Bgc Group, Inc. · NASDAQ:BGC

Bgc — BGC Partners — Q4 2017 Earnings Presentation

55 slides from Bgc's earnings presentation, February 2018

1. Slide 1: BGC Partners, Inc. Earnings Presentation 4Q 2017

   1 BGC PARTNERS, INC. Earnings Presentation 4Q 2017 NASDAQ: BGCP

2. Slide 2: Disclaimer

   DISCLAIMER 2 Discussion of Forward-Looking Statements by BGC Partners Statements in this document regarding BGC 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

3. Slide 3: Disclaimer (Continued)

   DISCLAIMER (CONTINUED) 3 On June 28, 2013, BGC sold eSpeed to Nasdaq, Inc. (“Nasdaq”). The purchase consideration consisted of $750 million in cash paid upon closing, plus an expected payment of up to 14.9 million shares of Nasdaq common stock to be paid ratably over 15 years beginning in 2013, assu

4. Slide 4: Disclaimer (Continued)

   DISCLAIMER (CONTINUED) 4 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 securities owned, less se

5. Slide 5: General Overview

   BGC PARTNERS 5 GENERAL OVERVIEW

6. Slide 6: Select Consolidated Adjusted Earnings Financial Results

   SELECT CONSOLIDATED ADJUSTED EARNINGS FINANCIAL RESULTS 6 Highlights of Consolidated Adjusted Earnings Change Change 4Q 2017 4Q 2016 FY 2017 FY 2016 Results (USD millions, except per share data) (%) (%) Revenues $894.2 $755.8 18.3% $3,353.4 $2,908.1 15.3% Pre-tax Adjusted Earnings before non-control

7. Slide 7: Global Revenue Breakdown

   GLOBAL REVENUE BREAKDOWN 7 FY17 & 4Q17 Global Revenues Americas RE APAC 47% 7% FY17 Americas RE APAC 51% 7% 4Q17 EMEA EMEA 26% 28% Americas FS 16% Americas FS 17%  Total Americas revenue up 21% in 4Q 2017 and up 15% in FY17  Europe, Middle East & Africa revenue up 13% in 4Q 2017 and up 17% in FY17

8. Slide 8: BGC's 4Q 2017 Revenue Breakup

   BGC'S 4Q 2017 REVENUE BREAKUP 8 Corporate, 1% BGC’s Businesses at a Glance Gains from mortgage banking Management,  BGC maintains a highly diverse Servicing Fees Rates, 13% activities, net, and Other, 12% revenue base 5%  Wholesale Financial Services Corporate 1% F/X, 9% Brokerage revenues and ear

9. Slide 9: BGC's FY 2017 Revenue Breakup

   BGC'S FY 2017 REVENUE BREAKUP 9 Corporate, 1% BGC’s Businesses at a Glance Gains from mortgage banking Management, Servicing Fees  BGC maintains a highly diverse Rates, 15% activities, net, and Other, 11% revenue base 6% Corporate  Wholesale Financial Services 1% Brokerage revenues and F/X, 10% ea

10. 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) 3,989 4,056 4,033 4,047 4,045 1,498 1,495 1,494 1,532 1,554 725 660 2,491 2,561 2,539 2,515 2,491 169 191 4Q 2016 1Q 2017 2Q 2017 3Q 2017 4Q 2017 Financi

11. Slide 11: Adjusted Earnings Expense & Pre-Tax Margin Trends

    ADJUSTED EARNINGS EXPENSE & PRE-TAX MARGIN TRENDS 11 $2,000 100% 90% $1,500 (USD millions) 80% $1,000 70% 58.6% 57.4% 57.3% 56.0% 60% $500 50% $0 40% FY 2016 FY 2017 4Q 2016 4Q 2017 Compensation and Employee Benefits Compensation and Employee Benefits as % of Total Revenue 25% 35% 21% 23.6% 24.3% 28

12. Slide 12: Financial Services Overview

    12 Overview FINANCIAL SERVICES

13. Slide 13: Business Overview: Financial Services Summary (4Q 2017)

    BUSINESS OVERVIEW: FINANCIAL SERVICES SUMMARY (4Q 2017) 13 Highlights 4Q 2017 Revenue Breakdown $421,672 $1,220  Total revenues increased 17% YoY $14,372 $359,301 $1,064  36% increase in FENICS rates revenues $12,949 $86,703 Other $41,950 Data, software, and post-  Pre-tax Adjusted Earnings exclu

14. Slide 14: Business Overview: FENICS

    BUSINESS OVERVIEW: FENICS 14 FENICS Net Revenue Growth1 4Q 2017 FENICS Breakdown2 (USD $000s) 240,000 16% Data, software and post trade Data, 180,000 12% software and (inter- company) post trade 20% 21% 120,000 8% F/X 11% 60,000 4% Rates 25% - 0% Credit FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 24% Fe

15. Slide 15: BGC's FENICS (Fully Electronic) Revenue Growth

    BGC’S FENICS (FULLY ELECTRONIC) REVENUE GROWTH 15 FENICS (Fully Electronic) Revenues1 (USD 000s) 300,000 $276,866 $260,610 250,000 54,015 51,978 200,000 54,557 54,309 150,000 100,000 154,323 168,294 $65,770 $60,230 12,306 13,514 50,000 14,372 12,949 34,975 37,884 - FY 2016 FY 2017 4Q16 4Q17 Electron

16. Slide 16: Conversion to Electronic Brokerage by Asset Class

    CONVERSION TO ELECTRONIC BROKERAGE BY ASSET CLASS 16 Electronic Brokerage Revenues (% of Brokerage Revenues and in $ MN) FY 2010* FY 2017 $ MN 30% 180 Electronic Brokerage Revenues (% of Brokerage 167 Electronic Brokerage Revenues ($ MN) Revenues) 160 25% 24% 140 20% 120 100 15% 15% 14% 70 80 69 10%

17. Slide 17: FENICS Highlights (2017)

    FENICS HIGHLIGHTS (2017) 17 Milestones Brokerage:  Official 1Q 2017 launch of FENICS Trading Solutions (TS) – a middleware solution automating the price making and distribution of FX options liquidity to third party platforms, multi-dealer venues, and exchanges.  Five Industry Awards including: 

18. Slide 18: Newmark Overview

    NEWMARK 232 Newmark = Cornish & Carey AA A Newmark Company Overview NEWMARK SST we = 9 NAMA h x 4

19. Slide 19: Business Overview: Newmark

    BUSINESS OVERVIEW: NEWMARK 19 Highlights  Newmark stand-alone revenues increased by 18% YoY for FY 2017 (up 19% YoY in 4Q 2017)  Pre-tax Adjusted Earnings increased by 74% for FY 2017 (up 23% in 4Q 2017)  See Newmark’s stand-alone financial results press release and Powerpoint presentation for mo

20. Slide 20: Newmark IPO

    NEWMARK IPO 20  Newmark’s IPO of 23 million shares of Class A common stock at a price of $14.00 per share closed in December 2017 (NASDAQ: NMRK)  Newmark's public stockholders owned approximately 9.8% of Newmark’s 234.2 million fully diluted shares outstanding as of December 31, 2017  BGC current

21. Slide 21: Outlook

    21 BGC PARTNERS OUTLOOK

22. Slide 22: Outlook Comparison

    OUTLOOK COMPARISON 22 Outlook Compared with a Year Ago Results  BGC anticipates first quarter 2018 consolidated revenues of between $870 million and $920 million, or 11 to 17 percent higher compared to $783 million for the first quarter of 2017.  BGC expects consolidated pre-tax Adjusted Earnings

23. Slide 23: GAAP Financial Results

    GAAPFINANCIAL GAAP Financials RESULTS

24. Slide 24: Select Consolidated GAAP Financial Results

    SELECT CONSOLIDATED GAAP FINANCIAL RESULTS 24 Highlights of Consolidated GAAP Results (USD Change Change 4Q 2017 4Q 2016 FY 2017 FY 2016 millions, except per share data) (%) (%) Revenues under both U.S. Generally Accepted Accounting Principles (“GAAP”) and Adjusted $894.2 $755.8 18.3% $3,353.4 $2,90

25. Slide 25: Condensed Consolidated Statements of Operations

    BGC PARTNERS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) (UNDER GAAP) 25 Three Months Ended December 31, Year Ended December 31, Revenues: 2017 2016 2017 2016 Commissions $ 643,110 $ 520,374 $ 2,348,108 $ 1,985,667 Principal transactions 75

26. Slide 26: Condensed Consolidated Statements of Financial Condition

    BGC PARTNERS, INC. CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) (UNDER GAAP) 26 December 31, December 31, 2017 2016 Assets Cash and cash equivalents $ 634,333 $ 535,613 Cash segregated under regulatory requirements 162,457 57,822 Reverse

27. Slide 27: Appendix

    APPENDIX TMNT ANTI INT ss 1

28. Slide 28: Real Estate Segment, Voice/Hybrid Brokerage and FENICS Details

    REAL ESTATE SEGMENT, VOICE/HYBRID BROKERAGE AND FENICS DETAILS 28 (USD millions) Q4 2017 FY 2017 Voice / Voice / Hybrid / Real Hybrid / Real FENICS Other Estate Corporate Total FENICS Other Estate Corporate Total Revenue $65.8 $355.9 $462.0 $10.5 $894.2 Revenue $276.9 $1,435.0 $1,601.4 $40.1 $3,353.

29. Slide 29: Our Rates Business Continues to Do Well Despite Increases in G-4 Balance Sheets

    OUR RATES BUSINESS CONTINUES TO DO WELL DESPITE INCREASES IN G-4 BALANCE SHEETS 29 G-4* Balance Sheet as % of GDP YoY Change (pp) in G-4 Balance Sheet as % of GDP 1 40% 8 percentage points 7 35% 6 30% 5 25% 4 3 20% 2 15% 1 10% 0 -1 5% -2 0% -3 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

30. Slide 30: BGC's Economic Ownership as of December 31, 2017

    BGC’S ECONOMIC OWNERSHIP AS OF DECEMBER 31, 2017 30 BGC Partners, Inc. Detailed Ownership Fully-diluted Economic (as of December 31, 2017) Shares (MN) Ownership (%) Class A owned by Public 223.9 48% Class A owned by executives, board members and employees 1 18.4 4% 2 Limited partnership units 115.3

31. Slide 31: Strongly Capitalized; Investment Grade Credit Profile

    STRONGLY CAPITALIZED; INVESTMENT GRADE CREDIT PROFILE 31 ($ in '000s) BGC Partners, Inc. 12/31/2017 Cash and Cash Equivalents $634,333 Securities Owned 33,007 Marketable Securities (net) 5,833 1 Total Liquidity $673,173 BGC Partners, Inc. and Subsidiaries Issuer Maturity 12/31/2017 8.375% Senior Not

32. Slide 32: 4Q 2017 Industry Volumes Mixed; Volatility Down

    4Q 2017 INDUSTRY VOLUMES MIXED; VOLATILITY DOWN 32 4Q 2017: Yr/Yr Change in Capital Markets Activity 4Q 2017: Yr/Yr Change in Average Daily Volatility (ADV excl. Eurex Equity Derivatives) Equity Indices (ICE) (34%) U.S. Rates (MOVE) (12%) Energy & Commodities Futures (FIA) (18%) Eurex Equity Derivat

33. Slide 33: Volumes Generally Mixed; Volatility Up from a Year Ago

    VOLUMES GENERALLY MIXED; VOLATILITY UP FROM A YEAR AGO 33 1Q 2018TD Change in Capital Markets Activity 1Q 2018TD Change in Average Daily Volatility (1/1/2018 – 1/25/2018) (1/1/2018 – 1/25/2018) Investment Grade Credit (5%) Commodity Volatility Index (BofAML) (62%) U.S. Treasuries (Primary Dealer) (4

34. Slide 34: Average Exchange Rates

    AVERAGE EXCHANGE RATES 34 January 1 – January 25, January 1 – January 25, 4Q 2017 4Q 2016 2018 2017 US Dollar 1 1 1 1 British Pound 1.328 1.243 1.374 1.231 Euro 1.178 1.079 1.215 1.061 Hong Kong Dollar 0.128 0.129 0.128 0.129 Singapore Dollar 0.739 0.709 0.755 0.699 Japanese Yen 112.895 109.495 111.

35. Slide 35: Differences Between Consolidated Results for Adjusted Earnings and GAAP

    DIFFERENCES BETWEEN CONSOLIDATED RESULTS FOR ADJUSTED EARNINGS AND GAAP 35 Differences between Other income (losses), net, for Adjusted Earnings and GAAP In the fourth quarters of 2017 and 2016, gains of $2.2 million and $1.0 million, respectively, related to BGC’s investments accounted for under th

36. Slide 36: Differences Between Consolidated Results for Adjusted Earnings and GAAP (Continued)

    DIFFERENCES BETWEEN CONSOLIDATED RESULTS FOR ADJUSTED EARNINGS AND GAAP (CONTINUED) 36 Differences between Compensation Expenses for Adjusted Earnings and GAAP In the fourth quarter of 2017 and full year 2017, the difference between compensation expenses as calculated for GAAP and Adjusted Earnings

37. Slide 37: Differences Between Consolidated Results for Adjusted Earnings and GAAP (Continued)

    DIFFERENCES BETWEEN CONSOLIDATED RESULTS FOR ADJUSTED EARNINGS AND GAAP (CONTINUED) 37 Differences between Taxes for Adjusted Earnings and GAAP BGC’s GAAP provision for income taxes from 2016 forward is calculated based on an annualized methodology. The Company’s GAAP provision for income taxes was

38. Slide 38: Adjusted Earnings Defined

    ADJUSTED EARNINGS DEFINED 38 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

39. Slide 39: Adjusted Earnings Defined (Continued)

    ADJUSTED EARNINGS DEFINED (CONTINUED) 39 Additionally, Adjusted Earnings calculations exclude certain unusual, one-time, non-ordinary or non-recurring items, if any. These items are excluded from Adjusted Earnings because the Company views excluding such items as a better reflection of the ongoing o

40. Slide 40: Adjusted Earnings Defined (Continued)

    ADJUSTED EARNINGS DEFINED (CONTINUED) 40 BGC incurs income tax expenses based on the location, legal structure and jurisdictional taxing authorities of each of its subsidiaries. Certain of the Company’s entities are taxed as U.S. partnerships and are subject to the Unincorporated Business Tax (“UBT”

41. Slide 41: Adjusted Earnings Defined (Continued)

    ADJUSTED EARNINGS DEFINED (CONTINUED) 41 BGC anticipates providing forward-looking guidance for GAAP revenues and for certain Adjusted Earnings measures from time to time. However, the Company does not anticipate providing an outlook for other GAAP results. This is because certain GAAP items, which

42. Slide 42: Adjusted EBITDA Defined

    ADJUSTED EBITDA DEFINED 42 Adjusted EBITDA and Adjusted EBITDA Before Allocations to Units Defined 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 follow

43. Slide 43: Impact of ASC 606 on Newmark's Future Results

    IMPACT OF ASC 606 NEWMARK’S FUTURE RESULTS 43 Impact of ASC 606 on Newmark’s Future Results From 2014 through 2016, the Financial Accounting Standards Board (“FASB”) issued several accounting standard updates, which together comprise Accounting Standards Codification Topic 606, Revenue from Contract

44. Slide 44: Proposed Spin-Off of Newmark

    PROPOSED SPIN-OFF OF NEWMARK 44 Proposed Spin-Off of Newmark BGC currently expects to pursue a distribution (or “spin-off”) to its common stockholders of all the Class A shares and Class B shares of Newmark common stock that it then owns in a manner intended to qualify as generally tax-free for U.S.

45. Slide 45: Reconciliation of GAAP Income (Loss) to Adjusted EBITDA

    RECONCILIATION OF GAAP INCOME (LOSS) TO ADJUSTED EBITDA (IN THOUSANDS) (UNAUDITED) 45 Q4 2017 Q4 2016 FY 2017 FY 2016 GAAP Net income (loss) available to common stockholders $ (119,799) $ 44,439 $ 51,475 $ 185,022 Add back: Provision (benefit) for income taxes 95,184 14,614 150,268 60,332 Net income

46. Slide 46: Reconciliation of GAAP Income (Loss) to Adjusted Earnings and Post-Tax Adjusted EPS

    RECONCILIATION OF GAAP INCOME (LOSS) TO ADJUSTED EARNINGS AND GAAP FULLY DILUTED EPS TO POST-TAX ADJUSTED EPS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) 46 Q4 2017 Q4 2016 FY 2017 FY 2016 GAAP income (loss) before income taxes $ (62,482) $ 80,977 $ 231,997 $ 314,170 Pre-tax adjustments: Non-c

47. Slide 47: Reconciliation of FENICS GAAP Income Before Taxes to Pre-Tax Adjusted Earnings

    RECONCILIATION OF FENICS GAAP INCOME BEFORE TAXES TO PRE-TAX ADJUSTED EARNINGS (IN THOUSANDS) (UNAUDITED) 47 Q4 2017 Q4 2016 FY 2017 FY 2016 FENICS GAAP income before income taxes (1) $ 24,974 $ 22,498 $ 110,083 $ 102,003 Pre-tax adjustments: Grant of exchangeability to limited partnership units 479

48. Slide 48: Fully Diluted Weighted-Average Share Count for GAAP and Adjusted Earnings

    FULLY DILUTED WEIGHTED-AVERAGE SHARE COUNT FOR GAAP AND ADJUSTED EARNINGS (IN THOUSANDS) (UNAUDITED) 48 Q4 2017 Q4 2016 FY 2017 FY 2016 Common stock outstanding 290,871 279,833 287,378 277,073 Limited partnership units - 86,290 100,215 79,727 Cantor units - 50,932 51,361 50,653 Founding partner unit

49. Slide 49: Segment Disclosure – 4Q 2017 vs 4Q 2016

    SEGMENT DISCLOSURE – 4Q 2017 VS 4Q 2016 (IN THOUSANDS) (UNAUDITED) 49 Q4 2017 Q4 2016 Financial Real Corporate Financial Real Corporate Services Estate Services Items Total Services Estate Services Items Total Total revenues $ 421,672 $ 462,041 $ 10,521 $ 894,234 $ 359,301 $ 388,606 $ 7,851 $ 755,75

50. Slide 50: Segment Disclosure – FY 2017 vs FY 2016

    SEGMENT DISCLOSURE – FY 2017 VS FY 2016 (IN THOUSANDS) (UNAUDITED) 50 FY 2017 FY 2016 Financial Real Corporate Financial Real Corporate Services Estate Services Items Total Services Estate Services Items Total Total revenues $ 1,711,824 $ 1,601,420 $ 40,112 $ 3,353,356 $ 1,523,235 $ 1,353,720 $ 31,1

51. Slide 51: Reconciliation of BGC Real Estate Segment Revenues to Newmark Stand-Alone Revenues

    RECONCILIATION OF BGC REAL ESTATE SEGMENT REVENUES TO NEWMARK GROUP, INC. STAND-ALONE REVENUES (IN THOUSANDS) (UNAUDITED) 51 BGC PARTNERS, INC. RECONCILIATION OF BGC REAL ESTATE SEGMENT REVENUES TO NEWMARK GROUP, INC. STAND-ALONE REVENUES (in thousands) (unaudited) Q4 2017 Q4 2016 FY 2017 FY 2016 BG

52. Slide 52: Reconciliation of BGC Real Estate Segment to Newmark Stand-Alone GAAP Income

    RECONCILIATION OF BGC REAL ESTATE SEGMENT TO NEWMARK GROUP, INC. STAND-ALONE FOR GAAP INCOME (LOSS) FROM OPERATIONS BEFORE INCOME TAXES (IN THOUSANDS) (UNAUDITED) 52 BGC PARTNERS, INC. RECONCILIATION OF BGC REAL ESTATE SEGMENT TO NEWMARK GROUP, INC. STAND-ALONE FOR GAAP INCOME (LOSS) FROM OPERATIONS

53. Slide 53: Reconciliation of BGC Real Estate Segment to Newmark Stand-Alone Pre-Tax Adjusted Earnings

    RECONCILIATION OF BGC REAL ESTATE SEGMENT TO NEWMARK GROUP, INC. STAND-ALONE FOR PRE-TAX ADJUSTED EARNINGS (IN THOUSANDS) (UNAUDITED) 53 BGC PARTNERS, INC. RECONCILIATION OF BGC REAL ESTATE SEGMENT TO NEWMARK GROUP, INC. STAND-ALONE FOR PRE-TAX ADJUSTED EARNINGS (in thousands) (unaudited) Q4 2017 Q4

54. Slide 54: Liquidity Analysis

    LIQUIDITY ANALYSIS (IN THOUSANDS) (UNAUDITED) 54 December 31, 2017 December 31, 2016 Cash and cash equivalents $ 634,333 $ 535,613 Reverse repurchase agreements - 54,659 Securities owned 33,007 35,357 Marketable securities (1) 5,833 164,820 Total $ 673,173 $ 790,449 (1) As of December 31, 2017, $202

55. Slide 55: Media Contact and Investor Contact

    55 Media Contact: Karen Laureano-Rikardsen +1 212-829-4975 Investor Contact: Ujjal Basu Roy (BGC), Kelly Collar (Newmark), ir.bgcpartners.com twitter.com/bgcpartners or Jason McGruder (BGC and Newmark) linkedin.com/company/bgc-partners +1 212-610-2426

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