Q3 2024 BGC Group Inc Earnings Call
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Greetings and welcome to the BGC Group Incorporated's third quarter of 2024 earnings call. This time I'll just consider an listening mode.
The question and answer session will follow today's formal presentation. If anyone should acquire operator assistance, please for a star zero from your telephone keypad. As your minder, this conference is being recorded.
Now, my pleasure to introduce Jason Chryssicas, Head of Vester Relations.
and St. Jessica, you may now begin. Thank you and hello everyone. This morning we issued BGC's third quarter 2020 for financial results press release and earnings presentation.
You can find us at IR.tgcg.com
Except as otherwise specified, any store of results provided on space, call up compare only the third or 2024 with the prior period. And we'll be referring to our results on a non-cap basis which includes the terms adjusted earnings and adjusted speed.
Please refer to today's press release in the Vester presentation. It's a couple of mail tables in our website for additional details on our core libous.
and for completing up the auditions of any non-gap terms for the considerations of these items to corresponding gap souls and how and when management uses them.
The outlook discussed today, as he was no material acquisition, is a meaningful change in our stock price. Our expectations are subject to change based on various macroeconomic, social, political, and other factors.
None of our targets are goals beyond 2024 should be considered formal guidance.
Also, I remind you that information on this call at King James Forward looking statements, including without limitation, statements concerning our economic outlook in business.
Such statements are subject to risk-inensorities which could cause after-resulted different from expectations.
Except as required by law, we undertake no obligations to update any forward-looking statements.
For a complete discussion of the risks and other factors that many impact these forward-looking statements. CRSC filings including but not limited to the risk factors, and the slowdown regarding forward-looking information in our most recent SCC filings.
and with that I'm now having to turn the color of the Howard Lutnick, terming the horn from the CEO of BGZ Group.
Thank you, Jason. Good morning and welcome to our third quarter 2020 for Copper School. We've meet today as Sean Windeatt, our Chief Operating Officer and Jason Hauf, our Chief Financial Officer.
We delivered record third quarter revenues of $561 million of 16% compared to last year.
Our strong performance reflected growth across every asset class and region. We drove our pre-txt to just an earnings up more than 24%.
Earlier this month we agreed to cry our OTC Global Holdings, the largest independent energy and commodities broker, and we closed our acquisition of sage energy partners.
We expect both transactions to be immediately accreted and together we'll add more than $450 million in annual revenues.
FNX continues to outperform its peers, generating record volumes across a U.S. Treasury and FX platforms.
FMS Futures Exchange, which launched September 23rd, provides clients with much needed innovation, superior pricing, and dramatically improved capital efficiencies.
We expect to connect an additional 5 to 10 of the largest FSM's over the next couple of quarters.
with that I'll turn the call over to Sean.
Thanks and good day everyone. Our third quarter revenues through a 16.2% to $561.1 million, representing record third quarter revenues and reflecting strong growth across every asset class and region.
Sean: Total brokerage revenues grew by 15.1% to $5.6 million.
rates revenues increased by 19.6% to 174.3 million dollars reflecting higher volumes across the graphic class.
ECS revenues grew by 21.3% to 112.9 million dollars driven by strong organic growth across the energy complex and BGC's leading environmental business.
As Howard mentioned earlier, we're excited about what the OTC and Sage acquisitions will bring to our ECS business.
OTC, the world's largest independent energy and commodities broker, will transform our offering in oil and shipping, allowing us for the first time to broker the entire barrel. Say, seamlessly aligns with our business, further strengthening our leading environmental franchise.
For an exchange revenues improved by 15.4% to 92.1 million dollars driven by emerging markets products and higher G10 options volumes.
Credit revenues increased by 6.7% to 68 million dollars, led by Phoenix portfolio match and higher emerging market and European credit volumes.
Capquities revenues, grew by 1.3% to 53.3 million dollars, driven by US and European equity derivatives volumes, partly offset by lower Asian equity derivative activity.
Sean: Data Network and Post-Trade revenues improved by 17.5% to 32.7 million dollars driven by strong subscription-based revenue growth across Phoenix market data and new Sarah.
Turning to Phoenix.
In the third quarter, Phoenix Revolution proved by 13.3% to 142.1 million dollars.
Thanks Markets, produced revenues of $116.8 million and increased at 9.2%.
This growth was driven by a higher electronic volumes across rates and foreign exchange.
Our Phoenix Growth Platforms generated revenues of $25.3 million, up to $37.3% driven by FMX portfolio match and fair.
Sean: FMXUST generated record daily average volume of $53 billion for the third quarter up 40% compared to last year.
This translated to 29.4% market share for the third quarter compared to 25.3% the year ago.
FMAX FX, average daily volumes, improved more than 38% compared to last year, on record ADV of more than $9 billion.
FMX FX continues to act before and grows market share in the enormous global foreign exchange market.
Sean: FMX futures exchange, launch on September 23, trading over futures, the largest no-stop futures contract in the world. Exchange launch with 5 FCMs, Goldman Sachs, JP Morgan, Marx, RBC and Wells Fargo.
Sean: We expect to connect an additional 5-10 of the largest XCMs for the launch of U.S. Treasury futures in the first quarter of 2025.
Portfolio match US credit volumes increase more than 150% and its European volumes are up over 9th old compared to last year.
Lu Cera, our network business providing critical real-time trading infrastructure to the capital markets, grew its revenue by over 34%.
Sean: Lucer is leveraging its strength in the FX markets and expanding across the Rates landscape.
John Chau: John Chau, I look.
Speaker Change: and please provide the following guidance for the fourth quarter of 2024.
We expect to generate total revenue of between 545 and 595 million dollars, as compared to 516.8 million dollars in the fourth quarter of 2023.
Speaker Change: Richard the midpoint of our guidance will represent over 11% revenue growth for the full year 2024.
Speaker Change: We anticipate pre-tax adjusted earnings to be in the range of 122 to $138 million, versus $110.8 million last year.
Richard the midpoint of guidance would represent around 17% earnings growth for the full year 2020-04. With that, I'd like to turn the call over to Jason.
Jason: Thank you Sean and all of you everyone.
Jason: VGC January to third quarter revenue, a $551 million, reflecting growth across all young fees.
America's revenues increased by 19%, Europe Middle East and Africa revenues increased by 16.5% and Asia-Pacific revenues increased by 8.3%.
Speaker Change: Turning to expenses.
Speaker Change: Compensation and Employment of its undergap and for adjusted earnings increased by 16.4% and 16.3% respectively, primarily due to higher commissurable revenues during the period.
Non-convinciation expenses under Gap and for adjusted earnings increased by 17.5% and 11.5% respectively.
Speaker Change: largely driven by higher interest expense, which was more than offset by higher interest income.
Speaker Change: Moving on to Ernst. Our free tax adjusted earnings grew by 24.4% to 126.7 million dollars.
Post-doc suggested earnings increase by 34.5% to 126.6 million dollars and post-doc suggested earnings per share improved by 36.8% to 26% per share.
Speaker Change: Our third quarter, adjusted EBITDA was 151.4 million dollars and 11.4% improved.
Speaker Change: Turning the share count.
Our fully diluted weighted average share count for adjusted earnings was 494.8 million during the third quarter, a 0.4% decrease compared to the second quarter of 2024.
BGC continues to expect that fully diluted weighted average share count to remain in approximately flat for the full year of 2024.
AdNC September 30th, our liquidity was $772.5 million compared with $711.4 million as of year and 2023.
With that operator, we would like to turn open the call for questions.
Speaker Change: Thank you. At the time of the week in Dr. In the question and answer session.
If you'd like to ask a question, please press star 1 from your telephone keypad and the confirmation tone indicate your line is in the question queue.
We first start too if you'd like to withdraw your question from the queue.
Speaker Change: For Precision Surgery and Speaker Equipment, maybe necessary to pick up your handset before pressing the star keys.
One moment please will you pull for questions once again to the star one. Thank you.
Thank you our first question is from the line of Patrick Molly with Piper Seinler. Please just do your three questions.
Yeah, good morning Howard and team, I guess.
Good morning, no.
Patrick Molly: I wanted to just start off with a question on FMAX. It's been a little over month now.
Patrick Molly: and I hope you can get a stay of the union from you.
on House Attitude, you've been with the launch.
and then on the additional 5-10 of the larger CFCM that you plan to connect over the next couple of quarters. I'm assuming a few of those are strategic investors. So just want to maybe what the hold-up is and what there's any delays in getting them connected, what's kind of driving that. Thanks.
Sure, so let's focus for a little bit on FMX features.
We said we would open with between three and five F-Sams and we opened with five F-Sams, which we listed today.
We do expect over the next two quarters to hopefully have all of the balance of the partners connected. That would be our objective, plus a few others. Many FSM's just...
She didn't start the process of connecting until after it was fully approved and after it was announced and after when it was opening, it just a process.
Patrick Molly: which we're totally aware of and that's why if you remember which I've said all along, I said the first year is to get all the players on the field.
Patrick Molly: Right, that would mean all the SM signed up, so our expectation was it would take us the first two years to get all the SM signed up. There were 50 SMs.
Obviously we're focused on the largest ones, but in the top 20 of course, but we know by the end of the first year we would have all the F-Sams signed up, then the end of the second year we would have all the clients of all the F-Sams signed up.
and then we'd be ready in your three to bring full-on competition.
Patrick Molly: to the CMMA so...
We opened with five, which was the high end of what we expected, so I was very happy.
But by definition, we only have five FCS meaning the only people who can do business with us are the clients of those first five.
Patrick Molly: We expect to add 5 to 10 of them over the next couple of quarters and most of them if not all of them we should have most not all of the partners.
Patrick Molly: Sala.
As they sign up, often, where it comes with it, is more, strangely, and far to change trading as well, so you get a nice...
Patrick Molly: Additional benefit of bumped up in the other assets of FMX, which is our US Treasury platform, and our foreign exchange platform. So I think that comes with that as they do the added connectivity. We do have an expectation that those market share points and volumes.
Patrick Molly: with Vontepers Well, so...
I think it's going slightly better than expected in that we thought we would have three to five and we had five.
I'm not going to overdo it. It's product we find. They're doing business. They're open interest every day. There's a whole variety of heating pains of trying to make it a smoother.
simpler easier for the FCNs and the OCH. That's a process that's always ongoing. I would expect that much of that to sort of sway out through the end of this year. And I think as we know it's an extra, I think all these sort of new things will be sorted out nicely. And we'll be in an excellent shape going forward.
No thanks for that. Just one on FMX-40 move on to the rest of the business. It looks like the club market share declines to clenchedally in the third quarter for the first time ever. So just curious what the driver that share was and then how we should think about market share trajectory from here in that business.
Sure or so.
Patrick Molly: It was last quarter we rounded up.
and this quarter, you know, so that's why I gave you the 29.4, you know, to show you that. And the last quarter was like 29.5, some other number, like 29.8, I think, or something like that. So, you know, it was one was a slight round-up, and one was a slight round-down, but it's irrelevantly similar.
Speaker Change: What happened in the quarter was there was a spike involving?
and there was a dramatic spike in volume between professional trading firms trading with each other.
Patrick Molly: on the CMA.
Patrick Molly: and as you remember that's not business that we focused on. So, volatility was very high and the trading between professional trading firms, which is not something we focused on.
made the market share slightly larger, you know, the pie was larger.
Patrick Molly: and so that was the only change. I would expect our march higher on a market share for a US Treasury business has not changed, our outlook has not changed and I think you would expect it to go.
and a very positive way as, and I said, the as some of the partners.
Come on with the FCM, they're going to come on with more of their trading pods, we're in the home, and I think we have the expectation, really nice bumps in our Treasury Business going forward.
and we have line of sight to it with clients. We know what's coming from and I think we're very optimistic and positive.
Okay, understood. In the shifting gears to the energy business and the stage and OTC Global Holding Jack with the issues.
Speaker Change: and the three transformational, you're going to have a lot more exposure to the energy sector. So when we just think about the overall company, how should we think about what this means for the margin out, looking kind of a growth trajectory of the business going forward? Why now? Why now? Why is now?
Speaker Change: Good time, you think, to make acquisitions like this and then getting a little bit more specific is earning way to help us.
Quantify how will create a view of expect these acquisitions to be to your earnings.
and then maybe if you give us like a breakout of that 450 million in revenue, how much comes from stage versus OTC, that would be very helpful as well.
Speaker Change: Well, a lot of things, okay. So I think in terms of the overall acquisitions.
We're under-sized in America, now you've seen significant growth in America.
Speaker Change: We said we were undersized in energy and commodities and shipping and now you've seen us.
You see this grow there and what these two will do, that continues that trajectory of growth in this marketplace or in this particular sector where we were not as large as a huge marketplace, a huge place.
Speaker Change: A big diversified group of participants, and now this will make us one of the main players.
Speaker Change: So, and as we said, it's this.
Speaker Change: Two acquisitions we've done from Sage, which links in seamlessly with our existing business and plug and play with our existing business in particular our environmental business.
Speaker Change: And then of course you've got OTC, we were strong in stronger in the US, not as strong in Europe. This will strengthen us in the US, give us the complete picture and also in Europe, make us one of the strongest in oil from the overall.
So for us, part of our strategy and we're very excited by both of those acquisitions. From a revenue and a...
Speaker Change: and we said today.
The revenues that once obviously both closed will, we estimate will get us annualised revenues of an excessive $450 million.
Speaker Change: and whilst we haven't given an estimate today on EPS what we've said is...
Both of those transactions will be immediately accreted with already closed on stage and as we set an upper-pad notes we expect to close in OTC towards the end of Q1 and both will be immediately accretive on EPS.
Speaker Change: Okay, then I'm gonna, on the, on the sides.
Speaker Change: Breakout, I guess this would tie in a question about the revenue guide for the fourth quarter. Of that 10% year over your growth.
How much of that is going to come from these acquisitions? I guess how much is organic versus not our gank? And they go in forward for these acquisitions as we build them into our models. I mean, sure we just is a fair to model just kind of the, the, the, the, the, the
Speaker Change: Existing margins of the business and assume it's a creative, but you know, you're still kind of in that low 20% range in the energy business as well. Any color there would be helpful.
Okay, so in Q4, in Q4 it's actually over 10% that we have is between 1 and 2% is acquisition, the balance still being between 89% is organic.
and the balance acquisition just one to two percent.
and then from a going forward, from a margin perspective.
I think one so D.C. closes, I think you're with a large acquisition.
Immediately, it was creative, but with any big acquisition, slightly lower margin to start with whilst you're integrate that business and then getting to margins as you say around the 20 level sounds pretty good to me.
Speaker Change: Okay.
and then just I guess if you could maybe just share.
Once we get past the stage or the OTC acquisition, any kind of updated thoughts on capital allocation priorities and are there any potential businesses within Phoenix that you could possibly look to the best, just updated thoughts there would be great.
Speaker Change: So you're right in that when we've made a creative acquisition that will be part of our capital allocation. I think we did a study of what would be the best use of our capital and I think it's clear that these acquisitions for our shareholders, our value, our superior.
and so we made those acquisitions. They're a good prices and their great business is fresh to grow and grow the profitability and our EPS.
So I think that will, it will obviously reduce our share-reporting period during the period of time that we're putting aside money to pay for these acquisitions.
and so you should expect that but we've done that calculation on the share count and all the rest and it's you know it's creative so that's beneficial to the shareholders.
Day or after, turning to your point, we do have some tech assets.
Electronic acids that are growing very, very nicely. And that we think there are a few of them that might attract significant attention from others who would like to buy them at a...
Multiple, in multiples, in multiples higher than what we trade at.
Speaker Change: and so that would be also a creative where open-minded to that for sure. We said so.
and those kind of things.
are just timing based. We're reminded we have suitors who have come and chat with us. We are reminded about it and over time I would thank you, we'll see you.
The best, some businesses. I'm not talking about giant businesses, but I'm talking about small businesses that we have that will prove our point that our electronic assets are worth.
So much more, probably more than the market capital in the company if these kind of multiples. So I think that's, we expect that over the next year we would expect something like Pat to close.
Speaker Change: The End.
Speaker Change: The End.
Thank you. As a reminder, if you like to ask a question at this time, you may press star 1 for your telephone keypad.
Speaker Change: The End
Thank you. We have followed up from the line of Patrick Molly with Piper Sander. Please just use your questions.
It's just us today, Patrick, it's just us today, I'm good.
Patrick Molly: I think I was on mute and threw him back in the queue. I wanted to go back to the organic growth outlook Howard. I know in the past you said that you expect.
you know that you can generate around 10%.
Speaker Change: Revenue growth.
going forward. Is that still achievable in your mind and in the fourth quarter, it looks like you might dip below that on an organic standpoint. Is that just, you know, you have a tough comp, so you're maybe temporarily dip below that. How should we think about that in the fourth quarter?
I think our year, we said in the beginning of the year that we expected revenue growth, so it was above 10 and we're guiding revenue growth to 11 to the year.
Obviously, as you saw this quarter.
Speaker Change: The company focuses on its maximum performance, you know, just delivered 16%.
We don't see anything stepping back because if I don't know how the election will play out, I don't know how the after the election stuff will play out. I don't know how December will play out versus last year, which was a blowout December. So I think we've just been reasonable with our expectations.
But we are very comfortable with organic road to 10%, nothing has changed that at all.
and then just last one for me any update on quarter to day trends and once we get on the other side of the election, how you expect maybe volumes in just overall activity levels in your business to try to trend into the end of the year.
Speaker Change: But by guiding revs up more than 10, we certainly tell you that our expectation is, things are going to remain lovely at B&G6.
The End.
Alright, thank you all Howard. Okay, just say it here. Goodbye everybody.
I just don't think I'd like to turn it full back to you for closing comments.
Speaker Change: Thank you. So we continue to deliver strong top and bottom-wring growth.
Speaker Change: Our SNF features exchange which opened the month ago, you know, actively onboarding clients and we feel really good about it. We expect a grudge trajectory in market share with some of the pieces to far exceed when we experience with our FMFs to a strategy business and you know what that is now. So we expect very positive things about our super-cheap just business.
and we're happy to welcome Sage Energy partners to BGC and we look forward to welcoming OTC in the new year. Things as I said are feeling very, very good for BGC and we look forward to seeing you next course. Thanks everybody, I appreciate joining us this morning.
Thank you. This does conclude today's teleconference. Thank you for your participation. You may now disconnect your lines at this time.