Q1 2021 BGC Partners Inc Earnings Call
Excuse me. This is the conference operator, thank you for your patience for the call will begin and a few minutes. Please continue to hold thank you for the BGC partners call.
[music].
Welcome to the BGC Partners, Inc. First quarter 2021 earnings conference call.
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Please be advised that today's conference is being recorded.
I would now like to hand, the conference over to your Speaker today, Jason Chris <unk> head of Investor Relations. Please go ahead.
Good morning, we issued Ptc's first quarter 2021 financial results press release and presentation summarizing these results earlier this morning.
And finally debt IR Dot BGC partners Dot com.
You can find additional details on our quarterly results and today's press release and Investor presentation.
Unless otherwise stated the results provided on today's call compare only the first quarter of 2021 year earlier period.
We will be referring to our results on this call only on an adjusted earnings basis, unless otherwise stated we may also refer to adjusted EBITDA and they were afraid for liquidity, which we define as cash cash equivalents plus marketable securities and have not financed reverse repurchase agreements and securities owned less securities loaned and repurchase agreements, we define total capital as redeemable partnership interest total.
Michael this equity and non controlling interest and subsidiaries.
Please see today's press release results under generally accepted accounting principles or GAAP. Please also see the relevant sections and the back of today's press release for the complete and updated definitions of any non-GAAP terms reconciliations of these items and a corresponding GAAP results and how when and why management uses such terms.
Digital information with respect to our GAAP and non-GAAP results mentioned on today's call are available on our website at IR day.
And as dot com and in our Investor presentation.
Refer to the company's technology, driven businesses as Phenix Phenix offerings include products markets and extra platform and its integrated marketing and software and solutions and post trade services.
This is our categories. It's been it's integrated and thing you'd want sufficient levels of technology, such that significant amounts of other transaction can be executed without broker intervention and half pretax adjusted earnings and margins at least 25%.
Also remind you that the information regarding our business on today's call.
And our historical are forward looking statements. These include statements about the effects of the COVID-19, pandemic and the company's business results financial position liquidity and outlook any forward looking statements involve risks and uncertainties and except as required by law BGC undertakes no obligation to update any forward looking statements any outlook targets discussed.
This call so no material acquisitions buybacks extraordinary transactions or meaningful changes for the company stock price for discussion of additional risks and uncertainties, which could cause actual results differ from those contained and the forward looking statements CPUC and SEC filings, including but not limited to the risk factors and special note on forward looking information set forth and filings and any updates to such risk factors and special note on forward looking information.
Obtained and the subsequent reports on form 10-K for 10-Q and form 8-K.
I'm now happy to turn the call over to Howard Lutnick Chairman of the board and CEO of BGC partners.
Thank you Jason Good morning, and thank you for joining us for our first quarter 2020 One conference call.
Joining me for today's call of BGC, as Chief operating officer share, Wendy <unk>, and our Chief Financial Officer.
Net.
<unk> margins improved across nearly all measures driven by record <unk> and corns revenues, excluding the one off pandemic driven volume and volatility that occurred towards the end of the first quarter last year, we estimate our overall revenues would have grown by approximately 8 million.
As compared to a year ago.
Beginning this quarter, we will categorize our furniture businesses as Phoenix markets and Phoenix growth platforms. Phoenix markets includes the fully electronic portions of Bgc's brokerage business, our data software and post trade revenues that are unrelated to Fedex growth platforms as well as Phoenix.
Created revenues.
Our Fedex growth platforms include Fedex U S treasuries that exco loose, Sarah Phenix, FX and all other.
Other newer standalone platforms. These platforms were designed to build volumes and market share, which we've accomplished over the last two years, we expect to leverage our strong market share gains to drive significant revenue growth from our Phoenix growth platforms going forward.
Phoenix markets and Phoenix growth platforms.
Pete with highly valued companies such as the CMA trade web and market access.
Fedex overall generated its fourth consecutive record quarter of net revenues, which grew 40% to 105 6 million.
The next markets revenues grew by grew 36, 5% this quarter to $95 $1 million and had a pre tax profit margin of 32%.
Revenues from our Phoenix growth platforms grew at $10 $6 million and increase of 82, 1%.
Okay.
So can you guys hear me okay.
As we continue to grow our higher margin businesses, we are well positioned for increased profitability.
With that.
I'd like to turn the call over to share with you.
Sure.
I think Sean lots John's line, just dropped off so steepest guy you want to jump in now and and will bring Sean will get back on as soon as he reconnects.
Sure sure.
As reported in today's earnings release.
BGC recorded its second highest ever total revenues of $567 $6 million behind only the year ago period for the COVID-19, pandemic drove market volatility and trading volumes to record levels.
Excluding the impact of these pandemic related events Bgc's first quarter 2000, and for doing revenues would have been an estimated $8 million higher than last year.
By geography, we saw Europe, Middle East and Africa revenues declined by five 2% the.
The Americas were down by six 6%, while Asia Pacific revenues declined by seven 3%.
By asset class insurance increased 16, 8%, while rates credit and energy and commodities FX and equity derivatives and cash equities were down by three 3% seven 3% nine 4% 11, 6% and 13, 9% respect.
Book.
We took steps last year to optimize our front office head count with a focus on reducing underperforming and less profitable brokers, which lowered revenues and the short term, but increased profitability during the quarter.
These measures along with increased contribution from Phenix led to a four 2% improvement in average productivity of our financial brokers and salespeople compared to last year.
Moving on to Phoenix This quarter Phenix generated net revenues of $105 $6 million as we converted voice hybrid brokerage to Phoenix markets, which drove revenues and 40% higher and delivered its fourth consecutive quarter of record net revenue.
This was driven by Phoenix markets revenues of $95 $1 million and increase of $36 five per cent for the pretax adjusted earnings margin of 32%.
The next growth platform as revenues increased to $10 $6 million up significantly from a year ago, reflecting an $82 one per cent improved driven by strong growth and Phenix U S T.
And Sarah and Phenix scope.
Under the former reporting methodology.
<unk> brokerage revenues increased by 49, 2% to $83 $7 million, while data software and post trade revenues increased 13, 3% to $22 million.
<unk> achieved record quarterly brokerage revenues of $52 $4 million growing by 16, 8% and generated its second consecutive quarterly profit.
Moving on to expenses.
Our compensation and employee benefits expense under GAAP and adjusted earnings decreased and the first quarter of 2021 due to lower Commission revenues lower head count and cost reduction initiatives previously executed.
Compensation expense under GAAP reflects $1 7 million and $22 7 million of charges related to cost savings initiatives for the first quarter 2021, and 2020, respectively.
Our non compensation expenses decreased due to manage tighter cost control.
Lower selling and promotion activities as a result of pandemic.
Reduced professional and consulting fees.
And decreased commissions and floor brokerage expense.
Moving on to adjusted earnings.
Our pre tax income was $114 $5 million and increase of two 1%.
We achieved post tax adjusted earnings of $101 6 million, a 135 basis point margin expansion and adjusted EBITDA of $147 $5 million and improvement of 24, 1%.
Turning to share count.
Our fully diluted weighted average share count increased by <unk>, 6% sequentially to $557 1 million under adjusted earnings and the first quarter of 2021.
As of March 31, and 2021, our spot share count was $557 million and increase of <unk>, 7% sequentially.
We anticipate our net issuance of shares to be significantly lowers and prior periods as we expect to use relatively more cash with respect to compensation and acquisitions to minimize dilution.
And to repurchase more shares and units.
With respect to our balance sheet as of March 31, 2021 hour.
Our liquidity was $634 $2 million compared with 650 to $2 $6 million as of year end 2020.
Cash and cash equivalents were $574 $4 million versus $593 $6 million as of December 31st 2020.
Notes payable and other borrowings were 1 billion $313 3 million compared with 1 billion and $315 $9 million.
And the second quarter, we expect to repay our $255 $8 million of five one and two 5% senior notes due may 27, 2021, which will reduce our cash and debt levels.
Total capital was $894 million compared with $828 $9 million.
Cash used as historically been the greatest and the first quarter, which includes payments of annual bonuses tax payments and timing differences between commissions earned in the seasonally busier first quarter and commissions collected from business generated and the seasonally slower fourth quarter.
The company continues to explore a possible conversion into simple corporate structure.
And when there is clarity on U S federal tax policies, and you'll be able to make a decision with respect to potential corporate structure.
I would like to turn it back over to Sean.
Thank you have and then and thank you, Steve and good day everyone.
And as Howard mentioned, both our Phoenix and current businesses generated strong revenue growth and profitability improvement during the quarter.
Profitability across our Phoenix growth platforms, and current businesses improved approximately $15 million from last year, primarily driven by higher revenues, reflecting the operating leverage and these businesses.
<unk> reported record net revenues this quarter supported by 40% growth and represented over 20% of our total revenues excluding insurance.
As Howard mentioned and yet we have modified our presentation of Phoenix this quarter to more clearly describe and categorize phenix revenues.
These total revenues equal to the combined revenues of our formerly reported Phoenix brokerage and data software and post trade line items.
The business is in Phoenix growth platforms, our new our fully electronic and Standalone from other parts of our business.
These are the fastest growing parts for overall business and have the potential for 50% pretax profit margins at scale.
Revenue generated from data software and post trade attributable to Phoenix growth platforms are included within their related businesses.
Thanks growth platforms, 82, 1% increase and revenues were driven by strong growth in Phoenix U S treasuries do Sarah and Phoenix go.
Thanks for your Treasury achieved record market share across all U S treasury platforms growing from 6% to over 9% in March 2021.
And represented over 18% of club market up from 9% the same period a year ago.
Phenix U S. Treasury average daily volumes also grew by over 47% and the first quarter of this year I per.
Forming all other U S treasury platforms, including those at CME trade web Bloomberg and market access.
Turning to U S treasuries tighter pricing continued to attract client volumes with nearly 70% of all our club trades and the first quarter being transacted at prices only offered on our platform.
<unk> revenues increased approximately 73% year over year.
And one new clients expanded existing customer relationships and reflected the integration of Algemene, which was acquired in March 2020.
During the first quarter, <unk> launched and loom Alpha and new product that combines the popular functionality of algemene Alpha aggregation with looser as global bank and buy side connectivity and rates and credit execution.
And he's go total volumes increased by the 300% and grew estimated block size from market share and Euro Stoxx 50, Nikai $2 25 index options by 490, and one size and 290 basis points respectively.
During the first quarter, we launched Dax index options and we expect to launch Cosby 200 index options during the second quarter.
The key to this technology is our ability to add products with low marginal cost.
Our existing success.
And from market share and supports our ability to quickly scale and gained market share across our newly launched products.
<unk> is the only anonymous multilateral electronic platform for block size listed equity index options, which delivers a unique advantage providing trade as best execution as well as benefits to compliance offices and need to validate these requirements.
Colin and brokerage revenues grew 16, 8% to $52 $4 million.
Setting a new quarterly revenue record.
During the quarter, we saw increased production from newly Hyde insurance brokers underpinned by hardening insurance pricing trends.
Our voice hybrid business, including other revenues and excluding insurance generated revenues of $409 $5 million.
With a pre tax adjusted earnings margin of approximately 22%.
We saw strong growth across U S and European rates, including inflation products European government bonds U S equity products and environmental products.
This growth was offset by lower activity across Sterling rates products G 10, FX options and emerging market index products.
We remain well positioned to capitalize on accelerating electronic execution trends.
BGC sizable voice hybrid revenue base leaves us uniquely positioned to convert significant semi of all revenues are high margin technology, driven Phoenix market businesses.
Turning to outlook.
I look for the second quarter of 2021 is as follows.
Bgc's revenues were approximately 9% lower for the first 18 trading days of the second quarter of 2021, when compared to the same period in 2020.
Which included continued high volatility and trading volume driven by pandemic related events during April of last year.
Therefore, looking forward for the second quarter, we expect to generate total revenues of between 485 and $535 million as compared to $519 1 million.
We anticipate pretax adjusted earnings to be and the range of $88 million to $108 million versus $92 $1 million.
And we anticipate our full year 2021, adjusted earnings tax rate to be and the range of 10% to 12% versus 11% for <unk>.
Full year 2020.
And with that possible and I have to had.
Thank you Sean.
As you've heard on todays call, we have made significant progress growing our highly valuable phenix and core assets.
And just helped drive margin expansion as compared to last year. We continue to believe the assets of BGC are demonstrably more value and its current market capitalization reflects.
Our Phoenix assets, our market, leading growth and are capturing significant amounts of market share for much larger market cap competitors.
And revenue growth also continues to outpace the overall industry.
My management team and I are continually thinking about the most effective ways to express the value of the assets of this company.
We are focused on maximizing shareholder value.
With that operator, we'd like to open the call for questions.
We will now begin the question and answer session.
To ask a question you May press Star then one on your telephone keypad.
If you are using a speaker phone please pick up your handset before pressing the keys.
And at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
The first question comes from Rich Repetto with Piper Sandler. Please go ahead.
Yeah.
I guess, it's good morning, still Howard and Sean and Steve So Howard.
And said that your management team is focused on I believe monetize and Fedex I guess the question is and we've talked prior when you said it was a priority.
So.
Could you give us a status update on where that stands.
Could you possibly review.
I am different alternatives and what investors could expect and may be and whether it's possible to have some sort of.
A timeline and just for near term event or just from the fact that.
You know it was going to take a while.
Okay, So, let's let's start with the.
The true business so we.
BGC bleeds.
And that Fedex is the greatest opportunity in front of the company to drive significant and fundamental value improvement for this company, we think our Fedex businesses are wildly undervalued and.
And we are going to be focused on driving that.
And we so and that conversation we've had many conversations about our growing insurance business. We think our insurance business continues to grow continues to improve and we also think it is a significant value and we are focused on what is the best way to do to express shareholder value.
Take time, and that's just the way it works things take time.
Now turning back to Fedex.
Yes.
We tried this quarter to show you the margin of our Phoenix markets business, so by separating and showing you the margin of 32%. We are describing clearly how our technology driven businesses are driving up our margin you have seen our.
And grow and it is being driven by the fact, and we are producing better economic results from our Phoenix market business, which drives the economics of the underlying company.
Also we started to show you the Phoenix growth platforms and those revenues for use of the businesses that in 2019, we lost $55 million as we invested in those business and building them and then then we invested $40 million and those businesses right and.
And you have just seen the revenues grow 82% this quarter and we have an expectation as we have discussed with you that these businesses have built debt market share have built their volumes have built their value across these marketplaces, and we will start to earn revenue at add significantly.
We will continue to invest in them, but as these revenues grow they're growing on a fixed cost base and therefore, you will start to see those revenues and those profits will continue to grow.
Those assets for example, our U S. Treasury business are highly sought after and are highly valuable and our objective is going to be to figure out how to best monetize those things for the shareholders of our company. There are a variety of ways to do that but I want to be clear. This is not going to be long term event.
We expect and when I say might management is working on it does.
It does not mean, our management is working on 2020 five business plan and that's not our model.
Working on it now we think these businesses have created tremendous value for the company now and we expect in 2021 to be having really interesting conversations about what Fedex can achieve and the world out there so how that will be what it will be.
I don't know, but we are going to have conversations because these assets are extraordinarily valuable and.
And they have nothing to do with the stock price of BGC that starts with a five I assure you that in my opinion I. Just think these assets are worth far for more than the current market value.
Okay Howard just.
Follow up I've got a couple follow ups one is high.
Given that there wasn't any say announced.
Transaction, I think but there wasn't any share buyback as well so is that other two related or.
And we've talked about you use and excess cash in the past.
Yeah.
And returning capital and some form to shareholders.
It's kind of funny right. If there was something to do that I, probably couldnt do stock buyback so.
These things sort of work you can't obviously I can't do stock buybacks before I announced my earnings that's sort of obvious so I couldn't do something yesterday that.
And appropriate so.
So once earnings were done.
And then my Counsel tells me what I'm allowed to do and not to we expect as the best.
<unk> said in his remarks that we expect.
And to use more cash in terms of compensating people to have less shares.
More cash to the extent, we do and acquisition and we expect to buyback shares.
Shares to mitigate dilution, we do expect to buy back shares and.
And we are going to wait for when our counsel tells us it's okay to buy back shares and we will decide when and if it is time.
And when and if it is time to buy back shares and how much of a bot and we'll tell you how much we bought every quarter I don't think we have an expectation of sort of defining a sort of a standard is simple model and flying and the X amount per quarter or is that kind of thing I think we expect to buy back a material amount of shares this year that is the.
Company's expectation.
For us to use our free cash flow in material part to buy that shifts.
Got it and I guess.
I guess my last question and I'll get back into queue, but there's a myriad of things you could potentially do with Fedex and you did reiterate it stand alone the number and the revenues that you broke out but.
And you know the things that come to mind from my standpoint.
Sega.
Pivot investment.
<unk> back transactions and.
And you do.
Troll and two camera and I believe.
Specs and so all of these on the tape like what alternatives or what.
And could investors even.
Attention.
Uh huh.
And I'm, not saying going to execute immediately but what are some of the alternatives that you're looking at.
Well.
Yeah.
The simplest way to say it is everything.
He is on the table.
Okay. If you look back to 2013 and we sold.
<unk>.
No one on our phone calls and no matter, how many times I've said the value no. One believed that we would sell it and achieved the kind of economic benefit to the shareholders that we did.
Every time I said that the share was not correctly price stock would go up or down a penny.
And then we sold the small division of the company for the market cap of the company.
These assets are worth wildly more in my opinion.
And my opinion than the current stock price I think there's some other parts is clear our treasury business went to 9% over 9% of all trading all systems counting trade web counting Bloomberg County market access counting NASDAQ, adding them all together.
Other went from six to over 9% of all of them and the last year and went from 9% to 18% of just clock counting broker Tech go look at the market share we've taken off a broker to broker debt has gone from like 85% market share and the low seventy's or what do you think picked up that market share and it's going lower because I.
Our market share is growing our system is winning.
Okay and people are not focused on the value creation of going and creating a fundamentally important competitor to the Chicago mercantile exchange and.
And so I think these assets are of enormous value and it is our job and my management team understands it is our job to figure out a way to best Express it and I want to be clear there is nothing off the table, but there was no one in this market who does not understand how important Fedex you as tears and now they are all starting.
And what's been exco.
And then the scale by which Fedex go has grown its front and market share and options.
So fundamentally impression that when you call someone and they look at the numbers. They are pulled arrives by the scale by how much we have grown them and we keep rolling out new products. These things matter.
Okay, and I know they are part of BGC, but they matter and I think we are going to do very very well.
Got it thank you Howard I'll get back into the queue.
Okay.
Again, if you have a question. Please press Star then one on a touchtone phone.
The next question comes from Patrick O'shaughnessy with Raymond James. Please go ahead.
Hey, good morning, hoping you can comment on kind of the broad competitive landscape at this point, because obviously, we hear what youre, saying with Phoenix, Ust and the share gains there are certainly impressive but.
And I think we listen to.
Trade web and they talk about success, they're having with dealer sweeps.
And.
Credit and streaming quotes that they're having and rates market access talks about some of its dealer dealer success as well so hoping that you can comment on the broad competitive landscape.
I think.
Trade web.
And market access and the Chicago Mercantile exchange, our world class competitors and World class players.
Okay and that was true last year.
And they are not any dumber and they're not any more sophisticated and capable and the success of sweeps and success of this and success of that they are all true what day Werent a true win for.
And then ex U S. T went from six to nine over 9% of market share of all of them.
And what part was not true when we went from 9% to 18%. So I think they are really really good and there was a net.
The endless volume of transactions that still go by voice and still go through dealers and still are done and the old way and.
Lists and they can all grow.
Right, but that will not stop and my opinion Phenix, Ust for making a fundamental debt and the size and scale of this business. We matter everybody knows we matter I didn't say they don't matter right. These are great players, but the fact that we are not value.
And the same hemisphere as debt.
It is our management job to teach everybody a lesson that that is just not true.
Alright.
And digging into Phoenix, Ust, how would you frame the competitive advantage of that platform and how sustainable that is.
So here he is an interesting example.
No.
In the and the CMS system.
Everyone can trade with everybody.
Sort of open season.
Okay, and what you have is a substantial percentage of their business is high frequency trading firms trading with each other.
These sophisticated electronic market makers, who make prices sort of in the hundreds of seconds and they trade against each other and they have a bad experience discussed these sophisticated players don't want to trade against each other because they sit there and pick off each other and it's very unfortunate.
What these firms want to trade with is when someone is pricing a five year corporate bonds and wants to hedge it they want to provide that liquidity invest scale.
So what we do is our system allows these companies to not trade with each other.
They can cause sierras, and curate and select who the counterparties are so they can get a better experience what happens when they get a better experience that comes so natural they doubled the size and they're willing to do because they are not afraid of getting picked off and so what happens is the <unk>.
The average size of our system relentlessly grows because it is a safer place to do and your business granted so think about it we've grown from nine to eight 2% market share not allowing.
What's probably 40% to 50% of the CME and volume to occur which means we won't let the big high frequency firms trade with each other we've actually for clothes that volume on our system, but what that's done is it's created a better value for everybody and trading on the platform. So do I think that's sustained.
<unk>.
I, absolutely think it's sustainable.
And I think it's just a different business model and the other business model is a great business model for the CMA and ours is a great business model for us.
Got it thank you.
And then switching gears to the insurance brokerage business current.
Aggressively are you hiring and into this business at this point and.
And I guess, maybe drilling down into your second quarter outlook.
And what would your expectations in terms of insurance brokerage revenue be for the second quarter.
Okay, so for the insurance marketplace.
And it's described as a hardening marketplace, which means that the.
The price is going up.
Right. So the price of insurance is going up.
Insurance brokers get a percentage of the premium written some of the premium goes up commissions go.
And that's just mathematically good to be and a business where the commissions are rising and allows you to be a default. They are rising and the reason. They are rising is because there was a tsunami of bad things that happened.
In the pandemic right. There were there were vast numbers of insurance companies that lost and a huge amount of money and event insurance I mean, just imagine the people who ensured like the Tokyo Olympics I mean, it's really just a polarizing thought to think about the insurance companies, who who had that so though.
And those insurance companies have gotten crushed with those economics and that you put that on top of their investment and experienced through the whole thing right and credit and all these other things. They just took the balance sheet took a hit and their insurance took a hit and when the whole industry takes a hit the whole industry can act and one particular way.
Which is over time, they're going to make their money back and the way they make their money back and they raise their rates and so you've seen them raise the rates everywhere. So our business insurance has great day.
And this line raw material fundamental economics sort of like the rates business of fixed income.
And when the person United States gets up and so lets talking about trillions of dollars of new bond issuance.
I can't see past the joy of what he's saying.
And there are bond deals just like bond deals and when someone says they get a bar one nine trillion.
A lot of bonds that are going to be issue and who else is going to issue them every major country and the world is going to do the same thing and this is like the greatest raw material of bond insurance has rates going up and bonds have issue and sort of flying out the door. It's these are good raw material underlying factors.
As.
For our business now.
The constraining thing and insurance.
As you make money on everybody you hired last year, because the way insurance works is the first year that you hire someone and they continue to the client stage at the old firm and.
And do not move the clients over to the new firm per year that is sort of.
The law of the land.
The effect of the way it works and the insurance business. So those you've hired a year ago you win on today and those who were hired today you build your business for next year. So are we continue to hire of course, we are but what youre going to see is that big big hiring spree that we ran last year.
Right.
Before the pandemic began obviously those people will go and to start harvesting. Those numbers. So you are going to continue to see good numbers from our insurance business Youre going to continue to see good growth for our insurance business, but theres no action, we can take.
Today, if we hired like the world's greatest team today, what you'd see is we spent a significant amount of money to hire them and.
And the next year would be a drag which you saw last year right.
You saw that in 2020, and like drag drag drag and we were happy on these calls because we knew we were building our business for.
For 2021 for 2020, a year ago, we lost money, we only lost money because we hired lots of great people paid.
Paid them amortize their cost and their business didn't come with them until now.
And so the good part is we've turned profitable we expect to remain profitable and we expect to build those profits over time and as we hire more brokers that will constrain it but as I said I think we have built substantial asset value.
Significantly in excess of what we've invested.
And we are confident.
With the scale of our business eventually.
We will find the transaction, whether that's a public transaction, the private transaction or otherwise that express and the value that we've created and courts.
Great. That's all for me thank you.
And we have a follow up from rich Repetto with Piper Sandler. Please go ahead.
Yes Howard.
First question on the insurance business.
And I believe that broke even.
In for Q.
Could you talk about the margins.
I'm missing it somewhere but the margins and the insurance business from the first quarter.
And there is small right. We just remember we started we got to breakeven and now and now we're at smallpox.
And there they are and the black.
But small and.
And it just will continue to grow over time as as more of our brokers are past their first year as more of our brokers can bring on their accounts, which don't come on and I would like to pose Monday you know it takes time.
And it takes time and so theyre going to continue to grow over the course of the year and we said that we thought over a number of years, we would get to the industry standard and 15% margin.
Those businesses growth of 15% margins and we and we expected I think we've put out Sean you remember the day, we said, yes. It was.
When we said we would double from the point in time, when we would have approximately a $150 million. So the inference was doubling from $1 50 to getting to a a industry margin around 15%.
Alright, so we expect that when our revenues get to 300 million, we would expect to have a 15% margin or for it makes 45 million Bucks.
Yeah got it that's helpful. And then I believe if I'm, just verify and some numbers, but I believe.
Steve said that the boys hybrid.
422 or was.
And it was appointed and $22 million and revenue and 22% from $402 million and revenue and 22% margin net.
Great.
<unk>.
409% and 22% right and I'll just close okay.
Our.
Next question is on the margin of Fedex.
And the Phoenix.
Markets. So it's 30.
Two now and.
And but I thought you Howard you said that that has the potential to go to 50 or more.
Margins at Phoenix overall have the potential to go like a lot of other electronic firms to 50% at scale.
Yes.
Rich Rich, let me make sure you got the right. So.
The Fedex growth platforms.
Can meet or exceed whatever other systems that anybody else has and will.
Okay, meaning they are stand alone fully electronic platforms.
So we said on the call that they could get to 50% margins, but if other people and scale gets at 62, eight and there's nothing that constrains us from getting to $62 eight meaning these are fully electronic systems.
With the with the scale possibility to get to whatever those kind of margins can get to but we have as our and our first goal, let's get the 50% margins. Okay. That's on the growth platform.
<unk> markets, which is the which is the electrification of our brokerage business and technologically driven brokerage business I don't think they will get to 50%.
And I said, we think.
And they will get to in the range of the 35.
And maybe with scale up to 40% range, because we are going to have substantially more expensive sales people right.
And we're going to continue to employ our greatest brokers, who have the greatest relationships and have the greatest knowledge and this business and therefore, they will remain on our payroll and so I think the differences Phoenix markets will have and upside of 35% to 40% margins, whereas furnished go use teams share FX and all.
Those businesses, Ken Ken the Sky's the limit as consistent to the other best players from awards.
Got it.
And that makes sense.
And get it now.
And just goes back to one question is the standalone capability of.
And like the salesman.
And.
Telling me electronic products and I'm just.
And not just converting voice hybrid to electronics are on or not.
Well I'll give you. An example, we have extraordinary market share and gifts.
Alright, British government bonds.
And that business is virtually entirely electronic.
But it is not.
Electronic but is virtually entirely left.
It was a a move from our Voyce business, where we had excellent market share into and electronic business and is the majority the vast majority of that business types and executed electronically by its clients. It is.
Right, but our brokers and manage it and make it work and that is a great assets.
Phoenix markets. So is that separable is available is that monetize the book of course of course.
Right, but it came from Phoenix markets right and is a perfect example of what can happen when our brokers have the right tools and have the right incentives and drive and build it and that's part of Phoenix markets right. And then now you have the concept of let's go build the market data because that market data is a tremendous value.
And we're going to put that and Fedex markets as well so.
Do we make substantial amounts of money on unskilled state and yet we don't we'll be we will.
Right, but that this is part of the growth of our business. So we're keep showing you. The the market data number so that I don't want to take something away from you and sort of mix it but I want you to understand that that the market data.
And the brokerage business and the electronics for all one as far as we're concerned we're going to try to maximize the value of that business.
Got it.
Last question for me and.
But the inter company.
The technology services, a 21% and $27 million.
Hi.
Could you walk through what those revenues and I and I know you haven't been.
They're not included in Phoenix markets, our products and growth.
But could you just talk about that that $27 million and the first quarter.
Sure sure.
And Sean you want to you want to start so great Yeah sure she'll say so.
And that business is the debt the technology. The technology that is provided by by the company by BGC too to our brokers and to the businesses that technology that is that is.
If you like that is the fee that is paid by those businesses for that technology and.
And as we've mentioned in previous quarters Rich, what you would expect and what we hope is that as the business.
Moves into Phoenix markets, and therefore has higher margin because you pay.
Paying lower brokerage and wed expect that business to move into the Phoenix market business as it becomes more technology dependent and then there'll be an offsetting.
Smaller offsetting decline in within our intercompany basis, and you've seen that.
As our Phoenix market has grown over the last two to three quarters, you've seen the intercompany come down and what you've also seen is the is.
And the expansion of the margin increase.
Would it be proper to view that revenue to 27 and sort of a pipeline for.
The Phoenix markets and Phoenix growth revenue.
I think I mean, that's a really good way of thinking about actually it's a very good way of thinking about it but and remember no. Other pipeline is in $20 million of revenue to go but actually but because it's just the percentage of the technology piece. So you would expect that as that goes and.
That number goes down and the exponential growth in knee.
And the revenue that moved into into Phoenix markets.
Understood understood very helpful.
That's all I have thanks, Howard and Sean and Steve.
This concludes our question and answer session.
And would like to turn the conference back over to Howard Lutnick for any closing remarks.
I appreciate you all spending the time with us today.
The company as I said is focused on maximizing shareholder value and and I Hope we've helped you understand.
Those details we tried to separate the margins.
Phoenix markets, we tried to show you the revenues and we will separate and show you. The revenues of our growth platform going forward, which we obviously expect will grow materially and.
We will continue to try to make our company more transparent and make it clear how well we are doing and building our asset value, but our clear purpose right is to understand that we have these assets you have these value and we need to express them to you to gain.
<unk> for our shareholders, which we are focused on so I. Appreciate your time today and I look forward to updating you next quarter.
The conference has now concluded.
Thank you for attending today's presentation you may now disconnect.
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