Bgc Group, Inc. · NASDAQ:BGC
Bgc — BGC Partners — Q4 2018 Earnings Presentation
45 slides from Bgc's earnings presentation, February 2019
Slide 1: BGC Partners, Inc. Earnings Presentation 4Q 2018
BGC PARTNERS, INC. NASDAQ: BGCP Earnings Presentation 4Q 2018
Slide 2: Disclaimer
DISCLAIMER 2 Discussion of Forward-Looking Statements Statements in this document regarding BGC and Newmark that are not historical facts are “forward-looking statements” that involve risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking stat
Slide 3: Disclaimer (Continued)
DISCLAIMER (CONTINUED) 3 For the purposes of this document, all of the Company’s fully electronic businesses may be collectively referred to as “Fenics”. Fenics includes revenues from fully electronic brokerage, as well as data, software, and post-trade services. Fenics results do not include those
Slide 4: Disclaimer (Continued) - Non-GAAP Financial Measures
DISCLAIMER (CONTINUED) 4 Non-GAAP Financial Measures This presentation should be read in conjunction with BGC’s most recent financial results press releases. Throughout this presentation, BGC refers to certain non-GAAP financial measures, including Adjusted Earnings, Adjusted EBITDA and Liquidity. F
Slide 5: General Overview
ml BGC PARTNERS, INC. 7 bge (5 °' Fenics GENERAL OVERVIEW
Slide 6: Select Consolidated Adjusted Earnings Financial Results
SELECT CONSOLIDATED ADJUSTED EARNINGS FINANCIAL RESULTS 6 Highlights of Consolidated Adjusted Earnings Results from Change Change 4Q 2018 4Q 2017 FY 2018 FY 2017 Continuing Operations (USD millions, except per share data) (%) (%) Revenues $466.4 $432.0 8.0% $1,937.8 $1,751.0 10.7% Pre-tax Adjusted E
Slide 7: Revenue Breakdown by Geography
REVENUE BREAKDOWN BY GEOGRAPHY 7 FY 2018 & 4Q 2018 Global Revenues APAC 14% FY 2018 APAC 15% Americas 31% Americas 31% 4Q 2018 EMEA 54% EMEA 55% Total Americas revenue up 3% in 4Q 2018 and 5% in FY 2018 Europe, Middle East & Africa revenue up 10% in 4Q 2018 and up 13% in FY 2018 Asia Pacific r
Slide 8: 4Q 2018 Revenue Breakdown by Asset Class
4Q 2018 REVENUE BREAKDOWN BY ASSET CLASS 8 4Q 2018 $466.4 million BGC’s Businesses at a Glance Data, Software, Post-trade and Other, 7% BGC maintains a highly diverse revenue base Overall industry volumes typically seasonally strongest in 1st quarter, weakest in 4th quarter Equities, insurance,
Slide 9: FY 2018 Revenue Breakdown by Asset Class
FY 2018 REVENUE BREAKDOWN BY ASSET CLASS 9 FY 2018 $1.94 billion BGC’s Businesses at a Glance Data, Software, Post-trade and Other, 6% BGC maintains a highly diverse revenue base Overall industry volumes typically seasonally strongest in 1st quarter, weakest in 4th quarter Equities, insurance, R
Slide 10: BGC's Front Office Headcount & Productivity
BGC’S FRONT OFFICE HEADCOUNT & PRODUCTIVITY 10 FRONT OFFICE HEADCOUNT FRONT OFFICE PRODUCTIVITY (as of period-end) (period-average, USD Thousands) 756 676 2,491 2,486 2,654 2,468 2,465 168 176 4Q 2017 1Q 2018 2Q 2018 3Q 2018 4Q 2018 Financial Brokerage 4Q 2017 4Q 2018 FY 2017 FY 2018 Headcount inc
Slide 11: Adjusted Earnings Expense & Pre-Tax Margin Trends
ADJUSTED EARNINGS EXPENSE & PRE-TAX MARGIN TRENDS 11 $1,500 53.2% 52.5% 60% 51.1% 50.7% $1,000 (USD millions) 40% $500 20% $0 0% FY 2017 FY 2018 4Q 2017 4Q 2018 Compensation and Employee Benefits Compensation and Employee Benefits as % of Total Revenue 30% 40% 34.6% 31.3% 29.1% 30.7% 20% 30% 20% 10%
Slide 12: Financial Services
ml BGC PARTNERS, INC. 7 bge (5 SF" Fenics FINANCIAL SERVICES
Slide 13: Business Overview 4Q 2018
BUSINESS OVERVIEW 4Q 2018 13 Highlights 4Q 2018 Revenue Breakdown (USD $000s) $466,351 Total revenues increased 8% YoY $13,322 – Solid revenue growth in rates, foreign $431,966 $11,514 exchange, and data, software, and post- $18,169 trade $14,372 $89,997 Other $86,703 – Revenues would have been at
Slide 14: Business Overview: Fenics
BUSINESS OVERVIEW: FENICS 14 Fenics Net Revenue Growth1 4Q 2018 Fenics Revenue Breakdown2 (USD millions) $261 $223 Data, software $209 $192 and post trade Data, software (inter-company) and post trade 20% 23% $101 FX $81 10% $71 $78 $48 Rates Credit 26% 21% FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY
Slide 15: BGC's Fenics (Fully Electronic) Revenue Growth
BGC’S FENICS (FULLY ELECTRONIC) REVENUE GROWTH 15 Fenics (Fully Electronic) Revenues1 (USD 000s) 350,000 $325,385 300,000 64,278 $276,866 250,000 54,015 65,185 200,000 54,557 150,000 100,000 195,922 $79,584 168,294 $65,770 13,514 15,461 50,000 18,169 14,372 37,884 45,954 - FY 2017 FY 2018 4Q17 4Q18
Slide 16: Outlook
ml BGC PARTNERS, INC. OUTLOOK
Slide 17: Outlook – First Quarter 2019
OUTLOOK – FIRST QUARTER 2019 17 BGC anticipates first quarter 2019 revenues of between $515 million and $555 million. BGC expects pre-tax Adjusted Earnings before noncontrolling interest in subsidiaries and taxes to be in the range of $98 million and $112 million for the three months ended March
Slide 18: GAAP Financial Results
ml BGC PARTNERS, INC. GAAP FINANCIAL RESULTS
Slide 19: Condensed Consolidated Statements of Financial Condition
BGC PARTNERS, INC. CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) (UNDER GAAP) December 31, December 31, 2018 2017 19 Assets Cash and cash equivalents $ 336,535 $ 513,306 Cash segregated under regulatory requirements 80,243 110,110 Securiti
Slide 20: Condensed Consolidated Statements of Operations
BGC PARTNERS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) (UNDER GAAP) 20 Three Months Ended December 31, Year Ended December 31, 2018 2017 2018 2017 Revenues: Commissions $ 372,073 $ 330,093 $ 1,510,386 $ 1,333,367 Principal transactions 62
Slide 21: Condensed Consolidated Statements of Operations - Continued
BGC PARTNERS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) (UNDER GAAP) 21 Three Months Ended December 31, Year Ended December 31, 2018 2017 2018 2017 Per share data: Net income (loss) available to common stockholders: Net income
Slide 22: Appendix
ml BGC PARTNERS, INC. APPENDIX
Slide 23: Strongly Capitalized; Investment Grade Credit Profile
STRONGLY CAPITALIZED; INVESTMENT GRADE CREDIT PROFILE 23 (USD $000s) BGC Partners, Inc. As of 12/31/2018 Cash and Cash Equivalents $336,535 Repurchase Agreements (986) Securities Owned 58,408 Marketable Securities (net) 16,924 Total Liquidity1 $410,881 Issuer Maturity 5.125% Senior Notes BGC 05/27/2
Slide 24: BGC's Fully Diluted Share Count Summary as of December 31, 2018
BGC’S FULLY DILUTED SHARE COUNT SUMMARY AS OF DECEMBER 31, 2018 24 BGC Partners, Inc. Fully Diluted Share Count Summary Fully-diluted Ownership (as of December 31, 2018) Shares (MN) (%) Class A owned by Public 272.0 52% Class A owned by executives, board members and employees (1) 19.4 4% Partnership
Slide 25: Fenics Revenues
FENICS REVENUES 25 Quarterly Fenics Net Revenues1 (2016-2018) 100 (USD millions) 90 86 85 80 80 73 75 70 69 71 70 67 66 61 60 60 53 53 46 43 50 43 41 46 45 40 38 36 35 40 30 15 15 17 18 20 14 14 13 13 13 13 14 14 10 18 16 14 13 13 12 14 13 13 14 15 15 0 1Q2016 2Q2016 3Q2016 4Q2016 1Q2017 2Q2017 3Q20
Slide 26: 4Q 2018 Industry Volumes Generally Higher; Volatility Generally Higher
4Q 2018 INDUSTRY VOLUMES GENERALLY HIGHER; VOLATILITY GENERALLY HIGHER 26 4Q 2018: Yr/Yr Change in Capital Markets Activity 4Q 2018: Yr/Yr Change in Average Daily Volatility (ADV excl. Eurex Equity Derivatives) U.S. Corp. Bonds (Primary Dealer) (11%) Commodity Volatility Index (SPGSCI Excess (21%) F
Slide 27: 1Q 2019 To-Date Volumes Higher, Volatility Mixed
1Q 2019 TO-DATE VOLUMES HIGHER , VOLATILITY GENERALLY MIXED FROM A YEAR AGO 27 1Q 2019TD Change in Capital Markets Activity 1Q 2019TD Change in Average Daily Volatility (1/1/2019 – 1/28/2019) (1/1/2019 – 1/28/2019) FX Fut ur es (CME) (17%) FX (CVIX) 10% Eur opean Equities (17%) Energy (ICE) (11%) U.
Slide 28: Average Exchange Rates
AVERAGE EXCHANGE RATES 28 January 1 – January 28, January 1 – January 28, 4Q 2018 4Q 2017 2019 2018 US Dollar 1 1 1 1 British Pound 1.286 1.328 1.287 1.377 Euro 1.141 1.178 1.142 1.216 Hong Kong Dollar 0.128 0.128 0.128 0.128 Singapore Dollar 0.727 0.739 0.737 0.756 Japanese Yen 112.785 112.895 108.
Slide 29: Events Since September 30, 2018
EVENTS SINCE SEPTEMBER 30, 2018
Slide 30: Events Since September 30, 2018
EVENTS SINCE SEPTEMBER 30, 2018 30 BGC Acquired Ed Broking Group Limited in October, 2018 (transaction closed on February 1, 2019) • Ed Broking Group Limited (“Ed”) is an independent Lloyd's of London insurance broker with a strong reputation across Accident and Health, Aerospace, Cargo, Energy, F
Slide 31: Differences Between Consolidated Results for Adjusted Earnings and GAAP
DIFFERENCES BETWEEN CONSOLIDATED RESULTS FOR ADJUSTED EARNINGS AND GAAP 31 Differences between Consolidated Results for Adjusted Earnings and GAAP from Continuing Operations This document contains non-GAAP financial measures that differ from the most directly comparable measures calculated and prese
Slide 32: Differences Between Consolidated Results for Adjusted Earnings and GAAP
DIFFERENCES BETWEEN CONSOLIDATED RESULTS FOR ADJUSTED EARNINGS AND GAAP 32 In the fourth quarter of 2018 and full year 2018, $1.1 million and $4.3 million, respectively, in GAAP non-cash charges related to the amortization of GFI employee forgivable loans granted prior to the closing of the January
Slide 33: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES 33 This document contains non-GAAP financial measures that differ from the most directly comparable measures calculated and presented in accordance with Generally Accepted Accounting Principles in the United States (“GAAP”). Non-GAAP financial measures used by the Company
Slide 34: Adjusted Earnings Defined
ADJUSTED EARNINGS DEFINED 34 Adjusted Earnings Defined BGC Partners uses non-GAAP financial measures including, but not limited to, “pre-tax Adjusted Earnings” and “post-tax Adjusted Earnings”, which are supplemental measures of operating results that are used by management to evaluate the financial
Slide 35: Adjusted Earnings Defined (Continued)
ADJUSTED EARNINGS DEFINED (CONTINUED) 35 When the Company issues limited partnership units, the shares of common stock into which the units can be ultimately exchanged are included in BGC’s fully diluted share count for Adjusted Earnings at the beginning of the subsequent quarter after the date of g
Slide 36: Adjusted Earnings Defined (Continued)
ADJUSTED EARNINGS DEFINED (CONTINUED) 36 Generally, the most significant factor affecting this non-GAAP tax provision is the amount of charges relating to the grants of exchangeability and other compensatory grants of equity. Because the charges relating to the grants of exchangeability and other co
Slide 37: Adjusted Earnings Defined (Continued)
ADJUSTED EARNINGS DEFINED (CONTINUED) 37 Other Matters with Respect to Adjusted Earnings The term “Adjusted Earnings” should not be considered in isolation or as an alternative to GAAP net income (loss). The Company views Adjusted Earnings as a metric that is not indicative of liquidity or the cash
Slide 38: Adjusted Earnings Defined (Continued)
ADJUSTED EARNINGS DEFINED (CONTINUED) 38 Adjusted EBITDA BGC also provides an additional non-GAAP financial performance measure, “Adjusted EBITDA”, which it defines as GAAP “Net income (loss) available to common stockholders”, adjusted to add back the following items: Interest expense; Fixed ass
Slide 39: Liquidity Defined
ADJUSTED EARNINGS DEFINED (CONTINUED) 39 Liquidity Defined BGC also uses a non-GAAP measure called “liquidity”. The Company considers liquidity to be comprised of the sum of cash and cash equivalents plus marketable securities that have not been financed, reverse repurchase agreements, and securitie
Slide 40: Simplifying Non-GAAP Reporting Beginning in 2019
ADJUSTED EARNINGS DEFINED (CONTINUED) 40 Simplifying Non-GAAP Reporting Beginning in 2019 Beginning with the first quarter of 2019, the Company expects to simplify and clarify its definitions of Adjusted Earnings and Adjusted EBITDA in order to be more consistent with how many other companies report
Slide 41: Reconciliation of GAAP Income to Adjusted Earnings and Post-Tax Adjusted EPS
RECONCILIATION OF GAAP INCOME (LOSS) FROM CONTINUING OPERATIONS TO ADJUSTED EARNINGS FROM CONTINUING OPERATIONS AND GAAP FULLY DILUTED EPS FROM CONTINUING OPERATIONS TO POST-TAX ADJUSTED EPS FROM CONTINUING OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) 41 Q4 2018 Q4 2017 FY 2018 FY 20
Slide 42: Reconciliation of GAAP Income to Adjusted EBITDA
RECONCILIATION OF GAAP INCOME (LOSS) FROM CONTINUING OPERATIONS TO ADJUSTED EBITDA FROM CONTINUING OPERATIONS (IN THOUSANDS) (UNAUDITED) 42 Q4 2018 Q4 2017 FY 2018 FY 2017 GAAP Net income (loss) available to common stockholders from continuing operations $ (21,905) $ (80,303) $ 73,704 $ (124,803) Ad
Slide 43: Liquidity Analysis from Continuing Operations
LIQUIDITY ANALYSIS FROM CONTINUING OPERATIONS (IN THOUSANDS) (UNAUDITED) 43 December 31, 2018 December 31, 2017 Cash and cash equivalents $ 336,535 $ 513,306 Repurchase agreements (986) — Securities owned 58,408 33,007 M arketable securities (1) 16,924 5,833 Total $ 410,881 $ 552,146 (1) As of Decem
Slide 44: Fully Diluted Weighted-Average Share Count
FULLY DILUTED WEIGHTED-AVERAGE SHARE COUNT FOR GAAP AND ADJUSTED EARNINGS FROM CONTINUING OPERATIONS (IN THOUSANDS) (UNAUDITED) 44 Q4 2018 Q4 2017 FY 2018 FY 2017 Common stock outstanding 331,382 290,871 322,141 287,378 RSUs — — 368 — Other — — 1,335 — Fully diluted weighted-average share count for
Slide 45: Media and Investor Contacts
45 45 Media Contact: Karen Laureano-Rikardsen +1 212-829-4975 Investor Contact: Jason McGruder Ujjal Basu Roy ir.bgcpartners.com twitter.com/bgcpartners +1 212-610-2426 +1 212-610-2426 linkedin.com/company/bgc-partners