Q4 2021 BGC Partners Inc Earnings Call
Speaker 2: 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 EBITA. We may refer to our liquidity, which we define as cash and cash equivalents plus marketable securities that have not been financed, reversed repurchase agreements, and securities owned, less loaned and repurchased agreements.
Speaker 2: We define total capital as redeemable partnership interest, total stockholders' equity, and non-controlling interest in subsidiaries.
Speaker 2: Please see today's press release for results under Generally Accepted Accounting Principles or GAAP. Please also see the relevant sections in the back of today's press release for the complete and updated definitions of any non-GAAP terms, reconciliations of these items to the corresponding GAAP results, and how, when, and why management uses such terms.
Speaker 2: Additional information with respect to our GAAP and non-GAAP results mentioned on today's call is available on our website at ir.bgcpartners.com and in our investor presentation.
Speaker 2: We refer to the company's technology-driven businesses as Fenex. Fenex offerings include Fenex Markets and Fenex Growth Platforms. I also remind you that the information regarding our business on today's call that are not historical are forward-looking statements. These include statements about the effects of COVID-19 pandemic on 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 statement.
Hello, everyone and thank you for your patience. The cool is due to begin in two minutes time.
[music].
Speaker 2: Any outlook and targets discussed on this call assume no material acquisitions, buybacks, extraordinary transactions, or meaningful changes to the company's stock price.
Speaker 2: For discussion of additional risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, CBGC's SCC filings, including but not limited to the risk factors and special note on forward-looking information set forth in these filings and any updates to such risk factors and special note on forward-looking information contained in the subsequent reports on Form 10-K , Form 10-Q , or Form 8-K.
Speaker 2: With that, I'm now happy to turn the call over to Howard Lutnick, Chairman of the Board and CEO of BGC Partners.
Speaker 3: Thank you, Jason. Good morning and thank you for joining us for our fourth quarter and full year 2021 conference call.
Speaker 3: With me today are BGC's Chief Financial Officer, Steve Biscay, and our Chief Operating Officer, Sean Lindyac.
Speaker 3: BGC improved profitability across all metrics in 2021. Additionally, we executed numerous value-unlocking initiatives, including selling our insurance brokerage business for $535 million, reducing our share count by over 10%, and expanding Fenex USP's market share by nearly 600 basis points to over 20%.
<unk>, Inc, fourth quarter and full year 2021 earnings conference call. At this time all participants are in listen only mode. After the speaker's presentation. There will be a question and answer session. Please be advised that today's conference call is being recorded I would now like 10 days at the conference Jill speak today, Jason Chris This is headed.
Speaker 3: Leveraging Fenex USP's success, after consulting with our global clients and strategic partners, we are pleased to announce the expansion of the scope of FMX Futures to cover the entire US-raised futures complex.
Speaker 3: U.S. Treasury futures, Eurodollars, and Silver futures will launch concurrently in the fourth quarter of 2022.
Investor Relations. Thank you and please go ahead.
Yes.
Good morning, everyone, we issued Bgc's fourth quarter and full year 2021 financial results press release and presentation summarizing. These results earlier. This morning, you can find these at IR Dot BGC partners Dot com.
Speaker 3: We recently launched a number of crypto products and expect to have a comprehensive offering by the end of this year.
Speaker 3: Our crypto platform is powered by our multi-billion dollar global infrastructure and state-of-the-art FedEx trading technology.
Please note you can find additional details on our quarterly results in today's press release and Investor Investor presentation.
Speaker 3: Our futures exchange was amongst the first exchanges permitted to lift crypto derivatives, an advantage we plan to leverage as we scale our cryptocurrency offering.
Unless otherwise stated the results provided on today's call compare only the fourth quarter of 2021 with the prior year period and compare revenue excluding insurance due to its sale on November one 2021.
Speaker 3: As you know, we completed the sale of our insurance brokerage business on November 1st, bringing in gross proceeds of $535 million.
Referring to our results on this call only on an adjusted earnings basis, unless otherwise stated we may also refer to adjusted EBITA, We may refer to our liquidity, which we define as cash and cash equivalents plus marketable securities that have not been financed reverse repurchase agreements and securities owned less loans and repurchase agreements, we define total capital as redeemable partnership.
Speaker 3: Since we announced the sale on May 26th, we have repurchased and redeemed 71.5 million shares and units, reducing our fully diluted share count by over 10%.
Speaker 3: We continue to grow our technology-driven, higher-margin Fenex business at an industry-leading pace of 26%, to over $400 million for the full year 2021.
Interest total stockholders' equity and Noncontrolling interest in subsidiaries please see todays.
<unk> press release for results under generally accepted accounting principles or GAAP. Please also see the relevant sections in the back of today's press release for the complete and updated definitions of any non-GAAP terms reconciliations of these items to the corresponding GAAP results and how when and why management uses such terms.
Speaker 3: So the fourth quarter, FedEx net revenue improved by 20% compared to the prior year, which represents a record 23% of BGC's total revenue, excluding insurance.
Additional information with respect to our GAAP and non-GAAP results mentioned on today's call is available on our website at IR Dot BGC partners Dot com and in our Investor presentation.
Speaker 3: We expect Fenex to exceed a quarter of BGC's total revenues in 2022.
Speaker 3: FedEx revenue growth was a key factor in driving front office productivity 10% higher during the quarter, improving post-tax adjusted earnings by 20% and expanding margins by 370 basis points.
We refer to the company's technology driven businesses as Phenix Phenix offerings include Phoenix markets and Fedex growth platforms. I also remind you that the information regarding our business on today's call that are not historical are forward. Looking statements. These include statements about the effects of COVID-19 pandemic on the company's business results financial position liquidity and outlook any forward looking statements involve risks and <unk>.
Speaker 3: As many of you know, I was diagnosed in the fall with non-Hodgkin's lymphoma.
Speaker 3: I'm happy to report that I've completed chemotherapy on January 31st.
Uncertainties and except as required by law BGC undertakes no obligation to update any forward looking statements.
Speaker 3: But in mid-December, I had a very positive PET scan where the cancer was 95% resolved, and it made my doctors and me very, very happy.
Any outlook and targets discussed on this call assume no material acquisitions buybacks extraordinary transactions or meaningful changes in the company's stock price.
Speaker 3: I have my final PET scan scheduled in March and I look forward to updating you then. If you would like more details, my most recent video update is provided both on our website, on Rumble, or on YouTube. With that, I'd like to turn the call over to Steve Deskay.
For a discussion of additional risks and uncertainties, which could cause actual results to differ from those contained in the forward looking statements see bgc's SEC filings, including but not limited to the risk factors and special note on forward looking information set forth in these filings and any updates to such risk factors and special note on forward looking information contained in subsequent reports on Form 10-K form.
10-Q or form 8-K.
Speaker 4: BGC generated total revenue of $461.6 million, which included $19.9 million of insurance revenue.
With that 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 fourth quarter and full year 2021 conference call.
Speaker 4: excluding insurance brokerage, our total revenue was $441.7 million, an improvement of 2.7% versus the fourth quarter a year ago.
With me today are Bdcs Chief Financial Officer.
Speaker 4: Stronger volumes seen in the first half of the quarter softened, as surges in global COVID-19 cases caused market-wide dislocations, particularly across the voice hybrid business in December .
And our Chief operating officer, so linear.
Did you see improved profitability across all metrics of 20 per watt.
We executed numerous value on lots of initiatives, including selling our insurance brokerage business about $535 million.
Speaker 4: Overall, industry-wide secondary trading volumes were mixed during the fourth quarter with solid activity across race and energy products, while credit and European equity-driven volumes were challenged.
Sure Paul.
The salt unexplained in Phoenix, Suez teens market share nearly 600 basis points to over 20%.
Speaker 4: by geography and excluding insurance, the America's increased by 6.1%.
Leveraging clinics U S team's success.
Speaker 4: Europe , Middle East and Africa revenues increased by 2.2% while Asia-Pacific revenues decreased by 2.2%.
I'll go with our global clients and strategic partners. We are pleased to announce the expansion of the scope.
And ex futures to cover the entire U S rates futures complex.
Speaker 4: by asset class, rates increased by 5.8%, while credit, FX, energy and commodities, and equity derivatives and cash equities decreased by 4.2%, 1.5%, 0.2%, and 3.2% respectively.
U S Treasury futures.
And so for futures launch concurrently.
Fourth quarter of 2022.
We recently launched a number of crypto products and expect to have a comprehensive offering by the end of this year.
Speaker 4: Deeper integration of Fenix Technology solutions across the entire business has driven front office productivity 10.4% higher during the fourth quarter.
Our crystal platform is powered by a multibillion dollar global infrastructure, it's David yard Fedex trading technology.
Speaker 4: For the full year, average front office productivity increased 8.1% to $811,000, the second highest ever mark, behind only 2008 when the global financial crisis drove volumes and volatility to record levels.
Our futures exchange was amongst the first change is permitted to lift crypto derivatives advantage, we plan to leverage as we scale.
Currency offense.
As you know we completed the sale of our insurance brokerage business on November 1st, bringing gross proceeds of $535 million since.
Speaker 4: As we continue to automate our business, we expect productivity and profitability to increase.
Since we announced the sale in May 26, we have repurchased or redeemed 71, 5 million shares and units, reducing our fully diluted share count by over 10%.
Speaker 4: FedEx generated net revenue of $101.4 million, an improvement of 20.2%.
We continued to grow our technology driven higher margin Fedex.
Speaker 4: FedEx growth platforms recorded revenue of $13.7 million, an improvement of 89.3%, and FedEx markets generated revenue of $87.7 million, an increase of 13.7%, and had a pre-tax adjusted earnings margin of 30.7%.
Industry, leading pace of 26% to over $400 million for the full year 2021.
For the fourth quarter, Fedex net revenue improved by 20% compared to the prior year, which represents a record 23% of BGC as total revenue excluding insurance of course.
Speaker 4: Our compensation and employee benefits under GAAP increased in the fourth quarter of 2021 due to the sale of the insurance brokerage business, which included one-off compensation charges and sale-related expenses totaling $168.6 million, the majority of which were non-CAP.
We expect Fedex to exceed a quarter of BGC total revenues in 2022.
Fedex revenue growth was a key factor in driving front office productivity, 10% higher during the quarter, improving post tax adjusted earnings by 20% and expanding margins by 370 basis points.
Speaker 4: our non-compensation expenses under GAAP and adjusted earnings decreased by 3.9% and 5.4% respectively, primarily due to lower interest expense, professional and consulting fees, and other expenses.
I'd like to take a moment to update you on my.
As many of you know I was diagnosed in the fall with non Hodgkin's lymphoma.
I'm happy to report that <unk> completed chemotherapy in January 31st but in mid December I had a very positive pet.
Speaker 4: These expense reductions were partially offset by the higher selling and promotion charges as COVID-19 restrictions have relaxed across many of the major geographies in which we operate.
Pet scan, where the cancer was 95% resolved and he made my doctors and me very very happy.
My final pet scans scheduled in March and I look forward to updating you bet you.
Speaker 4: Our pre-tax income was $86.5 million, an increase of 9.2%, and represents a 221 basis point margin expansion from last year.
Like more details my most recent video update is provided both on our website on rumble or on Youtube with.
With that I'd like to turn the call over to Steve Okay.
Speaker 4: We've recorded post-tax adjusted earnings of $87.9 million, an increase of 19.5%, and a 370 basis point margin expansion.
Thank you Howard and Hello, everyone.
Did you see generated total revenue of $461 6 million, which included $19 $9 million of insurance revenue.
Speaker 4: We generated a fourth quarter adjusted EBITDA of $230.3 million, an improvement of 114.4%.
Excluding insurance brokerage our total revenue was $441 7 million an improvement of two 7% versus the fourth quarter a year ago.
Speaker 4: Our weighted average share count decreased 4% sequentially and 8% year-over-year to $509.2 million.
Stronger volumes seen in the first half of the quarter softened as surges and global COVID-19 cases caused market wide dislocations, particularly across the voice business in December .
Speaker 4: Our fully diluted spot share count, as of December 31st, decreased by 19.7 million shares, or 3.8% sequentially, to 497.5 million shares, which reflected 26.3 million Class A common shares repurchased during the quarter.
Overall in the shoe wide secondary trading volumes were mixed during the fourth quarter with solid activity across recent energy products, while credit and European equity derivative volumes were challenged.
Speaker 4: Compared to a year ago, BGC's fully diluted spot share count decreased by 55.7 million shares, or 10.1%.
By geography, and excluding insurance the Americas increased by six 1% Euro.
Speaker 4: which reflected the repurchase and redemption of 72.9 million shares and units during the year.
Europe Middle East and Africa revenues increased by two 2%, while Asia Pacific revenues decreased by two 2%.
Speaker 4: As of December 31st, our liquidity was $594.8 million, compared with $655.2 million as of year-end 2020.
By asset class rates increased by five 8%, while credit FX energy and commodities and equity derivatives and cash equities decreased by four point to 1.50 point too.
Speaker 4: The change in our liquidity reflected $457 million in share and unit repurchases and dividend and distribution payments, as well as a reduction in notes payable and other borrowings of $263.1 million compared to last year.
And three 2% respectively.
Deeper integration of finished technology solutions across the entire business has driven front office productivity, 10.4% higher during the fourth quarter.
Speaker 4: cash and cash equivalents were $553.6 million versus $596.3 million as of December 31, 2020.
For the full year average front office productivity increased eight 1% to $811000. The second highest ever Mark behind only 2008, when the global financial crisis drove volumes and volatility to record levels.
Speaker 4: Notes payable and other borrowings were $1,052,800,000 compared with $1,315,900,000 and total capital was $682,100,000 compared with $832,000,000. And with that, I'm happy to...
As we continue to automate our business, we expect productivity and profitability to increase.
Turning to Fedex quarterly performance.
That makes generated net revenue of $101 4 million an improvement of 22%.
Speaker 5: Thanks, Steve, and good day, everyone. Phoenix, our technology-driven, higher-margin business, continued to grow at a market-leading rate.
Fedex growth platforms recorded revenue of $13 7 million an improvement of 89, 3%.
Speaker 5: Fenix Strategy is focused on converting its $1.4 billion voice hybrid revenue base into higher margin technology-driven Fenix market revenue, while concurrently scaling its state-of-the-art fully electronic Fenix growth platforms, including FMX and cryptocurrencies. Looking
Is that ex mortgage generated revenue of $87 $7 million, an increase of 13, 7% and had a pretax adjusted earnings margin of 37%.
Moving onto expenses.
Our compensation and employee benefits under GAAP increase in the fourth quarter of 2021 due to the sale of the insurance brokerage business, which included one off compensation charges and sale related expenses totaling $168 $6 million, the majority of which were noncash.
Speaker 5: Our Fenix Growth Platform's revenue improved 89.3% from a year ago, driven by growth across Fenix UST, Lucera, Fenix FX and Fenix Go.
Speaker 5: FedEx US Treasury revenues increased nearly six-fold, driven by market-leading ADV growth, new product offerings and more traders using the platform.
Our non compensation expenses under GAAP and adjusted earnings decreased by three 9% and five 4% respectively.
Early due to lower interest expense professional and consulting fees and other expenses.
Speaker 5: During the fourth quarter, Fenix UST had ADV growth of over 65%, significantly outperforming the overall market.
These expense reductions were partially offset by the higher selling and promotion charges as COVID-19 restrictions have relaxed across many of the major geographies in which we operate.
Speaker 5: Fenix UST club market share increased nearly 600 basis points to over 20% in the fourth quarter with 21% in December .
Moving onto our adjusted earnings our.
Our pretax income was $86 $5 million, an increase of nine 2% and represents a 221 basis point margin expansion from last year.
Speaker 5: Additionally, Fenix U.S. Treasury saw robust demand for its newer electronic T-bills offering, with a five-fold increase in ADV quarter over quarter, and captured an estimated 15% of the electronic U.S. Treasury bill market.
We recorded post tax adjusted earnings of $87 $9 million, an increase of 19, 5% and a 370 basis point margin expansion.
Speaker 5: Lucera, our infrastructure and software business, saw accelerated revenue growth of its highly recurring and compounding subscription revenue base of 72% in the fourth quarter, as it onboarded new institutional and large bank clients, including in Lucera's cryptocurrency infrastructure business which launched in the third quarter.
We generated fourth quarter, adjusted EBITDA of $233 million, an improvement of 114, 4%.
Turning to share count.
Our weighted average share count decreased 4% sequentially and 8% year over year to $509 2 million.
Our fully diluted spot share count as of December 31st decreased 90 by $19 7 million shares or three 8% sequentially to 497 5 million shares, which reflected $26 3 million class a common shares repurchased during the quarter.
Speaker 5: Lucera is providing connectivity to the world's deepest crypto liquidity pools via its world-class infrastructure.
Speaker 5: FenixFX, our ultra low latency electronic FX trading platform, generated strong double digit revenue and volume growth during the quarter that outpaced its FX ECN peers and the overall market.
Compared to a year ago bgc's fully diluted spot share count decreased by $55 7 million shares or 10, 1%, which reflected the repurchase and redemption of 72 9 million shares and units during the year.
Speaker 5: Fenix Go, our global options electronic trading platform, saw revenue increase nearly three-fold from a year ago, driven by the integration of Matchbox, Fenix's equity platform that automates the trading, booking and lifestyle management of the global equity derivative contracts, creating a comprehensive electronic options solution.
As of December 31, our liquidity was $594 8 million compared with $655 $2 million as of year end 2020.
The change in our liquidity reflected $457 million in share and unit repurchases and dividend and distribution distribution payments as well as a reduction in notes payable and other borrowings of $263 $1 million compared to last year.
Speaker 5: Additionally, Fenix Go launched new MSCI Index Options products in January 2022 and expects to launch new cryptocurrency options later in the year.
Cash and cash equivalents were $553 $6 million versus $596 $3 million as of December 31, 2020.
Speaker 5: Revenues improved by 13.7%, driven by strong growth across rates, FX and market data.
Speaker 5: Fenix MidFX, the leading wholesale FX hedging platform, continue to generate strong volumes across spot FX and Asian NDFs, driving revenue 20% higher versus last year.
Notes payable and other borrowings were 1 billion $52 $8 million compared with 1 billion 350, $315 9 million and total capital was $682 1 million compared with $832 million.
Speaker 5: Fenix MID technology provides a highly efficient, fully electronic platform.
And with that I'm happy to turn the call over to Sean.
Speaker 5: for large global banks to hedge risk in a neutral environment.
Thanks, Steve and good day, everyone.
Phenix, our technology, driven higher margin business continued to grow at a market leading rate.
Speaker 5: Fenix Markets Data signed over 40 new contracts during the fourth quarter and more than doubled the total contracted value versus a year ago.
<unk> strategy is focused on converting is one $4 billion voice hybrid revenue base into higher margin technology, driven Phoenix market revenue, while concurrently scaling its state of the art fully electronic Fedex growth platforms, including FX and crypto currencies.
Speaker 5: Fenix Market Data has seen continued success in its new regulatory services offering with a robust pipeline leading into 2022.
Speaker 5: Fenix Market Data, which has a highly recurring and compounding subscription revenue model, continues to grow at a solid double-digit pace.
Looking at Phoenix in more detail.
Phenix growth platforms revenue improved 89, 3% from a year ago, driven by growth across Phoenix, Ust do Sandra Phoenix, FX and Phoenix go.
Speaker 5: Fenix Direct, our web-delivered multi-dealer FX options platform, saw ADV and revenue both double in the fourth quarter versus the prior year period.
Fedex U S. Treasury revenues increased nearly six fold driven by market, leading adv growth new product offerings and more trade is using the platform.
Speaker 5: CapitaLabs' NDF Match business, our advanced web-based matching platform that helps clients reduce foreign exchange exposure, had double-digit volume and revenue growth versus a year ago.
During the fourth quarter Phenix, Ust had ADB growth of over 65% significantly outperforming the overall market.
Speaker 5: Intercompany Technology Services generated revenue of $14.9 million for the quarter.
Phoenix Ust club market share increased nearly 600 basis points to over 20% in the fourth quarter.
Speaker 5: This represents internal charges to BGC's voice hybrid businesses by Fenex for its technology and is therefore eliminated in the company's consolidated financial results.
With 21% in December .
Additionally, Phoenix U S Treasury saw robust demand for its new electronic T bills offering with a five fold increase in adv quarter over quarter and capture an estimated 15% have electronic U S Treasury Bill market.
Speaker 5: As we continue to convert our voice hybrid business into Phoenix Markets revenue, inter-company technology service revenues will naturally decline.
Speaker 5: while Fenex Markets revenues will increase at a far superior rate.
Sara our infrastructure and software business. So our accelerated revenue growth of its highly recurring and compounding subscription revenue base of 72% in the fourth quarter as it onboarding, new institutional and large bank clients, including in these areas crypto currency infrastructure business.
Speaker 5: Going forward, we will no longer report this into company charge.
Speaker 5: Our voice hybrid business generated revenues of $340.3 million down 1.6% from last year due to the continued conversion of voice hybrid to Phoenix Revenue.
Which launched in third quarter.
Speaker 5: we continue to focus on automating our 1.4 billion dollar voice hybrid revenue base to a higher margin Fenix business.
<unk> is providing connectivity to the worlds deepest crypto liquidity pools far as world class infrastructure.
Fedex FX ultra low latency electronic FX trading platform generated strong double digit revenue and volume growth during the quarter that outpaced its FX ECM peers and the overall market.
Speaker 5: Our rates businesses grew 5.8% with particular strength across US government bonds, inflation products, listed rates and emerging markets.
Speaker 5: This improvement across rates brokerage more than offsets declines across other brokerage asset classes, excluding insurance.
Fedex go our global options electronic trading platform saw revenue increased nearly threefold from a year ago, driven by the integration of Matchbox Phenix is equity platform that automates, the trading booking and lifestyle management.
Speaker 5: Expectations of rising interest rates and associated volatility, along with the end of quantitative easing in the US, is expected to provide tailwinds to our leading rates business in the latter part of 2022.
Of the equity global equity derivative contracts trading a comprehensive electronic options solution.
Speaker 5: Now turning to first quarter outlook for 2022.
Additionally, Fannies go launch New MSCI index options products in January 2022, and expects to launch new crypto currency options later in the year.
Speaker 5: BGC's revenues were approximately 2% lower for the first 28 trading days of the first quarter when compared to the same period last year excluding insurance.
Looking at Phoenix markets revenues.
Revenues improved by 13, 7% driven by strong growth across rates FX and market data.
Speaker 5: We expect to generate total revenue of between $490 million and $540 million as compared to $515.1 million last year, which excludes $52.4 million of insurance revenue.
Fedex mid FX, the leading wholesale FX hedging platform continued to generate strong volumes across both FX and Asian, Mdx driving revenue, 20% higher versus last year.
Speaker 5: We anticipate pre-tax adjusted earnings to be in the range of $105 million to $125 million versus $113.9 million.
Fedex MIT technology provides a highly efficient fully electronic platform.
The large global banks to hedge risks in a neutral environment.
Speaker 5: and we anticipate our full year 2022 Adjusted Earnings Tax Rate to be in the range of 8% to 10% versus 6.4% for full year 2021. With that I'd like to turn back to Howard for closing remarks.
Fedex market data signed over 40, new contracts during the fourth quarter and more than doubled the total contracted value versus a year ago.
Phoenix market data has seen continued success in his new regulatory services offering with a robust pipeline leading into 2022.
Speaker 3: Thank you, Sean. We are proud of what we have accomplished in 2021, including returning over $457 million to shareholders in the way of buybacks, dividends and distribution.
Fedex market data, which has a highly recurring and compounding subscription revenue model continues to grow at a solid double digit pace.
Speaker 3: We also lowered our debt by over $260 million, all while growing Fenex to over $400 million in top-line revenue and improving BGC's profitability across all metrics.
<unk> direct a web delivered multi dealer FX options platform saw Adv and revenue both doubled in the fourth quarter versus the prior year period.
Capitalized NDS match business, our advanced web based matching platform that helps clients reduce foreign exchange exposure had double digit volume and revenue growth versus a year ago.
Speaker 3: As of yesterday, BGC's 2022 price-to-earnings ratio was 6.4 times.
Speaker 3: as compared with Fenix's peers of 38.4 times earnings.
Intercompany technology services generated revenue of $14 $9 million for the quarter.
Speaker 3: This is a fundamental reason why we prioritize buybacks over dividends and distributions. With that, operator.
This represents internal charges to Bgc's voice hybrid businesses by Phoenix for its technology and is therefore eliminated in the Companys consolidated financial results.
Speaker 1: Thank you. If you would like to ask a question, please press star followed by 1 on your telephone keypad now. If you change your mind, it is
As we continue to convert our voice hybrid business into Phoenix markets revenue intercompany technology service revenues will naturally decline.
Speaker 1: Our first question comes from Rich Rapetto of Pepper Sandler. Your line is open, please go ahead.
Phoenix market's revenues will increase at a far superior rate.
Speaker 6: Good morning, Howard, and the team, and first, we're very happy that everything's going well on the health front, Howard.
Going forward, we will no longer report this intercompany charge.
Our voice hybrid business generated revenues of $343 million down one 6% from last year due to the continued conversion of voice hybrid to Fedex revenue.
Speaker 6: The first question is on the brokerage.
Speaker 6: You're welcome. The first question on the brokerage business, just taking a look at some of the asset classes. If you looked at energy, energy was the lowest brokerage revenue going back to the fourth quarter of 2010.
We continue to focus on automating our $1 4 billion dollar voice hybrid revenue base to a higher margin Fedex business.
Speaker 6: I'm just trying to see, you know, the benchmarks weren't...
Our rates businesses grew five 8% with particular strength across U S government bonds inflation products listed rates and emerging markets.
Speaker 6: you know, we're pretty flat to up. But anyway, the question is, you know, anything special going on in energy as well as in rates? I know the rates did grow year over year and quarter to quarter, but 4Q seemed pretty.
This improvement across rates brokerage more than offset declines across other brokerage asset classes excluding insurance.
Speaker 6: Increased volatility was pretty special at the CME and other sort of benchmarks that trade rates. So I think rates and energy, any more call you could give us?
Expectations of rising interest rates and associated volatility along with the end of quantitative easing in the U S is expected to provide tailwind to our leading rates business in the latter part of 2022.
Speaker 5: I think if I take energy and start to look at energy, I think nothing special. It has always been a growth area and continues to be a growth area for us in energy and commodities. I think it was flat on the quarter and up fractionally on the overall year. But nothing specific in terms of energy and commodities, just an area that we continue to build and grow, and also not just in the U.S., but both Europe and Asia as well.
Now turning to first quarter outlook for 2022 BG.
Bgc's revenues were approximately 2% lower for the first 28 trading days of the first quarter when compared to the same period last year excluding insurance.
We expect to generate total revenue of between 490 and $540 million as compared to $515 $1 million last year, which excludes $52 $4 million of insurance revenue.
Speaker 5: And from a rates perspective...
We anticipate pre tax earnings adjusted earnings to be in the range of $105 million to $125 million versus $113 9 million.
And we anticipate our full year 2022, adjusted earnings tax rate to be in the range of 8% to 10% versus six 4% for full year 2021.
And with that logic 10 back to Howard for closing remarks.
Speaker 5: broad spectrum of products in rates and in geography as well.
Thank you Sean.
We are proud of what we have accomplished in 2021, including returning over $457 million to shareholders in the way of buybacks dividends and distributions.
We also lowered our debt by over $260 million, all while growing Fedex to over $400 million of top line revenue and improving bgc's profitability across all metrics.
Speaker 6: You push back the launch, I guess, that's so you can launch all the great products at the same time.
Speaker 6: Any, could you still make an office in regards to partners or, you know, will we need to wait until the fourth quarter to hear, you know, who's in the partnership or who might be investing in the exchange as well?
As of yesterday, <unk> 2022 price to earnings ratio was six four times.
As compared with Fedex peers of 38 four times earnings.
Speaker 7: No, we would expect before the fourth quarter to announce our strategic partner.
This is a fundamental reason why we prioritize buybacks dividends and distributions.
Speaker 3: So that should be coming sooner than our opening, for sure. And you're right, what happened is spending time with our strategic partners and clients, they wanted a complete offer. And so we decided to list them all. So we will do Eurodollars, we will do SOFR contracts, and we will do U.S. Treasury futures, all on the platform. And I think we have gotten just an incredible amount of...
With that operator, we'd like to open the call for questions.
Thank you if you would like to ask a question. Please press star followed by one on your telephone keypad now.
Change your mind.
Further it vital.
Our first question comes from Rich Repetto of Piper Sandler. Your line is open. Please go ahead.
Good morning, Howard and his team in first.
Speaker 3: positive feedback from our client base and potential strategic partners that that is the model that they want. And we have the capacity to do it. We have the technology to do it. We have the connectivity to do it. And I think we are really the only game in town as to create a competitor to the Chicago Mercantile Exchange.
Happy that everything is going well on the health front Howard.
Our first question is on the brokerage.
Youre welcome first question on the brokerage business.
Taking a look at some of the.
The asset classes, if you looked at energy.
Energy was a lowest brokerage revenue going back to the fourth quarter of 2018, I'm just trying to see the benchmarks warrant.
Speaker 6: And the last question is on your comments on crypto and that FMX is approved. And can you give us a little bit more of the background on that? This was an approval from well back or was it more recent that you got the approval? I'm just trying to get to understand what the crypto offering and how you got the approval and, you know, what could it lead to?
Pretty flat to up.
But anyway. The question is anything special going on in energy as well as in rates I know rates did grow year over year and quarter to quarter, but <unk> seem pretty.
Increased volatile was pretty special at the CME and other sort of.
Speaker 3: Sure. So FMX and its predecessor exchange NRDCO are clear or approved to do crypto derivatives.
Benchmarks the trade rates.
Rates in energy or any more color you could give us.
So I think if I take energy starts to build in energy I think.
Nothing nothing, especially I mean, if you.
Speaker 3: and that was a while back. So that was years in the making, the application was years in the making.
Has always been it's been a growth area and continues to be a growth area for us in engine commodities I think it was.
Speaker 3: And that's just an asset that we have that we can extend and scale and compete with the Chicago Mercantile Exchange again on another front.
It was flat on the quarter and up fractionally on the on the overall year, but.
I mean, nothing nothing specific in terms of energy and commodities just an area that we continue to build and grow.
Speaker 3: when you have, you know, a multi-billion-dollar electronic trading system globally connected with
And also also not just in the in the U S, but both Europe and Asia as well.
Speaker 3: futures infrastructure and regulatory approvals all sort of set up in front of us.
And from a from the REIT from a rates perspective.
Speaker 3: and it just creates a powerful competitor to the Chicago Mercantile Exchange. You're working with the LCH.
I think again, we have a.
They are big rates franchise rates were up as we said five 8% in the quarter.
Speaker 3: in the rates franchise has been incredibly exciting. And I think it has really motivated our clients and our potential strategic partners to deeply engage with us. You're watching our treasury business grow its market share. And that is just a concurrent rates business to U.S. treasury futures and Eurodollars and so forth. So we really feel excited about it, but it was historical. So if you look, we can compete with the Chicago Mercantile Exchange.
I think I singled out yet.
Yeah, a couple of key driving factors that in our inflation business and emerging market rates and really really for us the performance of our rates business is it driven by by the fact that we have.
Broad broad spectrum of products in rates by geography as well.
Speaker 3: on those product categories, and then we can extend those product categories across the crypto space if our clients and the market so, you know, it seems exciting to pursue. So we have the infrastructure for it. We have the regulatory framework for it. And I think it's pretty, pretty incredibly exciting.
Got it okay.
Next question is on the.
<unk>.
Range.
You pushed back the launch I guess, that's how you can launch.
All the all the right products at the same time.
Any could you still make an office in regards to partners.
Speaker 6: Got it. Thank you, and look forward to getting together soon, Howard. Take care.
Well, we need to wait till the fourth quarter to here you know who's in the.
The partnership or who might be investing in the exchange as well.
Speaker 1: As a reminder, if you would like to ask a question, please press star followed by 1 on your telephone keypad now.
Yes.
We would expect before the fourth quarter to announce our strategic partners.
Speaker 1: Our next question comes from Gotan Swant of Credit Suisse. Your line is open, please go ahead.
That should be coming sooner than our opening for sure.
And you are right what happened is spending time with our strategic partners and clients.
Speaker 8: Good morning. This is Jonathan from Walnut Credit Suisse, and Howard, glad to hear the update on your health.
They wanted a complete awful.
Speaker 8: Thanks so much.
And so we decided to list them. All so we will do eurodollars, we will do so for contracts and we will do in the U S Treasury futures.
Speaker 8: Can you please size some of the potential revenue opportunities in 2022, specifically on how much revenue growth will come from fee holiday expiries, if it will be a step up in 1Q2022 or rollout throughout the year? And how does the overall revenue mix of Fenex at 25% of the revenues impact the overall marginal revenue?
All on the platform and I think we have gotten just an incredible amount of.
Positive feedback from our client base and potential strategic partners, but that is the model that they want and we have the capacity to do it and we have the technology to do it we have the connectivity to do it.
Speaker 3: So with respect to our treasury business.
And I think we are really the only game in town and to create a competitor could you Chicago Mercantile exchange.
Speaker 6: Right, the free holidays are expiring, and those roll off over the next two quarters. So you should expect over the next two quarters our revenue opportunity across the treasury business.
Got it.
And last question is on your comments on crypto and FX is approved.
Can you give us a little bit more of the background on that.
Speaker 6: will improve. Additionally, we are talking to our strategic partners and clients now about their rate cards and features and how that will work.
This was an approval from well back or.
Or was it more recent that you got the approval I'm just trying to get to understand what the crypto offering and how you get the approval and what could it lead to I guess.
Sure So <unk>.
Speaker 3: futures in 2018, people would not have been so confident that we could go from a beginning to over 20% market share in three years. And I think they've all, naysayers, positive sayers, the whole market has watched us.
<unk> and <unk>.
Its predecessor exchange in our D. C O R clearer were approved to do.
Crypto derivatives and that was a while back so that was years in the making the application was years in the nation.
Speaker 3: without strategic partners, pound forward to, as you saw December , we had 21% market share and a relentless move upward. I mean, imagine we launched
And that's just an asset that we have that we can extend it and scale and compete with the Chicago Mercantile exchange again on another front.
Have multibillion dollar electronic trading system glue.
Speaker 3: treasury bills and we gained 15% market share in sequential quarters.
Globally connected.
With futures.
Speaker 3: I mean, so I think the excitement for us to go into the futures space is palpable. And I think, I just don't think the time we will have of what we would say these three holidays will be as long as they needed to be in U.S. Treasuries when we get to futures. I just think they're a path to revenues and material improvements will be swift.
Infrastructure.
And and regulatory approvals.
All sort of set up in front of us.
And it just creates a powerful.
Competitor.
At the Chicago Mercantile exchange working with the <unk>.
And the rates franchise has been.
Incredibly exciting and I think it is.
Motivated our clients and our potential strategic partners to deeply engage with us youre watching our treasury business.
Grow its market share and that is just a concurrent rates business to U S Treasury futures and eurodollar since so far so we really feel excited about it but it was historical subs look we can compete with the Chicago Mercantile exchange on those product categories and then we can extend those product categories.
Speaker 8: Just as my follow-up here, can you expand on how you're growing with this large market data opportunity? You signed 42 new contracts in 4K21. How will that translate into revenue growth? Is that a large step up in the first quarter?
Across the crypto space.
Our clients and the market so.
It seems exciting to pursue so we have the infrastructure for it we have the regulatory framework for it.
Speaker 3: long-term contracts, and then those contracts pay, let's say it's a four-year contract, they pay 25% a year for four years.
I think it's pretty putting incredibly exciting for us.
Speaker 3: So, we've just begun to sell our treasury data.
Got it thank you and look forward to getting together soon take care.
Speaker 3: You know, features data is in the offing, but people are discussing with us now to include that in their package.
As a reminder, if you would like to ask a question. Please press star followed by one on your telephone keypad now.
Speaker 3: And so I think what you'll see is an accelerating growth rate.
Speaker 3: as you know, that's the key to this, the compounding subscription model, you see just an accelerating growth rate, because as you get these compounding revenues, they just keep growing and growing, growing every new contract adds, you know, three or four years of revenue on top of your existing revenue base. So I think what you'll see is an accelerating growth rate.
Our next question comes from <unk> of Credit Suisse. Your line is open. Please go ahead.
Good morning. This is governments, along with credit Suisse, and Howard glad to hear the update on your health.
Thanks, So much can you. Please cite some of the potential revenue opportunity.
Can you please buy some of the potential revenue opportunities in 2022, specifically on how much revenue growth will come from the holiday expertise if it will be a step up in <unk> 2022 or rollout throughout the year and how does the overall revenue mix.
Speaker 3: You know, we had growth, let's say, in the 20s. You'll see growth exceed the 30s. Then you'll see growth exceed the 40s.
Speaker 3: percent. And so I think over the next couple of years, you're going to see an accelerating growth rate in market data.
Speaker 3: and they will get larger and larger. You know, I think that is one of the biggest opportunities we have.
At 25% of the revenues impact your overall margin profile.
Speaker 3: and I think it could be multiples larger. Our expectation is we could have our market data line could be three times the size of what it is now. And therefore, I don't think there's much in the way of our accelerating growth rate over the next two years.
So with respect to our our treasury business.
The holidays are expiring and those roll off over the next two quarters. So you should expect over the next two quarters.
Our revenue opportunity across the Treasury business.
We'll improve.
Speaker 1: The next question comes from Patrick O'Shaughnessy of Raymond James, your line is open, please go ahead.
Additionally, we are talking to our streets.
Strategic partners and clients know without the rate cards features.
How that will.
How that will work.
We have launched this.
Speaker 1: Patrick, your line is open, please ensure you're not muted locally.
Since it was in 2018.
People would not have been so confident that we could go.
Beginning to over 20% market share.
In three years, and I think they've all naysayers positive and say here's the whole market has watched us without strategic partners pounds forward as you saw.
Speaker 1: Unfortunately we're not getting any connection from Patrick's line so I'll hand back over to the team to conclude.
Speaker 6: Thank you all for joining us today. I'm very proud of what BGC accomplished. What we showed was that the drive of FedEx will drive all of our metrics better. And the conversion of our voice in hybrid business to FedEx markets will continue to drive margin. Our growth platforms will continue to grow. And the new inclusion of us building both...
<unk>, we had 21% market share and a relentless move upward.
When we launch Treasury bills early gains 15% market share in sequential quarters.
I mean, so I think the excitement for us to go into the futures space.
Is palpable and I think.
Just don't think the time that we will have.
What we would say is it's the holidays will be as long as they need them to be in U S. Treasuries, when we get to teachers.
Speaker 3: futures, and then a broad spectrum across the REITs complex, and cryptocurrency, $2.5 trillion of outstanding
Thanks.
Pass through revenues and material improvements.
We'll be swifter.
Speaker 3: instruments to trade is really just an incredible opportunity for someone at the scale of BGC. So we are very excited about our future. As we said, we're going to prioritize
Thanks, and just as my follow up here can you expand on how you are growing with this large market data opportunity.
Speaker 3: buybacks over dividends and distributions. And we look forward to talking to you all next quarter. Thanks for your time and thanks for your good wishes. And I look forward to giving you a very, very positive cancer-free update in a couple of weeks. But my doctors are supremely confident. They've made me very happy and confident. My family can't wait for the scan. So I look forward to telling you all in a couple of weeks. And have a great day.
He signed 42, new contracts in <unk>, 2021, and $4 21, how will that trend.
<unk> revenue growth is that a large step up in the first quarter.
So what happens is you sign <unk>.
Sign.
Long term contracts and and then those contracts.
Let's say, it's a four year contract and about 25% a year for four years.
So even just the guidance to sell our treasury data.
Since this data is in the offing, but people are discussing with US now to include that in their package.
Speaker 1: This concludes today's call. Thank you for joining. You may now disconnect your line.
And so I think what Youll see is an accelerating growth rate as you know that's the key to this.
Speaker 9: The.
Pounding subscription model.
You've seen just an accelerated growth rate because as you get these compounding revenues they just.
Keep growing and growing and growing every new contract adds three or four years of revenue on top of your existing.
Our revenue base, so I think what Youll see is an accelerating growth rate.
We have growth, let's say in the twenties, you'll see growth exceeds the <unk>, then you'll see growth exceed the forties.
Percents and so I think over the next couple of years, you're going to see.
An accelerating growth rate and market data.
And.
And they will get larger and larger you know I think that is one of the biggest opportunities we have.
And I think it could be multiples larger than our expectation as we come out of our market data line to be three times the size of what it is that.
And therefore, I don't I don't think theres much in the way of our accelerating growth rate over the next 10 years.
Thank you.
The next question comes from Patrick O'shaughnessy of Raymond James Your line is open. Please go ahead.
Patrick Your line is open please ensure you will not need to likely.
Okay.
Unfortunately, we're not getting any connection from Patricks line.
I'll hand back over to the team to conclude.
Yeah.
Thank you all for joining us today.
I'm very proud of what <unk> accomplished what we showed was that the drive of Fedex will drive all of our metrics better and.
Conversion of our voice and hybrid business to Fedex markets will continue to drive margin are growth platforms will continue to grow and the new inclusion of us building.
<unk>.
Futures and in a broad spectrum across the rates complex.
And crypto currency two five trillion of outstanding.
Instruments to trade.
It's really just an incredible opportunity.
For someone in the scale of BGC. So we're very excited about our future as.
As we said we're going to prioritize.
Buybacks over dividends and distributions and we look forward to talking to you all next quarter.
Thanks for your time and thanks for your good wishes.
Look forward to giving you a very very positive cancer free.
Uptake in a couple of weeks, but my doctors are supremely confident they've made me very happy and confident my family can't wait for the scan. So I look forward to telling you a couple of weeks and have.
Have a great day.
This concludes today's call. Thank you for joining you may now disconnect your lines.
Yeah.
Sure.
Okay.
Sure.
Yes.
Okay.
Okay.
Yes.
Okay.
Yeah.
Yes.
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