Q1 2025 BGC Group Inc Earnings Call
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Ladies and gentlemen, thank you for standing by the conference will begin momentarily once again, ladies and gentlemen, thank you for standing by the conference will begin momentarily.
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Yeah.
Speaker Change: Greetings and welcome to the BGC Group first quarter 2025 earnings call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. Please press star zero on your telephone keypad and as a reminder, this conference is being recorded.
Speaker Change: It is now my pleasure to introduce to you Jason Christy you guess head of Investor Relations. Thank you Jason you may begin.
Speaker Change: Hello, everyone. This morning, we issued Bgc's first quarter 2025 financial results, which can be found at <unk> Dot com.
Speaker Change: And historic results provided on today's call compare only the first quarter of 2025 with the prior year period, unless otherwise specified.
Speaker Change: We'll be 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 for complete and updated definitions of any non-GAAP terms reconciliations of these items to the corresponding GAAP results.
Speaker Change: And how when and why management uses them.
Speaker Change: The outlook discussed today assumes no material acquisitions or dispositions, our expectations are subject to change based on various macro economic social political and or 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: Information on factors that could cause actual results to differ from forward looking statements and the complete discussion of the risks and other factors that may impact. These forward looking statements see our SEC filings, including but not limited to the risk factors and disclosures within these SEC documents.
Speaker Change: With that I'm now happy to turn the call over to Shawn with your co Chief Executive Officer of BGC Group.
Shawn: Thank you Jason Good morning, and welcome to our first quarter 2025 conference call.
Speaker Change: With me today and lifestyle co Chief Executive officers, John and Peter Walsh, and J P E band.
Shawn: Along with our Chief Financial Officer, Jason Hoff.
Shawn: We delivered record quarterly revenues of more than $664 million, a 15% increase versus last year's record first quarter.
Shawn: Our strong results were driven by robust organic growth across both our voice hybrid and Fedex businesses, which each achieved new all time highs.
Shawn: FX had its best ever quarter with record volumes and market share across both our <unk> Ust and FX platforms, driven by strong support from our FX equity partners.
Shawn: On April 1st we completed our transformative acquisition of OTC Global Holdings that is expected to add over $400 million in annualized revenue nearly doubling the size of our existing ECS business.
Shawn: This positions us as the world's largest ECS broke it makes BGC a more comprehensive and diverse company.
Shawn: We expect the acquisition of OTC to be immediately accretive and generate meaningful shareholder value.
Shawn: We're happy to welcome the entire OTC team to BGC irrespective.
Shawn: Our respective strengths and complementary businesses enhance our combined value and we're excited about the benefits of integrating OTC into Bgc's global platform.
Shawn: In the second quarter, we continued to build on our success with global market volatility leading to broad organic growth across our businesses.
Shawn: As a reminder, volatility benefits BGC by increasing secondary trading volumes as market participants seek to hedge their risk.
Shawn: Capitalize on price fluctuations.
Shawn: These activities are most efficiently executed in a wholesale market known for their depth and liquidity.
Shawn: And with that I'd like to turn the call over to John to go over the quarterly results and the business in more detail.
John Walsh: Thank you Sean it's an honor to join all of you for the first time as Bgc's co CEO.
John Walsh: As Sean mentioned, we registered record quarterly results, reflecting substantial growth across every region and our largest asset classes.
John Walsh: Our race revenue increased 14, 8% to a record $209 million, reflecting higher volumes across all our major major interest rate products ECS.
John Walsh: <unk> revenue grew by 26, 6% to a record $149 $9 million driven by strong growth across environmental and energy transition products as well as our oil and refined products.
John Walsh: Foreign exchange revenues were up 31% to a record $110 million, reflecting broad based growth across all FX products.
John Walsh: Credit revenues decreased by zero is about 7% to $86 9 million.
John Walsh: Due to lower emerging market in European credit volumes, partly offset by record portfolio match volumes and strong U S credit activity.
John Walsh: Equities revenues were flat at $62 9 million as a result of higher European and U S equity volumes being offset by lower Asian equity derivative volumes.
John Walsh: Data network and post trade revenues increased by five 2% to $32 $5 million. This growth was.
John Walsh: Primarily driven by Phoenix market data and Lou Sara partly offset by lower post trade revenues due to the sale of our capital lab business in the fourth quarter of 2024.
John Walsh: Excluding catheter lab revenues grew by circa 10% year over year, we expect growth in these businesses to accelerate throughout the year as we work through the large revenue pipelines in place.
John Walsh: Now turning to Phoenix.
John Walsh: In the first quarter Phoenix revenues improved by 15, 6% to $172 $7 million.
John Walsh: Alex markets reported revenues of $145 $5 million, an increase of 14, 2%.
John Walsh: This growth was primarily driven by record electronic volumes across rates and foreign exchange.
John Walsh: Phenix growth platforms grew by 23, 7% to $27 1 million.
This growth was primarily driven by aframax portfolio matched and lose Sara partly offset by the sale of capital at <unk>.
John Walsh: Excluding catheter lab phenix growth platforms revenues grew by approximately 30% year over year.
John Walsh: S M X U S. T generated record average daily volume of over $60 billion in the first quarter, a 33% increase compared to last year. This growth was driven by strong support from Fms as equity partners, which drove market share to approximately 33% for the first quarter up from 30, 30% last quarter and 28% a year ago.
John Walsh: Notably after IMAX daily volume exceeded $100 billion for the first time on the 28th in February 2025.
John Walsh: <unk> FX more than doubled its adv to a record $14 5 billion in the first quarter driven by deepening support from <unk> equity partners as well as on boarding new participants onto the platform.
John Walsh: FX futures exchange continued to make progress connecting new large ftm's, while preparing for the launch of U S. Treasury futures, which following the extreme volatility in April is scheduled for this month.
John Walsh: <unk> continues to integrate more stm's Adv and open interest on the exchange are expected to meaningfully accelerate.
John Walsh: In periods of high volatility liquidity typically migrates to established trading platforms and the exchanges with the deepest liquidity pools.
John Walsh: Our successful work over the past few years to develop that makes U S key into a leading treasury platform enabled us to achieve and seamlessly process record volumes during the recent periods of extreme volatility during.
John Walsh: During the first and second week of April F. M X U S. T SEC consecutive daily records, including record daily volume of more than $142 billion on April the nice 2025.
John Walsh: Portfolio match Adv doubled due to strong growth across both U S and European credit volumes portfolio match continues to capture market share in this rapidly growing segment of the credit market.
Speaker Change: Lee Sarah Fenech.
Speaker Change: Clinic network business, providing critical real time trading infrastructure as the capital markets increased its revenue by more than 15% and grew its client pipeline for sustained future growth.
Jason: <unk> plans to launch a new foreign exchange and rates products throughout 2025, which are expected to drive new growth opportunities I would now like to turn the call over to Jason.
Jason: Thank you John and Hello, everyone.
Jason: BGC generated first quarter revenue of $664 $2 million, reflecting growth across all of our geographies Americas revenues increased by 23, 3% Europe Middle East and Africa revenues increased by 12, 2% and Asia Pacific revenues increased by two 4%.
Jason: Turning to expenses.
Jason: Compensation and employee benefits under both GAAP and for adjusted earnings increased by 17, 5% versus the first quarter of 2024 due to higher commission revenues during the period.
Jason: Non compensation expenses under GAAP and adjusted earnings increased by five 2% and six 6% respectively.
Jason: Moving to earnings.
Jason: Our pre tax adjusted earnings grew by 18, 4% to $162 million.
Jason: Post tax adjusted earnings increased by 16, 1% to $143 million in post tax adjusted earnings per share improved by 16% to <unk> 29 per share.
Jason: Adjusted EBITDA decreased by four 1% to $199 $8 million due to a $36 6 million mark to market gain in the prior period related to affirm investment.
Jason: Excluding this gain from the prior period adjusted EBITDA would have increased by 16, 3%.
Jason: Turning to share count.
Jason: <unk> fully diluted weighted average share count for the adjusted earnings was $501 5 million shares during the period, a one 2% increase compared to the fourth quarter of 2024, and a one 3% increase compared to a year ago.
Jason: As a reminder, we repurchased the fewest amount of shares in the first quarter due to seasonal capital requirements.
Jason: In addition, we acquired OTC Global Holdings on April one 2025.
Jason: We have significant runway under our share repurchase authorization and buybacks continue to be an integral part of our capital allocation policy we.
Jason: We expect our share repurchases to increase throughout the remainder of the year.
Jason: As of March 31, our liquidity was $1 billion $146 1 million compared to $897 8 million as of year end 2024.
Jason: With that I'd like to turn the call back to Sean to go over our second quarter outlook.
Sean: Thank you Jason.
Sean: To provide the following guidance for the second quarter of 2025.
Sean: We expect to generate total revenues of between 715 and $765 million as compared to $558 million in the second quarter of 2024.
Sean: Which at the midpoint of our guidance would represent approximately 34% revenue growth.
Sean: Excluding OTC, we expect second quarter revenues to grow between 10% and 17%.
Sean: We anticipate pretax adjusted earnings to be in the range of $156 million to $171 million versus $125 $8 million last year.
Sean: Which at the midpoint of guidance would represent 30% earnings growth and we expect our adjusted earnings tax rate to be between 10, and 12% for the full year 2025, and operator with that we'd like to open the call for questions.
Thank you we will now be conducting the 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 that your line is in the queue. You May press star two to remove yourself from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
Sean: One moment, please while we poll for questions.
Sean: Yeah.
Speaker Change: And the first question comes from the line of Patrick Moly with Piper Sandler. Please proceed with your question.
Patrick Moly: Hey, good morning, guys.
Patrick Moly: Wanted to just start off talking about the Aframax launch it's been slightly delayed here, you're still planning to launch this month, though so I was hoping you could just maybe elaborate on what's driven.
Patrick Moly: Driven the delay so far is this entirely due to the environment and just not wanting to launch into some of the extreme volatility that we've seen are there any other technological or specific onboarding issue.
Patrick Moly: That have contributed to the delay and then as a second part to that there was an article that came out yesterday, citing of sorts from inside the <unk>.
Patrick Moly: Maybe dealing with some settlement or delivery issues on their end so to the extent that you're willing to address that is there any validity to those reports.
Patrick JP: Hello, Patrick JP here.
Patrick Moly: So you are correct.
Patrick Moly: Extreme volatility in April created an environment not hydro for a successful launch.
Patrick Moly: But the good news is launching this month in May.
Patrick Moly: So to come back to the optical we are aware of this article and while we don't comment on rumors we can say that we spoke to our with our clearing partner ACTH and by the way we spoke to them every day. So we spoke to sch as recently as last evening following the release of his article.
Patrick Moly: And guess what they are ready.
Patrick Moly: <unk> is ready we are ready and we will be launching in these months probably it.
Patrick Moly: Yeah.
Speaker Change: Okay. Thanks for that.
Speaker Change: And then as a follow up one more.
Speaker Change: You closed the OTC Global holdings about a month ago, you've had a little while now to look under the Hood. So was hoping to get your updated expectations on how accretive this acquisition could be what the revenue upside it looks like in terms of cross sales between the two customer bases and then on the on the margins at sea.
Speaker Change: Like the second quarter margins were maybe a little bit softer than we were expecting so any color you can give on kind of how you're expecting margins to trend from here would be great. Thanks.
Speaker Change: Yes sure. Thanks.
Speaker Change: We've had we've had a total of I think 37 days of voting OTC. So.
Speaker Change: But rest assured as you would know as Patrick we are hard at work with the with the integration and where we're very happy with what we've seen so far I mean look in the implied guidance.
Speaker Change: We separated guidance at 48, so you saw at the sort of midpoint of guidance, we expect $150 million, which as you would guess shows decent growth for growth from the $400 million that we initially expected.
Speaker Change: In terms of and in terms of.
Speaker Change: The margin itself I think we will.
Speaker Change: We had said on the previous call.
BGC as a group has margins in excess of pre tax margins in excess of 20%.
Speaker Change: Whereas when you're buying a large company like like OTC.
Speaker Change: Has smaller margins to start with as you can see you can work out the implied margin from our guidance. That's why we did that work for you.
But thats immediately we've done huge amounts of small transactions and we get the economies of scale. We are also very experienced at the larger transactions such as GSI and what I would expect is as I've said before whilst we don't think the OTC business will get.
Speaker Change: Two the BGC margins in the short term.
Speaker Change: You will definitely see a growth in those margins by the end of Q1 beginning of year two.
Speaker Change: Maybe maybe John do you want to add something in terms of that the business itself and the synergy.
Speaker Change: Hey, Patrick just you know what.
John Walsh: I would say is what I think we said last time, we've spent a lot of time and effort mapping.
John Walsh: Both front office back office and the Best example, I can give you in terms of what synergies look like from the product side as it seems counterintuitive to.
John Walsh: Broker in underlying product and shipping underlying product and not have those two connected and so that work has already begun.
John Walsh: The people inside OTC are fantastic.
John Walsh: Everything we've seen is as good or better than we expected and we expect to generate serious shareholder value.
John Walsh: Both the short term and long term.
John Walsh: Okay, Great. That's it for me thanks, guys.
John Walsh: Okay.
Speaker Change: And the next question comes from the line of Eli Abboud with Bank of America. Please proceed with your question.
Eli Abboud: Good morning, everyone. Thanks for taking the question after Treasury futures what does the next key milestones or product launches that investors should be on the lookout for when should we expect a longer 10 year Treasury futures and options on futures to go lives.
Speaker Change: Hi.
Speaker Change: <unk> Luke.
Speaker Change: As you know our year one is about connectivity.
Speaker Change: Right and as I mentioned previously we are launching this month in May our USD futures.
Speaker Change: Our bank partners.
Speaker Change: The partners are the main uses of USD futures is great news, we do expect their respective trading desk to become active on a change would we drive volume type.
Speaker Change: Our target today or do you see you know our plan rate as a reminder, you one connectivity to deepening client connectivity and increasing volumes and open interest and you have three.
Speaker Change: Full competition with CME, we stick to our plan.
Speaker Change: The three year plan, we have one and for the time being we might it's matching our expectations.
Speaker Change: Got it thanks and based on the Noncontrolling interest deduction. It looks like SMS still hasn't reached profitability can you help us quantify the cash burn related to FX futures and once the futures exchange starts to breakeven what do you.
Speaker Change: Think the normalized profit margins of S and X should look like.
Speaker Change: So.
Speaker Change: Obviously, we don't break out FX independently.
Speaker Change: Independently. However, however to be clear the cash burn to BGC is zero.
Speaker Change: As part of the part of the deal with <unk>.
Speaker Change: <unk> partners, we contributed the business.
Speaker Change: And.
Speaker Change: And that they are funding if you like the the future development of futures, how about that so the cash burn to BGC is zero.
Speaker Change: And then in terms of in terms of.
Speaker Change: Profitability and.
And where the margin will get to I think I think in the in the short term, we get certainly get to breakeven and slightly beyond and in terms of the medium to medium to long term.
Speaker Change: I think it's commensurate with other exchanges, which is which is around the 40% to 50% level.
Speaker Change: Got it and then just the last one for me.
Speaker Change: Do we have any additional clarity yet on the outcome for Howard shares My Maths right I think we're getting close to the 90 day Mark for divestment.
Speaker Change: Okay.
Speaker Change: It's probably as you'd expected I. All we can you can say is that Howard will comply with all the set of ethics Committee standards, including divesting as holdings.
Speaker Change: The public SEC filings required when he does so and as as we previously stated we don't expect any sales in the open market and we expect no changes equally to the corporate structure.
Speaker Change: Our new appointed Max.
Speaker Change: I would agree with you 90 days is fast approaching.
Speaker Change: Got it thanks, everyone.
Speaker Change: And the next question is a follow up from Patrick Moly with Piper Sandler. Please proceed with your question.
Patrick Moly: Yes, thanks for taking the follow up so I just have two modeling items to ask you about the first is on the tax rate. It came in at 11.9 by my calculation. This quarter was the highest it's been in a little while so any color you can give on tax rate expectations going forward and then secondly on the acquisition of.
Speaker Change: OTC Global Holdings.
Speaker Change: What should we assume in terms of the cash outlay.
Speaker Change: This quarter for that acquisition. Thanks.
Speaker Change: Sure.
Speaker Change: <unk>.
Speaker Change: So yes look the reason we added.
Speaker Change: As we have done before in my prepared remarks.
Speaker Change: Yes did that the tax rate and our expected tax rate is between 10 and 12%.
Speaker Change: For the 2025.
Speaker Change: In terms of in terms of cash outlay for OTC. It was.
Speaker Change: $325 million so.
Speaker Change: Is that a fully disclosed so that was that was paid on April with us.
Speaker Change: Alright, thank you.
Speaker Change: And ladies and gentlemen, there are no further questions at this time I would like to turn the floor back over to Mr. <unk> for closing remarks.
Speaker Change: Well, thanks, everybody thanks for joining us today.
Speaker Change: On our earnings call and just wish you all a great day and look forward to update you again very soon thanks very much.
Speaker Change: Thank you. This does conclude today's teleconference. We thank you for your participation you may disconnect your lines at this time.
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