Earnings call transcript Q2 2023

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Operator

Greetings and welcome to the BGC Group Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder this conference is being recorded.

It is now my pleasure to introduce your host, Jason Chryssicas, Head of Investor Relations. Jason. you, Thank

begin. You may

Jason Chryssicas

open. and quarter good presentation issued you, the everyone. these morning, financial results second market to XXXX prior the this BGC's press results Thank morning We release summarizing and

You can find at ir.bgcg.com. these

quarterly We press in release on today's presentation. results will investor details provide additional our and

provided period any are year compare period. revenue today's figures only as with the otherwise stated on XXXX prior Unless second for the current the provided indicated. historical results call quarter of Certain

this on results only our to referring be unless will adjusted an stated. basis call earnings We on otherwise

may to You refer adjusted also EBITDA.

we You and marketable as define total may and non-controlling refer been and to equity our redeemable have fair as that capital owned and liquidity, financed, plus loans interest, which value, equivalents instruments agreements. repurchase total securities stockholders' agreements define interest financial repurchase cash We not partnership subsidiaries. reverse cash in securities at less

under Please reconciliations in results uses accounting of and when see items for how accepted for the terms, of principles today's updated sections corresponding the to management relevant these generally and and the complete definitions GAAP. such results any or the press why see release non-GAAP release press of terms. today's Please GAAP back also

technology-driven growth respect and our as and markets with company's on our refer Fenics. and in We Fenics mentioned non-GAAP website Fenics’s include Fenics our results businesses today's information Additional to the to ir.bgcg.com call GAAP offerings on is available platforms. investor presentation.

financial to and as law on Any are call forward-looking statements. about risks undertakes forward-looking required involve the business also statements any that I except our position, no outlook. BGC uncertainties are that These remind you liquidity historical obligation statements. not by statements regarding results, update today's forward-looking and information include business company's

acquisitions outlook or extraordinary transactions changes targets company's on material no buybacks discussed this meaningful and to stock assume the price. call Any

these filings. SEC note subsequent Form on such uncertainties, special in forward-looking risks not or filings additional factors risk reports forward-looking on statement of discussion especially actual factors in contained the BGC's forward-looking of contained XX-Q Form risk those and see updates the any to limited X-K. set and Form differ to which from XX-K, cause And a including in could forth For not on results information information but

now call Lutnick, turn am to of I Group. CEO to Board the Howard of happy and Chairman over the BGC

Howard Lutnick

and welcome Officer, Thank the to Operating as first today Chief XXXX and Jason our Financial call quarter me Windeatt; our With you, BGC conference Good Jason. Chief and after Hauf. second morning are our our corporate Group. call our Sean Officer, conversion

strong zero in to as We rates. of growth scale XX% of end generated revenue over the interest of the continued following platform. the reflects manufactured breadth and outperformance quarter our our global BGC second improve business

We company. are remain growth a and to expect

completed our quarter, million reduction, is shares, of share the X%. count At conversion diluted approximately lowers to our average share count and fully we which which third share a million by reduced the beginning weighted corporate our approximately XXX $XX

CFTC to respect are we awaiting FMX, With approval.

cash reshape users support But and the same of strategic added who platform playbook. the the the continues the to share US are the investors industry products. the US outperform FMX's of interest to opportunity these the with market treasury interest we unique to futures, in quarter. markets. partners and execute expect details We now futures from represents fourth strategic largest US the In our rate captures FMX and these will transaction rate announce CME.

like turn call Sean. With the to that, I'd to over

Sean Windeatt

Thanks, day and everyone. good

execute which strategy the share in we quarter primarily million the $XXX.X our with in continue market as improved by to to increasing growth all XX.X% second by of grew across to revenues driven XXXX was Americas, geographies. region. This revenue Our growth the increase XX.X%

our in business leading our growth growth broking by revenue along led strong across driven our with XX% improvement ship complex by environmental energy businesses. was and and broking business, a Our Energy double-digit Commodities

rates. class now second asset largest our and represents Energy Commodities behind

businesses Rates foreign as products. Exchange fixed and Our emerging Credit strength income in year-over-year products European, inflation exchange generated Foreign market solid growth and by as well driven

forward. income We fixed expect and continued foreign across exchange improvement markets going

We the generated quarter. share a during $XXX.X by EBITDA XX% million improved $X.XX all to grew adjusted million earnings and XX.X% adjusted Pre-tax XX.X% double-digit earnings across metrics to to $XXX Adjusted by growth improvement. XX.X% second or earnings reflecting quarter. adjusted $XXX.X by for million post-tax the per increased

the was grew network of Rates, million, growth Credit and industry-leading an pace Fenics XX.X% businesses. Fenics generating total Fenics XX.X% which at $XXX.X and quarter. during of Fenics. to post-trade led revenue strong by Turning This data BGC's revenue represented of our

data quarter the this to we've data software post-trade of reflect to post-trade network and from better renamed Beginning the nature these and item businesses. line

share Markets Fenics Fenics a captured generated Fenics Treasury XX.X% growth revenues million improvement Our last year. US revenue record during increased quarter. increased versus the market $XX.X platform and XX.X% by over and of significant XX% revenue

grew grew second the credit market quarter US basis Match Portfolio continues its XXXX. five-fold points credit quarter. the over of the second XX% over fully the quarter our Our credit and the CLOB XX% share markets. increase during volumes electronic to share platform, its Match, from market up to first in across XXX industry outperform Portfolio from

products. market revenue the by Asian significant electronic more Fenics second saw than across equity growth in options gains platform, quarter share fully index primarily GO, driven double our

Data revenue post-trade Market revenue our XX.X% post-trade Capitalab driven growth and double-digit by Data strong across network business. Fenics and grew Lucera, by

revenue post-trade network of the and months over XX data million for Our first the $XXX last time. surpassed businesses

These by rollout businesses renewal We longer-term execute have rates. expect high customer revenue we recurring additional supported pipeline contracts as continued growth generally and on offerings. our

the to of XXXX. provide third outlook. to Turning guidance quarter I'm following for pleased our the

$XX million of $XXX million range $XX.X represents adjusted the third We versus We total revenue XX.X% generate of growth as $XXX.X compared This million of year. our $XXX range. to earnings at between in to midpoint and to of quarter expect million anticipate the be outlook of million $XXX last XXXX. in to million the pre-tax

Jason. turn to to like over I'd call that the With

Jason Hauf

Sean asset Commodities and revenue Thank generated BGC total increased as last an by million, everyone. XX%. increase Energy and XX.X% you, of class, of $XXX.X year. compared to hello, By

our Trident Commodities by X.X%, increased and Excluding increased rates and XX.X%. FX by was organic increased growth by equity Credit X.X%. in X.X% by decreased Energy X.X%, acquisition

Americas by revenue geography increased XX.X%. By

the XX.X%. growth organic by increased East Pacific Europe, Africa in and revenue Trident, Americas and Middle by was Excluding increased revenues Asia X.X% X.X%.

Turning expenses. to

to GAAP This both growth XX.X% Our greater compensation hybrid and earnings, our our led under across and Fenics enhance by businesses. and increase benefits and employee by increased XX.X% respectively. hiring adjusted voice was

and Our noncompensation expenses under respectively. GAAP XX.X% earnings increased by X.X% and adjusted

earnings. adjusted our to on Moving

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

an XX.X% million, Our adjusted EBITDA was improvement. $XXX.X

count. share to Turning

Our share sequentially XX June by count shares. spot X.X% XXX.X to of decreased as million

fully year-over-year Our X.X% to shares. diluted but average decreased million weighted share increased X.X% XXX.X count sequentially,

of count However, corporate count weighted the million beginning the quarter, as approximately to reduction shares, resulted $XX at our third approximate fully which conversion average mentioned, in diluted an X%. by Howard lowered share share XXX share our of million our

the senior less $X.X were million interest XX, May change compared received June additional of our In of of the year-end proceeds X.XXX% with outstanding for both would this senior We these paying $XXX.X quarter, incurred otherwise reflects million reduction the XXXX. as the five primarily July, additional interest our expense. was on the it million, $XXX We million of higher XX of from notes period. notes the revolver. senior liquidity notes. net down X% $XXX.X an have $XXX interest This was last we million completed repaid our largely weeks interest offering during expense expense been. with offset Because than income As of

expense note duplicated rate. an However, mitigating $X.X higher earned income, additional effectively and of we interest million the interest

to XXXX, its which corporate BGC. the Inc. in full a and X Group our completed ticker July name On BGC to BGC conversion change to included C-corporation, symbol

in a and stock. was Our the units are base redemption expected equity-based GAAP and/or is diversified investor under attracting converted conversion, the deliver GAAP significant restricted shareholders. were certain In or to new connection of units. our forward material aimed quarter structure earnings. former million conversion adjusted shares Upon corporate $XX.X to for broader related second charges all of conversion, believe charge units will partnership with partnership restricted at the value There we of corporate to stock compensation which stock net going no BGC common recorded A and issuance of the Class more

rate, published operational forma second conversion synergies we conversion. Today, on tax pro This Investor estimated our about Relations website. our quarter our information and earnings following presentation earnings adjusted including the count share our presentation corporate contains

million fully count, of average weighted addition diluted $X synergies targeting lowering In also to we operational are to $X million. our share

and geographies We that sits are across working conversion. capital unlocking the following multiple entities toward

earnings, we adjusted tax terms X%. of be XXXX post corporate estimated the of to conversion, the rate in of under range In balance X% expect to

slightly XXXX, range a our to are tax adjusted to of expecting up earnings X% we XX%. For currently to rate tick

With like turn that, closing to Howard to remarks. for I'd

Howard Lutnick

Jason. scale, competitive lies platform the product other comprehensive market and intermediaries. markets. in truly apart our sets global global BGC's offer and suite Thanks, We execution which breadth financial, and advantage strong from commodity the us across energy a and

BGC's landscape Our our significant conversion. we a opportunities are FMX, you updating completed improving We to look macro strategic pleased provide continued corporate trading on steadily to to for forward have position alongside and growth.

BGC. first Group. Jason time, said, a We be BGC are simple for to ticker as with today happy the new reporting here as And the

like Operator, call we'd open to the now Operator? questions. for

Operator

now Thank will [Operator a session. conducting I you. be question-and-answer Instructions].

Sandler. with from question your Patrick Moley first with Piper proceed Our Please is question.

Patrick Moley

for Yes. my good morning. Thanks question. taking

strong in So, with have really the significantly outperformed of some consistent It June, revenues said, and accelerated congratulations like is industry. the which on you but seems your quarter. what May peers

my bit playing pretty could you seems question the you in revenues how quarter strong. dive see the you could little seems do update the us third that on drove out think XX% into if growth back a wondering XXXX a half And of just this of So guess little I what you if outperformance, -- more? Howard, is,

would I'm come what down after that the we if wondering, So expect quarter. expect just or that's forward you maybe going should if Thanks. third to maybe

Sean Windeatt

It's Sean.

quarter start, big the driven that. were had America think grow think for I which we that's I in compared of first? one don't we opportunity -- and in and said to I terms the prepared America we've of that's it America, why we in where always undersized So, reasons by the outperformance on my I tremendous was said XX.X% gone, as we're So, industry. our in just executing And to remarks, in growth

that In of said asset always quarter Energy in share the growth this fact XX% huge you've class. market that because the class, of asset was gaining & terms now Commodity we're business we our Hence, seen, undersized.

credit small business gain points. saw and FX, point Energy XX better, further our as made, that to we that Commodity as single-digit And wanted also Again, share. rates we the percentage terms And then described nice & in marketplace increases. -- out by market acquisition which I excluding double all gets we even exactly think of nice the grew that's

European grow XX% our by You just saw business as under well.

on XX So in strategy had place it's executing that we've months. for the last the

Howard Lutnick

right? look oddity. healing, oddity and produces this scenario, years upon XX all zero And years with is macro the who people for of realizing, we through It structure forward think Instead reality. was a that as that that XX beaten rate we XX-year market interest by lived is manufactured of

as to now less and process. Fed a that planning coupons morning bills, treasury said So more [indiscernible] that's this is healing yesterday, the issue

more would by just foreign around right? to that foreign credit now to in not going the We only US but of That's on and create that's volume the all based simply into treasuries, exchange, Bouncing longer-term raise exchange markets. across rates What supply rates. do? volatility, market, about going more interest coming talk trading

on slow-moving US. talked is based we exchange versus of about Europe boat. the all years, kind economy XX a the foreign of For macro That's

and have feel Now, of deep to so moving what a environment, of macro benefit set is that are every see going you're to which BGC healing has month, of you businesses kind rates and to broad, from. you're a going interest going

for sale. XX wasn't giant it windy. have We And years, a

is you're and starting picking move. wind see the boat Now to up this

nothing, seen have yet. You

good we us this we this I it's this of really, quarter ahead have coming This I don't good who a really is I are impressive. and feel down. think there is we our feel opportunities feel really And feet. who we I business don't feel think quarter. coming. great I beneath about are. is feel

forward. the fourth because And the was that bring, with It's darn of know I'm just going project guidance quarter what finished certainly going is not will XX.X%. company I XX.X%. Midpoint world way. our to Obviously, but feels at this don't pretty our way the world rocking coming we the quarter comfortable

now way for it's long and years coming our long, stay our Finally, way XX to going and time. it's a

Patrick Moley

very helpful That's color. you. Thank

color be could DTCC. on next opportunities thoughts expanded my give their question you recent Howard on with CME maybe announcement if cross-margining your to going the in any FMX. And from was So, the on

And CME customers? anytime you've their planning the getting possible approval just far given the given any FMX delays that and offer any in -- CFTC have advantages so that seen think to as you do is to delays there is these counter

Howard Lutnick

let's so a Well, take that part.

to some of people benefit, different money, with work CME And healthy other are holding the long-standing have two the cross-margin relationship holds kind fact have but hold the futures. the CME skepticism pots meaning has a of treasuries, DTCC. So, two the And the try the the is those market to when certain to want together give DTCC one. a we the the they you

to treasury to get margin to future expect to the a short hope you're treasury meaning benefit long XX% offset if XX% and you're get the So, they then. they

is view and XX% LCH reduction the LCH pieces, when holding should will where XX% margin. be care you that of only hold pieces Our model in sort a with actual and risk the both one-pot about to you're actually both

you So, with offset. it, the have rate And would if XX% they the and margin have interest XX% gigantic marginal get all of against have LCH to an treasuries percentage you Eurodollars swap or you swaps.

I excellent America. an CME So, and They competitor. smart think are capable which the extraordinary company in monopoly is

is really that had XX% them XX% think that's I And the I clever But think to really, when of having a guy going good. capable be sort competitor. of an so XX%, thinking other thoughtful never But baseline. are competitor to this shock will into we sounds sort actual -- the

XX% XX% think That's So XX% number We one. better. good. to is is

waiting think CFTC process. if just it's are a We think a do We an win. approval. It's we not it's

the through working are We process.

come. and What that We control, it carefully we come, but will working will it through it certain are are it to will thoughtfully, don't confident day okay? we come,

it I've our who relationships the strategic are the our will What we tried details today transaction get. of quarter fourth announce that that to is our of they both intention in the is say and to details and with investors

fourth of our a that's CFTC in trying try that put okay? finer So, us, that the details -- in is starting we're it saying we're they date intend So, to to to we to announcement point whatever even give with if the quarter, come sort plan.

they They of come bring also in of the and these like Now, who big institutional financial two twins. users remember individual but of bank the get And brokers have both FCM. with do those when they pieces. users Not have are They're we the you partners things largest desks institutions they of our only largest are spectacular futures. things. of world product, called the trading

in group both. market, both futures you to have you a when building as when remember But and you So you bring the the want broad need traders get partners, these users. of strategic banks

bringing of the the of all You world get their institutions coming online. largest intermediaries customers the online and

have you're CME. competitor which shorten, they we we model. and do. creating why capture frame will to wildly the And to want use to the That's we to this a full the them that's it want really that's of do broad So why by why time have

and them. a And coming, – It's we're with finished CFTC process it's strategic but then all it There's is and when approve we a the will let you thoughtful. our with we it. the we logic all arrangement with coming. It's know. process, bring it are and will when to It users the have we high-frequency the will other fully of then will they documented all our banks players of out

Patrick Moley

just – last question think in on Howard, last maybe accelerated color there as could guess be I there that be I said, that Great. you've then call half. repurchases would And well. the return. quarter around capital second the lastly Great my hinted share or

just give update So half? and an you if the expect wondering should us second could in maybe we there what

Howard Lutnick

Sure.

two the quarters, days slightly later. XXX sort business, our the XX collect thereafter. the of of between it's beginning assume starts seasonality money, quarter the the let's But declines and each at and year of because best So of it we

our we two first in the two in earn we the quarters. And quarter we paid in bonuses So taxes. paid the quarters collect cash second and the and money we first

of good the think second now, I of a it second the So the the So year, so generate have cash And we half of the of half our into good right? going generate the tend second year, part in cash beginning so the in the be of feels year, – in to Because right right? more we're year. uses in so lots half we the right? we of spenders bigger we're

Capital return is growth buyback doing it there's right us capital, and in shares ways we're now shares. with the better; much dividend, increase where there's and trading your return back being two to stock there's company a company obviously, growing, to interested in with buying

If we you count. years, XXX last two share and now diluted million share diluted looked fully at us for fully have had the XXX a we count million

count would So model I XX we our using cut people that a cash our relentlessly reduce like million shares, of know our And to which shares. share most we've don't lot. consider

So of is to share shares, send has right? issue meaning the a government, It fully allowing buyback the us count. diluted the the of same conversion an cash effective corporate weighted had average effect reducing which to buyback, the the result net

while. a not be list would we the list. be and going I I I top would the think the don't dividend So but time, the increasing share table near-term are could repurchases over think the the the revisiting off in share top the But see would think dividend seem short-term, but the dividend Board forward. of I on that for of But repurchases to our taking considering are

Patrick Moley

Congrats leave another Great. strong quarter. there. you it to I’ll

Howard Lutnick

Thanks, Patrick.

Operator

to back Lutnick, floor time. the any questions further There comments. to are like Thank no Chief Executive over I'd this Officer for hand Chairman and at you. closing Howard

Howard Lutnick

joining as you and Group, today. quarters of come Thank look for you It we forward to BGC all growth a pleasure Thanks to many, everybody. many together. us is to

BGC (BGC) 2 Aug 232023 Q2 Earnings call transcript