Q4 2024 BGC Group Inc Earnings Call
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Speaker Change: Greetings and welcome to the BGC Group, Inc. Fourth quarter 2024 earnings call at this time, all participants on listen only mode.
And answer session will follow the formal presentation if.
Speaker Change: If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded it is now my pleasure to introduce your host Jason Chris Jakubik head of Investor Relations. Thank you you may begin.
Speaker Change: Hello, everyone. This morning, we issued Ptc's fourth quarter and full year 2024 financial results, which can be found at IR <unk> com.
Speaker Change: Historical results on today's call comparable with the fourth quarter of 2024 with the prior year period, unless otherwise specified.
Speaker Change: Referring to our results on a non-GAAP basis, which exclude the terms adjusted earnings and adjusted EBITDA.
Speaker Change: Please refer to today's investor materials on our website for additional details on our financial results and for 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 them.
Speaker Change: The outlook discussed today assumes no material acquisitions or dispositions and our expectations are subject to change based on various macro economic social political and other factors.
Speaker Change: Information on this call contains forward looking statements, including without limitation statements about our economic outlook and business.
Speaker Change: These statements are subject to risks and uncertainties, which could cause our actual results to differ from expectations.
Speaker Change: Except as required by law, we undertake no obligation to update any forward looking statements.
Speaker Change: For information on factors that could cause actual results to differ from forward looking statements and a complete discussion of the risks and other factors that may impact. These forward looking statements see our SEC filings included but not limited to the risk factors and disclosures within these SEC documents.
Speaker Change: I'm happy to turn the call over to Sean Winter, yet Chief operating officer of PTC Group.
Speaker Change: Thank you Jason Good morning, welcome to our fourth quarter and full year 2020 full conference call.
Speaker Change: With me today are my fellow <unk> global heads of brokerage genre Poudrage J P. A bad.
Speaker Change: And our Chief Financial Officer, Jason Haas.
Speaker Change: I'd like to start by congratulating, our chairman and CEO Howard Lutnick, while his nomination as a 41st United States Secretary of Commerce.
Speaker Change: The decades out has provided transformational leadership delivering billions of dollars of value for shareholders through pioneering electronic trading and strategic corporate transactions.
Speaker Change: As a resilient and visionary leader he built BDC into the world's most valuable wholesale breakout with more than 4000 employees generating over $2 $2 billion of annual revenue.
Speaker Change: We are confident that upon consummation. He will bring the same level of dedication and financial acumen to his new role serving the American people as he has at BGC.
Speaker Change: Turning to our fourth quarter and full year results.
BGC delivered record fourth quarter, and full year revenues growing by 11 and 12% respectively.
Speaker Change: Our strong revenue growth was driven by our ECS rates and foreign exchange businesses, which continue to outperform the market.
Speaker Change: This momentum is carrying forward into 2025 with trading volumes currently pacing Q1, 'twenty fours record.
Speaker Change: At the beginning of the fourth quarter, we closed our acquisition of stage energy partners and expect to close OTC holding around the end of the first quarter.
Speaker Change: We expect these acquisitions will contribute more than $450 million of annual revenues.
Speaker Change: Currently accretive and make BGC the largest ECS broke out in the world.
Speaker Change: Looking at our fourth quarter results in more detail.
Speaker Change: Total revenues grew by 10, 8% to $572 $3 million, representing record fourth quarter revenues, and reflecting strong growth across every region and our largest asset classes.
Speaker Change: Brokerage revenues grew by 11, 8%.
Speaker Change: $516 $1 million.
Speaker Change: <unk> revenues increased by eight 8% to $169 $6 million, reflecting higher volumes across interest rate derivatives listed Reits products and U S treasuries.
Speaker Change: ECS revenues grew by 28% to $134 $1 million.
Speaker Change: Driven by strong growth across the energy complex power and leading environmental business as well as the acquisition of Sage Energy partners.
Speaker Change: Foreign exchange revenues were up 21, 3% to $93 $6 million.
Speaker Change: Primarily driven by higher options and emerging market foreign exchange volumes.
Speaker Change: Credit revenues decreased by four 9% to $62 $4 million due to lower Cvs and emerging market credit volumes, partially offset by record volumes in portfolio Matt.
Equities revenues declined three 5% to $56 $3 million, primarily due to lower Asian equity derivative volumes, partially offset by higher European and U S volumes.
Speaker Change: Data network and post trade revenues improved by 10, 3% to $32 $6 million.
Speaker Change: This was primarily driven by strong subscription based revenue growth across Phoenix market data and loose Sarah offset by lower postpaid revenues due to the state of capital in the fourth quarter.
Speaker Change: Revenues for data network and host rate, excluding the impact of capital App grew by more than 20% year over year.
Speaker Change: Turning to Fedex in.
Speaker Change: In the fourth quarter <unk> revenues improved by eight 6% to $142 $1 million.
Speaker Change: That makes markets reported revenues of $116 $7 million, an increase of six 4%.
Speaker Change: This growth was driven by higher electronic volumes across rates and foreign exchange as well as higher market data revenues, partially offset by lower credit volumes.
Speaker Change: And as growth platforms generated revenues of $25 5, million% to 22% increase primarily driven by FX portfolio matched and loose terra partially offset by the sight of capture that in the fourth quarter.
Excluding the impact of this sale phenix growth platforms would have grown by approximately 37%.
Speaker Change: <unk> Ust generated average daily volumes of over $52 billion for the fourth quarter up 28% compared to last year.
Speaker Change: This translated to over 30% market share for the fourth quarter up from 29% last quarter and 26% a year ago.
Speaker Change: FX FX volumes improved by approximately 80% compared to last year on record Adv of more than $11 billion.
Speaker Change: <unk> FX continues to expand its market share and the enormous global foreign exchange market.
Speaker Change: FX Futures exchange continues to connect the world's largest CMS recently Onboarding <unk> partners Bank of America Barclays and Citi.
Speaker Change: <unk> expects to have more than 10 mcm's connected before the launch U S. Treasury futures around the end of the first quarter 2025.
Speaker Change: Sofa volumes continue to grow and FX futures exchange and its market share exceeds what we experienced at the same point in time following the launch of our U S Treasury business and as a reminder, <unk> USA now holds over 30% market share.
Portfolio matched adv increased by more than 150% due to strong growth across both U S and European trading volumes.
Speaker Change: Sarah Thanks network business that provides critical real time trading infrastructure to the capital markets grew its revenue by over 33%.
Speaker Change: Can you just to expand revenue pipeline with that I'd like to turn the call over to Jason.
Speaker Change: Thank you Shaun and Hello, everyone.
Speaker Change: BGC generated fourth quarter revenue of $572 $3 million, reflecting growth across all geographies Americas.
Speaker Change: Americas revenues increased by 17, 1% Asia Pacific revenues increased by 10, 2% in Europe, Middle East and Africa revenues increased by six 5%.
Speaker Change: Turning to expenses.
Speaker Change: Compensation and employee benefits under GAAP and for adjusted earnings increased by 16, 3% and 14% respectively, primarily due to higher commissions revenues during the period.
Speaker Change: Non compensation expenses under GAAP were flat and for adjusted earnings decreased by <unk>, 3%.
Speaker Change: Moving on to earnings.
Speaker Change: Our pre tax adjusted earnings grew by 16, 9% to $129 $5 million.
Speaker Change: Post tax adjusted earnings increased by 21, 9% to $123 $5 million and post tax adjusted earnings per share improved by 19% to 25 cents per share.
Speaker Change: Adjusted EBITDA was $192 million, a 26, 7% improvement.
Speaker Change: Turning to share count.
Speaker Change: Bgc's fully diluted weighted average share count for adjusted earnings was $495 $5 million during the quarter is 0.1% increase compared to the third quarter of 2024, and a 1% increase compared to the fourth quarter of 2023.
Speaker Change: As of December 31.
Speaker Change: Liquidity was 897 $8 million compared with $701 $4 million as of year end 2023.
Sean Winter: With that I'd like to turn the call back to Sean to go over our first quarter outlook.
Sean Winter: Thank you Jason.
Sean Winter: I am pleased to provide the following guidance for the first quarter of 2025.
Sean Winter: We expect to generate total revenues of between 610 and $660 million.
Sean Winter: As compared to $578 $6 million in the first quarter of 2024, which at the midpoint of our guidance would represent approximately 10% revenue growth.
Sean Winter: We anticipate pretax adjusted earnings to be in the range of $145 million to $161 million versus $135 $4 million last year.
Sean Winter: Which at the midpoint of guidance would represent 13% earnings growth.
Sean Winter: So with that operator, we'd like to open the call for questions.
Sean Winter: Yes.
Speaker Change: Thank you we will now be conducting a question and answer session. If you would 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 May press star two to remove yourself from the queue for participants using speaker equipment. It may be necessary to pick up the handset before pressing.
Sean Winter: Starches.
Speaker Change: One moment, please pull for questions.
Speaker Change: And our first question comes from the line of Patrick <unk> with Piper Sandler. Please proceed with your question.
Patrick: Good morning, how are you guys doing.
Speaker Change: Good Thank you Patrick.
Speaker Change: Great. So first off wanted to congratulate Shawn Johnson J P on the appointment as co Ceos.
Speaker Change: And if howard's listening in and wish him the best of luck on on his next journey as.
Speaker Change: Well so first question.
Speaker Change: Like you said in your prepared remarks by all accounts. It seems like Howard is on its way to being confirmed as the next Commerce Secretary can you just take a minute to kind of walk us through your expectations around the timeline of the.
Speaker Change: Executive leadership transition and is there any incremental detail you can share on the planned sale of ours BGC shares. Both those that are owned directly by him and his well own indirectly through cantor. Thanks.
Speaker Change: No problem. Thanks, So I think.
Speaker Change: Let's deal with the last base. So as we have previously said Patrick Howard Howard will comply with all of the Senate Ethics Committee standards, including divesting is holdings.
Speaker Change: 90 days of Senate confirmation.
Speaker Change: It would be public SEC filings, obviously will be required when he divestitures holding and we previously said, we don't expect any sales on the open market.
Speaker Change: And in addition that we don't expect any change to the corporate structure.
Speaker Change: And that remains the case.
Speaker Change: In terms of in terms of.
In terms of myself, John and James Bay.
Speaker Change: Sitting next to me an opposite me.
Speaker Change: But we're we're obviously tremendously excited.
Speaker Change: With the three of US now we've worked side by side over the past three years and managing the day to day business.
Speaker Change: I think hopefully over the last year in particular had set up space in the last few years has been highly successful.
Speaker Change: Think even last year last year, we did.
Speaker Change: And with revenue growth that we've just shown a 11, 7%.
Speaker Change: Acquisitions, and a huge growth in our ECS business and trading shareholder value in the.
Speaker Change: In the sale of our capture that business that we did during Q4.
Speaker Change: We described it as business as usual and that we're very excited very excited.
Speaker Change: To carry on the growth of this company.
Speaker Change: Okay great.
Speaker Change: So maybe just diving into the.
Speaker Change: Financials revenues were up 11%.
Speaker Change: In the fourth quarter and the midpoint of the first quarter guidance implies 10% year over year growth.
Speaker Change: So maybe a little bit of a two part question here one.
Speaker Change: I apologize if I missed it in the prepared remarks, but how many percentage points of growth did this age acquisition contribute in <unk> and how much.
Speaker Change: Are you expecting it to contribute in the first quarter and then secondly, as far as expectations for organic revenue growth go Howard historically, you kind of targeted at 10% top line growth.
Speaker Change: I think that's still a reasonable target for us for revenue growth in the core business.
Speaker Change: So actually I didn't mention it in the <unk>.
Speaker Change: <unk> remarks, you definitely didn't miss that event however.
Speaker Change: Sage Sage added between one and two percentage points of our.
Speaker Change: 11, 7% growth in the in the fourth quarter.
Speaker Change: And I would expect that to be exactly the same.
Speaker Change: In the first quarter of 2025.
Speaker Change: Okay, and then on the pre tax adjusted earnings guidance first quarter implies a pretty.
Speaker Change: A pretty nice expansion of the margin there.
Speaker Change: Can you just just curious what's driving that if you could maybe talk about some of the levers you have there.
Speaker Change: Yes.
Speaker Change: I think as you've seen over the last the last year.
Speaker Change: We win with gearing is perfect right when when our revenue is growing.
Speaker Change: We have a.
A pretty decent cost space that of course does not grow is not growing in line with revenue and so our gearing has been great threat 2024 and continues that way in 2025 now when we do these small acquisitions, which we've done a number of them.
Speaker Change: Yes, they plug and play into our platform, we generate economies of scale.
Speaker Change: And therefore, that's what you see dropping to the bottom line also the movement of business into electronic.
Speaker Change: As you know comes with with with its higher margins and hence the fact that you're you're seeing that flow through.
Speaker Change: With our results in 2024 exactly as implied in our guidance in two sizes.
Speaker Change: Q1 2025.
Speaker Change: Okay, Great and then just one on FX.
Speaker Change: It sounds like Youre, making a lot of profit our progress there and you're still expecting launch U S. Treasury futures in the first quarter Howard It previously.
Speaker Change: Blade out.
Speaker Change: Expectations about year, one being about getting all the <unk> onboard at your two was kind of about getting the customers or the clients connected and then year three would be.
Speaker Change: When you really make a concerted effort.
Speaker Change: Maybe taking market share there. So is that still the goal is that still the timeline, we can kind of use and in terms of the launch.
Speaker Change: I mean are we are we when you say a.
Speaker Change: Around at the end of the first quarter.
Speaker Change: We're probably already in balls and strikes here, but is it are you expecting it to be before the end of the first quarter. If you can maybe spill into the second quarter.
Speaker Change: No problem.
Speaker Change: The first part of the question.
Speaker Change: We remain.
Speaker Change: Absolutely on track you are absolutely right, yes, we'd said year. One is about connectivity. We said when we opened we expect it to have.
Speaker Change: <unk>, we said, which we did we said by the end of Q1 'twenty five we would expect to have 10 F CMS, which we do we currently have eight I think we even pointed out last time that even up.
Speaker Change: <unk> partners, it's just work and as I said in my in my prepared remarks, where we added.
Speaker Change: Bank of America bought these safety since our last call.
Speaker Change: No change at all and very happy with the progress I think we said if we pointed out that debt.
But if you if you look to the progress we have today compared to where we did when we launched treasuries. We're ahead of where we were a very very happy.
Speaker Change: One bank connectivity here too.
Speaker Change: Is.
Speaker Change: Deepening that Colin connectivity and increasing volumes and quiet right year three is a full on competition I think you described it exactly right.
Speaker Change: Okay, and then a little bit of.
Speaker Change: And just for the sake of our models with the close of the OTC acquisition at the end of the first quarter.
Speaker Change: In the deck it said.
Speaker Change: Two energy acquisitions, we're going to add $450 million I think by my estimation given the.
Speaker Change: <unk> contribution you mentioned it seems like sages or OTC is around $400 million annual revenues and last call. I think you said that the margins were maybe a little bit lower or they'd be a little bit lower off the bat relative to bgc's core business. So is it safe to kind of build in for.
Speaker Change: 400 annual revenues from OTC.
Speaker Change: 15% to 20% margins.
Speaker Change: And I mean any color there you can give to kind of help us with that would be great.
Speaker Change: Yeah sure sure by the way I think your math is definitely pretty good.
Speaker Change: Right in the 400.
Speaker Change: For OTC sounds good and as I as I suggested with a large acquisition like OTC.
Speaker Change: We expect the margin to be to be lower than our current margin. So I think I think at the beginning where youre thinking around the 15 level is perfectly good good to think about it.
Speaker Change: The very beginning.
Speaker Change: And what you've seen from us in the past.
Speaker Change: Even with the larger acquisitions that we did it just takes a little bit longer to get to get those economies that but but as I pointed out.
Speaker Change: On the last earnings call as well.
Speaker Change: It will be highly accretive to us from day, one so very excited.
Speaker Change: Okay, Great and then last.
Speaker Change: One last question.
Speaker Change: With the <unk> launch and the solid trends that you guys are seeing in the business over the last year or so you've got a lot more attention on the stock a lot more eyes on the stock.
Speaker Change: One question that I get a lot from investors.
Speaker Change: It relates to your usage and treatment of stock based comp.
Speaker Change: So I was hoping you could maybe just add some clarity there for investors as to why you think adjusting stock based comp out of your your earnings is the most appropriate way to present it.
Speaker Change: Then going forward with the change in management are there any future plans to maybe try and bring that GAAP EPS number in line with you just to take care.
Speaker Change: Okay I think.
Speaker Change: As you have seen that.
Speaker Change: Company, we feel that.
Speaker Change: Paying paying out.
Speaker Change: Produces.
Speaker Change: And key in key personnel and stock based comp we think.
Speaker Change: In a tremendous way.
Speaker Change: For good retention.
Speaker Change: We think we think it has been a significant reason for both retention and growth.
Speaker Change: And I think I think it proved to be successful over the over the past years.
Speaker Change: And there'll be no change we continue to do that what you have seen.
Speaker Change: Over the last the last few years.
Speaker Change: The overall level of the.
Speaker Change: Stock based comp.
Speaker Change: Come down a little bit.
Speaker Change: But and that's something we'll always continue to monitor but we believe we believe that.
Speaker Change: It is incredibly important.
Speaker Change: For the longevity and retention of our staff.
Is how do we continue to outpace the industry growing our company.
Speaker Change: Alright, great that's.
Speaker Change: That's it for me, but congrats again, guys looking forward to working with you.
Speaker Change: Thank you very much thanks Patrick.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Yeah. There are no further questions at this time therefore.
Speaker Change: I would like to turn the floor back over to Mr. Wendy Yang for closing remarks.
Wendy Yang: Just to say thank you very much all for joining us on the call today and look forward to towards the next quarter with that with more update thanks very much.
Speaker Change: And ladies and gentlemen, this does conclude today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
Wendy Yang: Okay.
Wendy Yang: [music].
Wendy Yang: Yeah.
Wendy Yang: Okay.
Wendy Yang: Okay.
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Wendy Yang: Okay.
Wendy Yang: Yes.
Wendy Yang: [music].
Wendy Yang: Sure.
Wendy Yang: [music].