rates is difficult to while So out rates community

end next the have volumes over you XX%. yield that couple has interest held So curve, flattening just rate maybe curve inverting being volumes the longer These issues, the swap of short-term potentially down and are yield down you saw and on and quarters.

the and out, the resting company. it the tailwind to gets at As its this settles Fed is year, of end final the place an enormous for

interest into are suffered we are a We've business thrilled becomes is make that business and challenge. fun. much, very when fixed are rates extraordinary much try Once couple very, and more years for of XXX rates Our living money, transacting brokering to just back. basis zero an large points, income rates rates coming the with zero get rates is really making

say by a While in And constrained you rates two end, continue deeply volumes, XXXX. end, rates over these very long the short through of world -- end I and that up next, quarters, of would are the the say, see to will the busy, start year, ramping

albeit a for is process get we that company side. to the until we the quarter through tailwind the rates So to other this great think a get

while wildly the was you've the because is appreciating, headwind -- euro Obviously, got remember it last a exchange. year dollar XXX. Foreign

we every we when worth they So $X.XX. of were a amount time make in revenues generate euros, significant euros,

it's $X.X. Now, of only worth

so you headwind. the that's And have

However, you that Central know of are couple start just quarters that quickly will as eventually well. rates raising a behind. They Bank European

the as starts the European that how raise and think raising this other rates is to consistently its with will then Central we goes the dissipate. way so rates back And Bank U.S.

world macro great volumes. better terms I a levels? foreign of business. exchange rate terms So for view, great But what's it's again, than of presentation. for in think It's two-quarter It's these in

has and down impact do Credit, chin, presentation. the volumes of taken volumes. the impact end rate at the stabilize you've this remain which are seen on will year. these So credit in things they rise down They do not rates the until

industry-wide the think are I down. volumes credit

I related I raising with declining. see credit you'd it's do stall it figure are event. just markets think deals companies access, a what for them the excited challenged, and get much quarters producing just The of being in many across industry, expect and really about with seen then talking the in always volumes dollars, we're that's we it we're try to ourselves and credit event and dollars, really to presenting related markets because crypto although You've as general to two just done seen tougher so out to market currency, presenting We're foreign and positive challenging I dollar-based, next. you've not constant we're that credit Rates show present currency for we're BGC It's rates think being Europe's will really then as positive, ourselves think business, rest our going futures about. consider and credit really in exchange to we which easier this make to. and

Gautam Sawant

And mentioned it. us rate business. into progressing for bringing Can as Got Treasury, the with a towards 'XX U.S. Futures? your provide derivatives exchange you Futures progress interest XQ dollar so investments on launch you on a just with the update follow-up you're and FMX strategic the

Howard Lutnick

in our we've UST, 'XX, As, the and of first the XXXX. Fenics got in end a and you saw treasury our didn't partners have XX% market U.S. quarter share we launched now business, we of at

So years. that's four

years in in not do we're to really so in And going active same in decided partners, to basically so the we've conversation bring waiting as banks banks the page, futures with we are and we're four interested market-makers.

pace. together, bring objective bureaucracy, lots is line the of lots to together, the institutions, and have supporting coalition and broad over are our across we so a of so these a with bring and institutions, thoughtful committees ones Our that and and them line to big them objective remains but is institutions

we in close say, it -- close is opens, would should and before expectation. expectation bring that that's the our before -- them before their our current investment I open, that So will we

everybody to the that is but cross get objective. our line the to hard it's same at However, time,

Gautam Sawant

us is you. the year, about priorities Thank in provide me. as with BGC this Can firm of given And capital well you please question X% us past the for XX% capital level talked deployment XXXX, last potential issuance compensation this a to equity is return the how still thinking as and uncertainty you for purchases, target help size tracking you've our could about target. equity in know a range year, I the

Howard Lutnick

constrain will well X%. we below issuance to issuance X, -- Number net our

it. do expect I to think if you'd where modeled X%, closer be you to we

net have to Our days equity issuance constrained. objective amounts our of the it be to of issuing corporate significant is And behind are us.

back. modeled with So be company continue first Bisgay those return you things. back tend more back balance quarter and cheap if policy, sums first you'd to the which pay the think the as the to thinking. last year stock We've X%, taxes, We is Capital of are quarter. our big the working enormous bonuses our in said, two two we system bought in how and buy we we is buying balance while and, so we money uses stock,

we cash really going and tend be to forward that in So the don't issues constrained we have dissipates first forward. going uses our those in quarter

acquisitions as So and what in we entail our Those expense grow can business. any Futures. our our investments that We think stock add not past. crypto. to use we and back so tuck-in and the Are capital balances. been has there and investments already that good the will buying two I the made share. we companies significant do be buying back balance balance in longer us in made those been to for are already invested made It's We've

if is the I be how that to I I historically think company of you'd XX% the just company, mix, closer So think add thinking. acquisitions been model return policy, which think capital in the has to you value

Gautam Sawant

Thank taking for it. Got question. you my

Operator

much. very you Thank

comes question from Sandler. Piper from next Rich Our

Rich. now is ahead, go line open. Your Please

Richard Repetto

in and forward the together I Good congrats June. morning, and health to Howard look on getting

these attracts is question involved, everybody I -- of early pull say people investors on maybe sort who's -- you how giving line. balance you How onboard? across you thinking of and more first do -- how the understand would confidence others. indication have But When you So sometimes that that like FMX. do you to want that that do an

Howard Lutnick

opposite So our happy to initiative, secret. the of I'm a report, Futures is

monopoly and the expressed the in clients are to compete Mercantile opportunity and think the our only it's We Exchange expressed us, credible I to building to the $XX really competitor, market-makers with have market cap. we're billion banks us have that Chicago

So know else I they who and and table. is know are think at all it, they all all the -- they

at secretive the banks. a supporting we not be We been this have require in the have want about be the initiative. players. order to broad-based, We table, of equity couple be to strong, to a from platform who's capable things They

on So to to not supporting this add willing and and platform. that and equity, and you able on come need have and be the you is realize the just platform you ready

across a come process. to, doing So are is know was going to to is talking line them and not talking you I together. equity unless these occur. expectation. told And who we're all that the come we're optimistic expect that they things The our And it volume we've in proof to, outcome, detailed on will call with and delivery know who this them is that both say and But strongly commitments. I just clearly but would we that

Richard Repetto

Okay.

of shouldn't saying? other the you I of So is we the heard that then major Is thing correctly, expect what if the do all them? participation from And to you're banks, any announcements until then expect launch. you Howard, get

Steve Bisgay

the Let's of majority them. just say

Howard Lutnick

I of announcement expectation. say is would launch their an I participation that before expect my the

the we single expect includes -- I end for Swap expect participate. the every Futures, expectation do U.S. expect question never And because to Futures of I that participants that is Treasury Futures, volume second them, would of and I expect and most So them? my say would and Treasury Eurodollar one, the most who all Futures, all happen I most at for in your U.S. will open business before matter year. it is, I

Richard Repetto

or you now that impact last it the by quarter. then a main decision could issues to we'll you conversion -- a resolve points talk or about the what on question that what that decision are Okay. said have are corporate grips and Can need to And factors second the make decision? with come end how to you the of

Howard Lutnick

expect the literally all need There forum. determine is benefits and of want are into remaining to convert a decision to we to a weigh the corporate shareholders We Directors corporate are, corporate they that they Board This those the where the on know decisions make weighing them to We to simpler of would company I and simpler that. balancing and committees and form. simpler are whether form. a benefits, know our its prefer

so company we for like will And make simple. it -- guys towards our would it management corporate calls because to simpler. move to we would like think these the make more simpler you more and has suggested form And company analyze

on it just their keep them do to we're So work and waiting simple.

will they decision, quarter. meaning to in is current that present, decision hopefully So but that the come

make then -- announce we'll decision, go hope we management's to that it's decision, we'll it is hands. and in they'll in forward. then So But hands, their their not

Richard Repetto

question. it. one quick last Got And

other there's have current part have the activity, expect you I eight, I lot or cuts. half. dated But words, in as -- guess, in we whether as in longer second the expect six debate Fed would rate the volatility of a more half second seven, how You well, the front-end of

your that for the lot belief will guess friendlier second your I this how half So complex. transfer a strong is into environment

Howard Lutnick

long-end or going wait the in volumes for They -- hikes XX%, that the long-end move start -- the is to the tunnel that we one two finish. continue. when Fed as the end, -- does saw, volumes optimistic to incredibly Z, and end the not X will move. and when think Fed relatively the in and quickly to up there's to the end and short the am the see think at of it okay, I positive going you I think clear, world The once think, that's people light I of will Look, and then more it, that's you're Y meaning

to is a continue to be think area. we So really the front-end volume excellent going

declines. for that is balancing away the go as with will right will of are We become area see the light it well offsetting growth long-end at it to and the it, the think a you once now waiting tunnel. end We stop

middle fourth Fed they the you finishing opinion, market -- fourth I sees start hikes. be or know, with volumes a -- think Fed in and the round quarter, the I put rates of is could will in quarter for whether So the well short long-end equal it's don't beginning tailwind this the will that of you the the it's think the the franchise. my of In when wonderful rate end, volumes and dramatically which see the to increase, I in our when

Richard Repetto

Got it. good health. and congrats, the Howard, on again, Thanks,

Howard Lutnick

Thanks.

Operator

have questions much. very Instructions] no [Operator you Thank And further I now.

So, I some to like remarks. to would hand back closing it Howard for

Howard Lutnick

Thank joining had I And this the I deeply throughout quarter. your delighted of I which us and you I'm all when support for to and go where that in cancer. good cancer-free. you I'm all time appreciate of I out see am can travel, I'd now now really a at joining pace. conference joining doing back all forward Richard, I look this and people feel

great back traveling no to to So I'm feel and back lasting anything. and I seeing I have people,

you next again quarter. your And to speaking forward thanks for look so to and support

Operator

Thank Goodbye. That session. gentlemen. concludes much, this and now ladies Thank you. you very

Howard Lutnick	Chairman of the Board and Chief Executive Officer
Jason Chryssicas	Head of Investor Relations
Steve Bisgay	Chief Financial Officer
Sean Windeatt	Chief Operating Officer
Guatam Sawant	Credit Suisse
Richard Repetto	Piper Sandler

BGC (BGC) 3 May 222022 Q1 Earnings call transcript