Q3 2023 BGC Group Inc Earnings Call
Ladies and gentlemen, thank you for standing by our conference will begin in just a couple of minutes well once again. Thank you for standing by our conference will begin in just a couple of minutes.
[music].
Okay.
Greetings and welcome to the BGC Group third quarter 2023 financial results Conference call. At this time, all participants are in a listen only mode.
And answer session will follow the formal presentation, if anyone should require operator assistance during the call. Please press star zero on your telephone keypad as a reminder, this conference is being recorded.
At this time I would like to hand, the call over to Jason and Chris He gets head of Investor Relations. Thank you you may begin.
Thank you and good morning, we should BDC third quarter 2023 financial results press release and the presentation summarizing. These results. This morning prior to the market open you.
You can find these at IR Dot <unk> Dot Com. Please note you can find additional details on our quarterly results in today's press release and Investor presentation.
Unless otherwise stated and historical results provided on today's call are only the third quarter of 2023 with the prior year period.
Certain revenue figures are provided for the current period as indicated we.
We will be referring to our results on this call me out.
On an adjusted earnings basis, unless otherwise stated we.
We may also refer to adjusted EBITA and they worked for a quite liquidity, which we defined as cash and cash equivalents plus marketable securities that have not been financed.
Reverse repurchase agreements and financial instruments, Oh, that's fair value less securities loaned and repurchase agreements.
We define total capital as redeemable partnership interest total stockholders' equity and Noncontrolling interest in subsidiaries.
Please see today's press release for the results under generally accepted accounting principles or GAAP. Please also see the relevant sections in the back of today's press release for a 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.
Actual information with respect to our GAAP and non-GAAP results mentioned on today's call is available on our website at IR Dot BGC Qi dot com and in our Investor presentation.
Prior to the company's technology, driven businesses as Phenix Phenix offerings include Phoenix markets. Since then export 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 company's business results financial position liquidity and outlook.
Any forward looking statements involve risks and uncertainties.
As required by law BGC undertakes no obligation to update any forward looking statements any outlook and targets discussed on this call assumes no material acquisitions buybacks extraordinary transactions or meaningful changes to the company's stock price.
A discussion of additional risks and uncertainties, which could cause actual results 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 the subsequent reports on Form 10-K Form 10-Q.
More form 8-K.
I'm now happy to turn the call over to Howard Lutnick Chairman of the board and CEO of BGC group.
Thank you Jason Good morning, and welcome to our third quarter 2023 Conference call with me today are our Chief operating officer, Sean <unk>, and our Chief Financial Officer, Jason Haas.
We had another outstanding quarter generating revenue growth of 16%, reflecting increased volumes across each and every one of our asset classes.
BGC is extraordinarily well positioned.
To benefit from the return of interest rates, which we expect to drive our trading volumes revenues and profitability higher.
Foreseeable future Phenix revenues improved 19% outperforming both its electronic trading platform and exchange peers. This was led by another record quarter for Fedex growth platforms, which grew by over 45%.
Turning to U S. T R. Electronic U S. Treasuries platform reached a record 25% market share of volume traded on U S. Treasury exchange marketplaces during the third quarter with that I'll turn the call over to Sean.
Thanks, and good day everyone.
<unk> revenue grew $66 $1 million or 15, 9% to $482 $7 million in the third quarter of 2023.
Running across every geography.
Total brokerage revenues grew by 14, 8% driven by strong growth across all of our asset classes.
Fixed income brokerage volumes were significantly higher during the period as interest rates and wider credit spreads continue to provide favorable macro trading conditions across rates credit and FX.
Rates and credit revenues improved by $12, one and nine 6%, respectively. While FX revenues were eight 6% higher.
Energy and commodities revenue grew by 35% driven by strong double digit growth across the energy complex and our environmental products.
Excluding Triton acquisition organic energy and commodities growth would have been 23% outperforming the overall market.
Our equities business increased by eight 8%, reflecting higher volumes across equity derivatives and European cash equities.
We generated strong double digit growth across all earnings metrics during the quarter driven by higher revenues across Phoenix and voice hybrid along with record front office productivity.
Turning to thanks.
Thanks generated industry, leading revenue growth of 18, 7% compared to last year.
These high margin technology, driven businesses generated total revenues of $125 $4 million in the third quarter and represented approximately 26% of Bgc's total revenue.
<unk> revenue growth was led by electronic rights and credit products as well as data network and post trade businesses.
I think Greg platforms had another record quarter generating revenue of $18 4 million, a 45, 4% improvement versus last year.
Thanks markets had strong revenue growth of 15, 1%.
Turning to U S. T revenue increased by over 55% on 26% higher average daily volumes and our market share increased to over 25% for the third quarter.
From 23% in the second quarter of 2023, and 18% a year ago.
Thanks, Ust is the second largest and fastest growing treasury marketplace globally.
Portfolio match U S credit volumes over nine fold compared to the year ago period.
<unk> continues to win market share in electronic credit portfolio trading a rapidly growing segment of the credit market Phoenix.
Thanks, Joe.
Fully electronic block size equity options exchange platform, so year on year revenue growth of 65% driven by strong growth across Delta one products and Euro Stoxx 50 index options.
Data network and post trade revenues grew by 16, 8% led by strong double digit improvements across new Sarah on network infrastructure business and capital at our post trade business.
Operator: Ladies and gentlemen, thank you for standing by. Our conference will begin in just a couple of minutes. Once again, thank you for standing by. Our conference will begin in just a couple of minutes. Thank you very much.
<unk> market data also recorded double digit growth.
<unk> record third quarter sales further adding to our subscription revenue pipeline.
Our data and network businesses have long term recurring revenue contracts.
Turning to our outlook I am please provide the following guidance for the fourth quarter of 2023.
We expect to generate total revenue of between 450 and $500 million.
As compared to $436 $5 million in the fourth quarter of 2022.
We anticipate pretax adjusted earnings to be in the range of $88 million to $108 million with us is $87 $1 million last year.
Which at the midpoint of our guidance would represent over 15% earnings growth for the full year 2023.
And with that I'd like to turn the call over to Jason.
Thank you Shaun and Hello, everyone.
BGC generated total revenue of $482 7 million, an increase of 15, 9% as.
As compared to last year.
By geography.
<unk> revenue increased by 19%.
Europe Middle East and Africa revenues increased by 16, 9% and Asia Pacific revenues increased by five 9%.
Turning to expenses, our compensation and employee benefits under adjusted earnings increased by 16, 6%.
Non compensation expenses under adjusted earnings increased by 10, 8%, primarily driven by higher interest expense of $6 $3 million.
As anticipated interest income also increased by a similar amount offsetting this expense.
Moving on to adjusted earnings power.
Our pretax income was $101 9 million.
A 23, 1% improvement with a 125 basis point margin expansion to 21, 1%, our 12 consecutive quarter of year over year margin expansion.
Operator: Greetings.
Operator: Welcome to the BGC Group Third Quarter 2023 Financial Results Conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation.
Our post tax adjusted earnings increased by 21, 4% to $94 1 million.
<unk> 19 per share.
18, 8% improvement.
Our adjusted EBITDA was $135 9 million.
Operator: If anyone should require operator assistance during the call, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.
A 27% improvement.
Turning to share count.
Our fully diluted weighted average share count decreased by $15 4 million shares.
Jason Chryssicas: At this time, I would like to hand the call over to Jason Chryssicas.
Jason Chryssicas: Head of investor relations. Thank you. You may begin. Thank you and good morning. We should BGC Third Quarter 2023 Financial Results Press release. The presentation is summarizing these results this morning prior to the market open. You can find these at ir.bgcg.com. Please know you can find additional details on our quarterly results in today's press release and investor presentation. Unless otherwise stated, any historical results provided on today's call compare only the third quarter of 2023 with the prior year period.
3% sequentially to 490 million shares.
This significant share reduction was primarily driven by our corporate conversion and the related unit redemptions as well as share repurchases during the quarter.
As of September 30th.
Liquidity was $605 million.
<unk> was $524 3 million.
At year end 2022.
With that I'd like to turn to Howard for closing remarks.
Jason Chryssicas: Certainly, revenue figures are provided for the current period as indicated. 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. We may refer to our liquidity which we define as cash and cash equivalent plus marketable securities that have not been commands, reverse repurpose agreements and financial instruments owned at fair value, less securities loaned and repurpose agreements.
Thank you Jason This is obviously, an exciting time to be part of BGC, our topline and bottom line growth clearly demonstrates the extraordinary extraordinarily positive position. We have built in the global capital markets. We continue to make significant progress with <unk> and as we've said we look forward to communicate.
Jason Chryssicas: We define total capital as redeemable partnership interest, total stockholders equity, and non-controlling interest in subsidiaries. Please see today's press release for the result under generally accepted accounting principles or GAPP. Please also see the relevant sections in the back today's press release for completing updated definitions of any non-GAP terms, reconciliation of these items to the corresponding GAP results and how, when and why management uses such terms. Additional information with respect to our GAP and non-GAP results mentioned on today's call is available on our website at ir.bgcg.com and in our investor presentation.
The additional updates and details during this quarter with that operator rapid I'd turn the call over for questions.
Thank you we will now be conducting a question and answer session.
Like to ask a question. Please press star one on your telephone keypad.
A confirmation tone will indicate your line is in the question queue you.
You May press Star two if you would like to remove your question from Mchugh.
Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment. Please while we poll for your questions.
Jason Chryssicas: We refer to the company's technology driven businesses as Phenics. Phenics offerings include Phenics markets and Phenics 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 company's business results financial position liquidity and outlook. Any forward looking statements involve risks and uncertainties. Except as required by law, BGC undertakes no obligation to update any forward looking statements.
Okay.
Our first questions come from the line of Patrick <unk> with Piper Sandler. Please proceed with your questions.
Yeah good morning.
Grant's on the strong quarter.
I'll start with a question on the macro before getting into the quarter.
Howard.
There's been a number of reports out there that are projecting a massive wave of sovereign debt issuance next year. So we're saying we could see upwards of 50% year over year growth in issuance in the U S, 20%, 30% in the UK and Europe. So just wondering if you could maybe share your thoughts on what that means.
Jason Chryssicas: Any outlook and targets discussed in this call assume no material acquisitions, buybacks, extraordinary transactions, or meaningful changes to the company's stock price. For discussion of additional risks and uncertainties, which could cause actual results different from those contained in the forward looking statements. CBGC'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 continue to the subsequent reports on form 10K, form 10Q, or form 8K.
Bgc's business, particularly rates revenues going forward.
So the historical relationship between issuance and secondary market trading volume.
Before the.
Oh wait.
Howard Lutnick: I am now happy to turn the call over to Howard Latinx chairman of the board and CEO of BGC Group. Thank you, Jason. Good morning and welcome to our third quarter of 2023 conference call.
22 zero interest rate period.
It was a 60% correlation.
So for example, if you had a 50% increase in issuance.
Howard Lutnick: We meet today our chief operating officer shown wind yet and our chief financial officer Jason off. We had another outstanding quarter generating revenue growth of 16% reflecting increased volumes across each and every one of our asset class. BGC is extraordinarily well positioned to benefit from the return of interest rates which we expect to drive our trading volumes revenues and profitability higher for the foreseeable future. Phoenix revenues improved 19% outperforming both its electronic trading platform and exchange peers.
Next year you'd have a 30%.
Kris.
Secondary market trading just taking 0.6 and multiply it to it so.
I think that those relationships are healing, meaning they are coming back now you have so much issuance since.
When we began this process that I think these markets.
Just growth for the foreseeable future for the long foreseeable future, but that kind of issuance growth I think should should bode very very well for those markets, having 30% growth rate.
That's what happens I think youre going to see.
Howard Lutnick: This was led by another record quarter for Phoenix growth platforms which grew by over 45%. Phoenix UST, our electronic US treasury platform, reached a record 25% market share of buying traded on US treasury exchange marketplaces during the third quarter.
Raw through the markets and and that will bode well for everyone. In these marketplaces as a macro.
Okay.
Okay.
Alright, thats good color.
I guess my next question just on the guidance ranges for <unk> I think at the midpoint.
Sean Windeatt: With that, I'll turn the call over to Sean. Thanks and good day everyone. Our revenue grew $66.1 million or 15.9% to $482.7 million in the third quarter of 2023 growing across every geography. Total brokerage revenues grew by 14.8% driven by strong growth across all of our asset class. Our fixed income growth volumes were significantly higher during the period, as interest rates and wider credit spreads continue to provide favorable macro trading conditions across rates, credit and FX.
It implies revenue growth should slow down slightly from 16%.
This past quarter to 9% this quarter. There is still obviously strong year over year growth against what appears to be a tougher comp in <unk> 'twenty two but just as we think about the growth algorithm for the business going forward was hoping to get your thoughts on.
What you view as an appropriate kind of run rate for for growth in both revenues and adjusted pre tax earnings.
Okay.
Well overall I don't think we see a.
Any.
Slowdown so in fact, we would expect next year as we sit here today to be north of 10%.
Sean Windeatt: Rates and credit revenues improved by 12.1 and 9.6% respectively, while FX revenues were 8.6% higher. Energy and commodities revenue grew by 35% driven by strong double-digit growth across our energy complex and our environmental products. Excluding our Trident acquisition, organic energy and commodities growth would have been 23% outperforming the overall market. Our equities business increased by 8.8% reflecting higher volumes across equity derivatives and European cash equities. We generated strong double-digit growth across all earnings metrics during the quarter, driven by higher revenues across Fenix and Voice Hybrid along with record front-office productivity.
Topline revenue growth.
Last year in the fourth quarter.
Began the broad based growth.
And so you could see that last year, because our fourth quarter.
Revenues were higher than our third quarter revenues, which as you remember.
We are seasonally the strongest first quarter, then the little slower second quarter, a little slow in the third quarter, a little slow in the fourth quarter and the third and fourth quarter or this summer.
Christmas and Thanksgiving.
Those kind of things so far.
Fact is when you outgrow it in the fourth quarter Youre showing that's something.
Exogenous happens.
And so that was the beginning of our growth so I don't think.
We see it.
Acceleration of our growth I think our growth rate will remain steady I'm sure it'll bounce around a couple of points as the market's bounce around but the fact is we are a plus 10% growing company going forward as far as we can.
Sean Windeatt: Turning to Fenix, Fenix generated industry-leading revenue growth of 18.7% compared to last year. These higher margin technology-driven businesses generated total revenues of $125.4 million in the third quarter and represented approximately 26% of BGC's total revenue. Fenix revenue growth was led by electronic rates and credit products as well as data, network and post-trade businesses. Fenix growth platforms had another record quarter, generating revenue of $18.4 million, $45.4% improvement versus last year. Fenix markets had strong revenue growth of 15.1%.
Okay and then just also on gross market data growth has been strong.
I think youre tracking towards 15% to 20% growth this year.
Do you think that's kind of like a good run rate to use going forward for growth there and then over the long term I think the market data has been around 5% to 6% of total revenue. So I'm. Just wondering what you think that can get to I guess over the next.
Few years in terms of.
As a percentage of revenue.
I think that growth rate.
Is consistent with our expectations.
And.
With that I think it should outgrow even our growth rate. So it should be it that it should be an accelerator to our growth rate and I think it's got one hundreds of basis points of growth.
Sean Windeatt: Fenix UST revenue increased by over 55% on 26% higher average data volumes and our market share increased to over 25% for the third quarter, up from 23% in the second quarter of 2023 and 18% a year ago. Fenix UST is the second largest and fastest growing treasury marketplace globally. Portfolio Match grew into US credit volumes over ninefold compared to the year ago period. Portfolio Match continues to win market share in electronic credit portfolio trading, a rapidly growing segment of the credit market.
Compared to our overall revenue so I think it's got a long.
Trajectory.
We see a path to doubling.
Those revenues.
And so I don't see it and.
Anywhere nearby I think we have a long way to go our datasets are getting better broader and deeper and that will only bode well for the gross level of that and its percentage of the company.
Yeah.
Alright, great and then one on one Fedex another record quarter. There I know you have some ancillary businesses within Fedex that you've said in the past you could potentially look to sell at some point later on down the line. So just.
Sean Windeatt: Fenix go the only fully electronic block size equity options exchange platform saw year-on-year revenue growth of 65% driven by strong growth across Delta 1 products and Euro stocks 50 in next options. Data, network and post-trade revenues grew by 16.8% led by strong double-digit improvements across Lucera, our network and infrastructure business and capital ad, our post-trade business. Fenix market data also recorded double-digit growth and had record third quarter sales further adding to its subscription revenue pipeline. Our data and network businesses have long-term recurring revenue contracts.
How do you think about the opportunity there to potentially divest some of those non core electronic businesses and potentially use the proceeds to buy back shares and then I guess just building.
In addition to that just maybe if you could update us on your <unk>.
Capital return plans going forward.
I wouldn't use the term.
Non core.
These are all deeply these are businesses that are deeply.
Consistent with our business model across.
Across the capital markets.
They are I think the term that people like to understand is they are completely separable.
Numerous products that if an exchange or electronic peer marketplace wish to acquire from us they would be easily separable and able to be.
Sean Windeatt: Turn to our outlook and please provide the following guidance for the fourth quarter of 2023. We expect to generate total revenue but between $450 and $500 million has compared to $436.5 million in the fourth quarter of 2022. We anticipate pre-tax adjusted earnings to be in the range of $88 to $108 million versus $87.1 million last year, which at the midpoint of our guidance would represent over 15% earnings growth for the full year 2023.
Sold so I think we are open minded to it we cannot understand why that company trades at a multiple of trade that but we understand that and so therefore, if there were assets that the company had that would trade at.
The kind of revenue multiples and profit multiples.
That's some of the electronic trading platforms and exchanges trade at I think we would be open minded to such a transaction and as you correctly said.
Jason Hauf: With that, I'd like to turn the call over to Jason. Thank you, Sean.
Selling things at.
Double digit multiples of revenue and buying back.
Jason Hauf: Hello everyone. BGC generated total revenue of $482.7 million and increased to 15.9% as compared to last year. By geography, America's revenue increased by 19%. Europe, Middle East, and Africa revenues increased by 16.9%, and Asia-Pacific revenues increased by 5.9%.
The company is at.
That mid single digit multiples of earnings it sounds like a a.
A smart thing for management to do especially since we are the biggest owners of this company shares and we really liked that idea. So we.
We understand it.
Spoke to us about some of our shareholders spoke to us about it.
We understand it and we heard you and were open minded but.
Jason Hauf: Turning to expenses. Our compensation and employee benefits under adjusted earnings increased by 16.6%. Non-compensation expenses under adjusted earnings increased by 10.8%, primarily driven by higher interest expenses of $6.3 million. As anticipated, interest income also increased by a similar amount offsetting this expense.
Those things happen, if and when they happen.
We are not making any promises but.
That would be our thinking of return policy week, we historically pay dividends, we're now buying back shares.
We like that model or buy back shares that we have had the opportunity to buy other companies incredibly accretively.
To what we think our long term prospects are and we're going to continue to do that so acquisitions of course, if correctly priced we're open minded to.
Jason Hauf: Moving on to adjusted earnings. Our pre-tax income was $101.9 million, a 23.1% improvement with a 125 basis point margin expansion to 21.1%, our 12th consecutive quarter of year-over-year margin expansion. Our post-tax adjusted earnings increased by 21.4% to $94.1 million or 19 cents per share, an 18.8% improvement. Our adjusted EBITDA was $135.9 million, a 27% improvement.
And we are generating cash buy back shares and if we of course.
We're able to do a transaction then we would just be much more aggressive in buying back those shares.
Okay.
Okay. Thanks, and then on <unk>.
Got to ask it but.
So just to clarify you are planning to still.
The strategic partners and financial details before the end of the year.
Is that did I hear that right and then just go and whats the FTC approval comes.
Jason Hauf: Turning to share count. Our fully diluted weighted average share count decreased by 15.4 million shares, a 3% sequentially to 490 million shares. This significant share of reduction was primarily driven by our corporate conversion and the related unit reductions as well as share of purchases during the quarter. As of September 30th, our liquidity was $605 million compared with $524.3 million as in BRN 2022.
If you could maybe just talk a little bit about your expectations for market share growth in volumes there.
And maybe just what you view as some of the competitive advantages.
<unk> will offer its customers compared to your big your biggest competition, there and CME.
So.
Kurt.
Plans are sort of.
One of two things will either at least.
It is the companies.
Higher than expectation to at least this quarter announced our strategic partners.
Howard Lutnick: With that, I'd like to turn to Howard for closing remarks. Thank you, Jason. It was obviously an exciting time to be part of BGC. Our top line and bottom line growth clearly demonstrate the extraordinarily positive position we have built in the global capital markets. We continue to make significant progress with FMX, and as we've said, we look forward to communicating additional updates and details during this quarter.
We may we may and discussions with those strategic partners being able to.
Lay out all of the transaction details.
We are still in discussions with our strategic partners about so it'll be either at least.
The names that's our objective, but also transaction details.
Operator: With that operator, we happen to turn the calls over for questions. Thank you.
Just need to work that out.
With all the partners.
Cft's C. We are again, we work closely with the CFPB.
Operator: We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your questions from the queue. For participants using speaker equipment and maybe necessary to pick up your hands before pressing the star keys. One moment please, while we pull for your questions.
Going through the process of getting our exchange approved we are very confident we remain very confident that that will just come in its due course of time.
And we are working through that.
That is not a stress point for us internally.
Internally.
It's just work.
Lastly, your question about market share.
So the futures market is a gigantic opportunity for us and it has wide breadth and.
Patrick Moley: Our first questions come from the line of Patrick Moley with Piper Sandler. Please proceed with your questions. Yeah good morning and congrats on the strong quarter. So I'll start with the question on the macro before getting into the quarter, but Howard you know there's been a number of reports out there that are projecting a massive wave of sovereign debt issuance next year. Some are saying we could see upwards of 50% year-rear growth and issuance in the US, 20% to 30% in the UK in Europe.
In the across the capital markets. So I would suggest our first year.
Patrick Moley: So just wondering you know if you could maybe share your thoughts on what that means for BGC business, particularly rates revenues going forward. So the historical relationship between issuance and secondary market trading volume before the you know the08 to 2022 zero interest rate period was a 60% correlation. So for example if you had a 50% increase in issuance next year you'd have a 30% increase in secondary market trading. You just take 0.6 and multiply it to it.
That we are open is going to be a year, which we would call breath.
Opening every account that we possibly can across the capital markets, having all of the MCM was all the trading firms getting everybody on the network now as you know because our treasury platform has been growing.
Seven points market share over the last year, we have broad based.
Users right, but the futures market is is much much much much broader and as you bring on those much broader number of users of course that will grow our treasury business dramatically as well that's why we look at these things together so first year.
Let's call it breadth.
Second you then begins.
Yes.
And.
And once those two years are completed.
Then youre going to see.
Bare knuckle competition.
What I would say, it's a sort of a one two sorry first year youre going to see us.
Patrick Moley: So I think that those relationships are healing meaning they are coming back. Now you have so much issuance since08 when we began this process that I think these markets have you know just growth for the foreseeable future for the long foreseeable future. But that kind of issuance growth I think should should both very very well for those markets having 30% growth rates. I mean if that's what happens I think you're going to see it roll through the markets and that'll both well for everyone in these marketplaces as a macro.
Finding.
Breath second year is making sure we have depth, meaning every customer every area of every customer every portion of every customer how much are they doing how much can we get them done.
Get them on the network get them using get the network effect going in.
And then.
At year three will be.
Significant significant competition and this is an opportunity for this company that is at a scale that is far far different than the value of this company today I think if people undervalue, our U S Treasury platform.
Wildly I think they have no idea of the incredible value that the infrastructure and connectivity. This company has to the world's capital markets players in that opportunity and futures you have the <unk> worth between $70 billion to $80 billion and we have around $3 billion that is just <unk>.
Patrick Moley: Sorry that's good color.
Howard Lutnick: So I guess my next question is just on the guidance ranges for 4Q. I think at the midpoint you know it implies revenue growth should slow down slightly from 16% this past quarter to 9% this quarter. So still obviously strong year-of-year growth you know against what appears to be a tougher comp in 4Q. 22. But just as we think about the growth algorithm for the business going forward which hopefully gives your thoughts on you know what you view as an appropriate kind of run rate for growth in both revenues and adjusted pre-tax earnings.
Logical I think that logic will come over time as we go pounding forward.
And we are very very excited about our prospects trash bags.
Alright, that's great guys I think that's it for me, but congrats on the strong quarter.
Howard Lutnick: Well overall I don't think we see any slowdown. So in fact we would expect next year as we see here today to be north of 10% top line revenue growth. Last year in the fourth quarter began the broad-based growth and so you and you could see that last year because our fourth quarter revenues were higher than our third quarter revenue which as you remember we are seasonally the strongest of first quarter then a little slower the second quarter a little slower the third quarter a little slower the fourth quarter and the third and fourth quarter are the summer and you know Christmas and Thanksgiving and it most kind of things so The fact is, when you outgrow it in the fourth quarter, you're showing that something exogenous happened.
Thank you we have reached the end of our question and answer session I would now like to turn the floor back over to chairman and Chief Executive Officer, Mr. Lutnick for any closing comments.
Thank you all for joining US today, we look forward to reporting and meeting with you next quarter and we will have again.
We look forward to a very positive call. Thank you will see that.
Yes.
Thank you. This does conclude today's teleconference. We appreciate your participation you may disconnect. Your lines at this time enjoy the rest of your day.
Hum.
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Hum.
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Sure.
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Howard Lutnick: And so that was the beginning of our growth. So I don't think we see it at any de-acceleration of our growth. I think our growth rate will remain steady. I'm sure it'll bounce around a couple of points as the markets bounce around. But the fact is we're a plus 10% growing company going forward as far as we can.
Howard Lutnick: Okay, and also on growth, market data growth has been strong. I think you're tracking towards 15 to 20% growth this year. Do you think that's kind of like a good run rate to use going forward for growth there? And that was in a long term, I think it's that market data has been around 5 to 6% of total revenue. So just wondering what you think that can get to, I guess, over the next few years in terms of as a percentage of revenue.
Hum.
Okay.
Howard Lutnick: I think that growth rate is consistent with our expectations. And along with that, I think it should outgrow even our growth rate. So it should be about, it should be in accelerated to our growth rate. And I think it's got hundreds of basis points of growth as compared to our overall revenue. So I think it's got a long trajectory. We see a path to doubling those revenues. And so I don't see an end anywhere near by. I think we have a long way to go. Our data sets are getting better, broader and deeper. And that will only bode well for the growth level of that and its percentage in the company.
Mhm.
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Hum.
Patrick Moley: All right, great.
[music].
Okay.
Uh-huh.
[music].
Mhm.
Patrick Moley: And then one on on FedEx, you know, another record quarter there. I know you have some auxiliary businesses within FedEx that you said in the past, you could potentially look to to sell at some point later on down the line. So just, you know, how do you think about the opportunity there to potentially divest some of those non-core electronic businesses and potentially use the proceeds to buy back shares?
Howard Lutnick: And then I guess just building or in addition to that, just maybe you could update us on your capital return plans going forward. So I'm going to use the term non-core. These are all deeply, these are businesses that are deeply consistent with our business model across the capital markets. They are, I think, the term that people like to understand is they are completely separable. It means we have numerous products that if an exchange or electronic peer marketplace was to acquire from us, they would be easily separable and able to be, you know, sold.
Howard Lutnick: So I think we are open-minded to it. We cannot understand why that company trades at the multiple trades at, but we understand that. And so therefore, if there were assets that the company had, that would trade at the kind of revenue multiples and profit multiples, that some of the electronic trading platforms and exchanges trade at, I think we would be open-minded to such a transaction. And as you correctly said, you know, selling things at double digit multiples of revenue and buying back a, your company at, at mid-single digit multiples of earnings sounds like a, a smart thing for management to do, especially since we are the biggest owners of this company shares.
Howard Lutnick: And we really like that idea. So we understand it. You spoke to us about it, some of our shareholders spoke to us about it. We understand it and we heard you. And we're open-minded. But, you know, those things happen if and when they happen. We are not making any promises, but that would be our thinking of return policy.
Howard Lutnick: We historically picked dividends. We're now buying back shares. We like that model of buying back shares that we have had the opportunity to buy other companies incredibly, credibly, to what we think our long-term prospects are and we're going to continue to do that. So acquisitions, of course, if correctly priced, we're open-minded to and we're generating cash by back shares. And if we, of course, were able to do a transaction, then we would just be much more aggressive in buying back shares. Okay, thanks.
Patrick Moley: And then on FMX, I've got to ask it.
Howard Lutnick: But so just to clarify, you are planning to still announce the strategic partners and financial details before the end of the year, is that I hear that right? And then just going, you know, once the CFPC approval comes, you know, if you could maybe just talk a little bit about your expectations for market share growth and volumes there. And maybe just what you view as some of the competitive advantages that FMX will offer as customers compared to, you know, your biggest competition there in CME.
Howard Lutnick: So our current plans are, it's sort of one of two things. Well, either at least it is the company's desire and expectation to at least this quarter announce our strategic partners. We may, we may in discussions with those strategic partners be able to lay out all of the transaction details, but that we are still in discussions with our strategic partners about. So it will be either at least the names, that's our objective, but also transaction details.
Howard Lutnick: We just need to work that out with all the partners. CFPC, we are again, we work closely with the CFPC going through the process of getting our exchange approved. We are very confident, we remain very confident to that. We'll just come in and do course of time and we are working through that. That is not a stress point for us internally. It just worked.
Howard Lutnick: Lastly, your question about market share. So the future's market is a gigantic opportunity for us and it has wide breadth in the, across the capital markets. So I would suggest a first year that we are open is going to be a year which we would call breadth opening every account that we possibly can across the capital markets. Having all the FCMs, all the trading firms, getting everybody on the network. Now, as you know, because our treasury platform has been growing, you know, like seven points market share over the last year, we have broad-based users, right?
Howard Lutnick: But the future's market is much, much, much, much broader. And as you bring on those much broader number of users, of course, I will grow our treasury business dramatically as well. That is why we look at these things together. So first year, let's call it breadth. Second year then begins depth. And once those two years are completed, then you are going to see bare knuckles competition. So that is what I would say.
Howard Lutnick: It is sort of a one, two, three, first year. You are going to see us defining breadth. Second year is making sure we have depth, meaning every customer, every area of every customer, every portion of every customer. How much are they doing? How much can we get them done? Get them on the network, get them using, get the network effect going. And then year three will be, you know, significant, significant competition.
Howard Lutnick: And this is an opportunity for this company that is at a scale that is far, far different than the value of this company today. I think people undervalue a US treasury platform wildly. I think they have no idea of the incredible value that the infrastructure and connectivity this company has to the world's capital market players. And that opportunity in futures, you know, you have the CMEs worth between $70, $80 billion. And we hover around $3 billion. That is just illogical. I think that illogical will come over time as we go pounding forward.
Patrick Moley: And we are very, very excited about our prospects for Africa. All right, that's great guys.
Patrick Moley: I think that's it for me, but congrats on the strong quarter. Thank you.
Howard Lutnick: We have reached the end of our question and answer session. I would now like to turn the floor back over to Chairman and Chief Executive Officer Mr. Lutnick for any closing comments. Thank you all for joining us today. We look forward to reporting and meeting with you next quarter, and we will have again, we look forward to a very positive call. Thank you. We'll see you then. Thank you.
Operator: This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time.
Operator: Enjoy the rest of your day.