Bgc Group, Inc. · NASDAQ:BGC
Bgc — BGC Partners — Q2 2017 Earnings Presentation
50 slides from Bgc's earnings presentation, July 2017
Slide 1: BGC Partners, Inc. Earnings Presentation 2Q 2017
1 BGC PARTNERS, INC. Earnings Presentation 2Q 2017 NASDAQ: BGCP
Slide 2: Disclaimer
DISCLAIMER 2 Discussion of Forward-Looking Statements by BGC Partners and Berkeley Point Statements in this document regarding BGC, the proposed transactions, and Berkeley Point that are not historical facts are “forward-looking statements” that involve risks and uncertainties, which could cause act
Slide 3: Disclaimer (Continued)
DISCLAIMER (CONTINUED) 3 On June 28, 2013, BGC sold its fully electronic trading platform for benchmark U.S. Treasury Notes and Bonds to Nasdaq Inc. For the purposes of this document, the assets sold may be referred to as “eSpeed,” and the businesses remaining with BGC that were not part of the eSpe
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
Slide 5: General Overview
BGC PARTNERS 5 GENERAL OVERVIEW
Slide 6: Select Consolidated Distributable Earnings Financial Results
SELECT CONSOLIDATED DISTRIBUTABLE EARNINGS FINANCIAL RESULTS 6 Highlights of Consolidated Distributable Earnings Results (USD 2Q 2017 2Q 2016 Change (%) millions, except per share data) Revenues $737.8 $653.8 12.8% Pre-tax distributable earnings before non-controlling interest in 131.5 103.6 27.0% s
Slide 7: Global Revenue Breakdown
GLOBAL REVENUE BREAKDOWN 7 Q2 2Q17 Global Revenues APAC Americas RE 8% 40% EMEA 32% Americas FS 20% Total Americas revenue up 13% in 2Q17 Europe, Middle East & Africa revenue up 13% in 2Q17 Asia Pacific revenue up 11% in 2Q17 Note: Percentages may not sum to 100% due to rounding, less than 1%
Slide 8: 2Q 2017 Segment Data (Distributable Earnings Basis)
2Q 2017 SEGMENT DATA (DISTRIBUTABLE EARNINGS BASIS) 8 (In USD millions) 2Q 2017 REVENUES 2Q 2017 Revenues Pre-tax Earnings Pre-tax Margin Corporate Financial $432.3 $111.0 25.7% 1% Real Estate $295.3 $35.2 11.9% Corporate $10.1 ($14.6) NMF Real Estate (In USD millions) Services Financial 2Q 2016 Rev
Slide 9: BGC's 2Q 2017 Significant Revenue Diversity
BGC'S 2Q 2017 SIGNIFICANT REVENUE DIVERSITY 9 Corporate Services, 1% BGC’s Businesses at a Glance Real Estate Management and Other, 7% BGC maintains a highly diverse Rates, 18% revenue base Real Estate Capital Corporate Wholesale Financial Services Markets, 13% 1% Brokerage revenues and earnings
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) 3,812 3,800 3,935 4,004 3,984 1,444 1,443 1,445 1,421 1,447 337 363 2,391 2,353 2,491 2,561 2,539 157 169 2Q 2016 3Q 2016 4Q 2016 1Q 2017 2Q 2017 Q2 2016
Slide 11: Distributable Earnings Expense & Pre-Tax Margin Trends
DISTRIBUTABLE EARNINGS EXPENSE & PRE-TAX MARGIN TRENDS 11 $2,000 100% 90% $1,500 (USD millions) 80% $1,000 63.0% 63.7% 70% 62.2% 61.3% 60% $500 50% $0 40% FY 2015 FY 2016 2Q 2016 2Q 2017 Compensation and Employee Benefits Compensation and Employee Benefits as % of Total Revenue 20% 30% 25.6% 25.0% 2
Slide 12: Berkeley Point Acquisition
BERKELEY POINT ACQUISITION 12 We believe that the addition of Berkeley Point will significantly increase the scale and scope of our Real Estate Services business, and that the combination of mortgage broking, multifamily investment sales, and agency multifamily lending will generate substantial re
Slide 13: Financial Services
13 Overview FINANCIAL SERVICES
Slide 14: Business Overview: Financial Services Summary
BUSINESS OVERVIEW: FINANCIAL SERVICES SUMMARY 14 BGC Financial Services Segment Highlights Quarterly Drivers General: Increased activity across rates; Pre-tax distributable earnings up decreased activity across credit and approximately 38% certain IDB energy and commodities Pre-tax distributab
Slide 15: Financial Services Revenue Breakout by Asset Class
FINANCIAL SERVICES REVENUE BREAKOUT BY ASSET CLASS 15 FINANCIAL SERVICES REVENUE COMPOSITION (USD millions) $432,317 $1,312 $13,322 $392,740 $838 % Change $14,160 $85,324 $45,593 Other NMF $57,306 $48,479 Data, software, and post-trade (6%) Equities and other 87% $70,730 $77,330 Energy and commoditi
Slide 16: Business Overview: FENICS
BUSINESS OVERVIEW: FENICS 16 FENICS Net Revenue Growth1 2Q 2017 FENICS Breakdown2 (USD $000s) 240,000 16% Data, software and 180,000 12% post trade Data, (inter- software and company) post trade F/X 19% 19% 120,000 8% 10% 60,000 4% Credit - 0% 25% Rates FY10 FY11 FY12 FY13 FY14 FY15 FY16 TTM 28% 2Q1
Slide 17: BGC's FENICS (Fully Electronic) Revenue Growth
BGC’S FENICS (FULLY ELECTRONIC) REVENUE GROWTH 17 FENICS (Fully Electronic) Revenues1 (USD 000s) 275,000 $261,497 $266,080 51,364 52,151 225,000 54,242 52,624 175,000 125,000 75,000 155,891 161,305 $68,684 $71,032 13,440 13,188 13,322 14,160 25,000 41,084 44,522 (25,000) TTM 2Q16 TTM 2Q17 2Q16 2Q17
Slide 18: FENICS in Review
FENICS IN REVIEW 18 (USD millions) Q2 2017 TTM Q2 2017 Voice / Hybrid / Voice / Hybrid / FENICS Other Real Es tate Corporate Total FENICS Other Real Es tate Corporate Total Revenue $71.0 $361.3 $295.3 $10.1 $737.8 $266.1 $1,320.3 $1,143.4 $33.6 $2,763.4 Pre-tax DE $30.4 $80.6 $35.2 ($14.6) $131.5 $1
Slide 19: Real Estate
Newmark = Cornish & Carey esis = Newmark = Knight Frank os A Newmark Company Overview REAL ESTATE SSN Th hi
Slide 20: Business Overview: Real Estate Services
BUSINESS OVERVIEW: REAL ESTATE SERVICES 20 Newmark Highlights 2Q 2017 Real Estate Segment Breakdown 2Q 2017 leasing and other services revenue increased 16% compared to 2Q 2016 Real estate Management capital markets services & 33% 2Q 2017 real estate capital markets revenue other revenues 18% in
Slide 21: Newmark's Continued Strong Revenue Growth
NEWMARK'S CONTINUED STRONG REVENUE GROWTH 21 Newmark Revenue (USD 000’s) 1,200,000 1,000,000 800,000 Revenues 600,000 400,000 200,000 - FY FY FY FY FY TTM 2Q17 2012 2013 2014 2015 2016 Revenue Newmark’s revenues have grown from $455 million for the year ended December 31, 2012 to $1,143 million fo
Slide 22: Industry Fundamentals Remain Strong
INDUSTRY FUNDAMENTALS REMAIN STRONG 22 Historical U.S. Cap Rate Yield Spread Over 10-Year U.S. Treasuries 10% 500 2Q 2017 Yield Spread: 359 bps 8% 400 SPREAD (BPS) CAP RATE 6% 300 4% 200 2% 100 0% 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Yield Spread Cap Rate
Slide 23: Outlook
23 BGC PARTNERS OUTLOOK
Slide 24: Outlook Comparison
OUTLOOK COMPARISON 24 Outlook Compared with a Year Ago Results BGC anticipates third quarter 2017 revenues of between $695 million and $740 million, compared with $645.0 million a year earlier BGC anticipates generating pre-tax earnings of between $118 million and $140 million, as compared to $1
Slide 25: GAAP Financial Results
GAAPFINANCIAL GAAP Financials RESULTS
Slide 26: Select Consolidated GAAP Financial Results
SELECT CONSOLIDATED GAAP FINANCIAL RESULTS 26 Highlights of Consolidated GAAP Results (USD millions, except per share 2Q 2017 2Q 2016 Change (%) data) Revenues under both U.S. Generally Accepted Accounting Principles $737.8 $653.8 12.8% (“GAAP”) and Distributable Earnings Income from operations befo
Slide 27: Condensed Consolidated Statements of Operations
BGC PARTNERS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) (UNDER GAAP) 27 Three Months Ended June 30, Six Months Ended June 30, Revenues: 2017 2016 2017 2016 Commissions $ 580,033 $ 498,588 $ 1,127,159 $ 973,675 Principal transactions 80,360
Slide 28: Condensed Consolidated Statements of Financial Condition
BGC PARTNERS, INC. CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) (UNDER GAAP) 28 June 30, December 31, 2017 2016 Assets Cash and cash equivalents $ 462,042 $ 502,024 Cash segregated under regulatory requirements 119,470 6,895 Reverse repur
Slide 29: Appendix
APPENDIX TMNT ANTI INT ss 1
Slide 30: BGC's Economic Ownership as of June 30, 2017
BGC’S ECONOMIC OWNERSHIP AS OF JUNE 30, 2017 30 Cantor 19% Public 48% Employees, Executives, & Directors 33% Note: Employees, Executives, and Directors ownership figure attributes all units (PSUs, FPUs, RSUs, etc.) and distribution rights to founding partners & employees and also includes all A shar
Slide 31: Strongly Capitalized; Investment Grade Credit Profile
STRONGLY CAPITALIZED; INVESTMENT GRADE CREDIT PROFILE 31 ($ in '000s ) BGC Partners , Inc. 6/30/2017 Ca s h a nd Ca s h E quiva le nts $462,042 S e curitie s Owne d 33,743 Ma rke ta ble S e curitie s (ne t) 73,914 1 Total Liquidity $569,699 BGC Partners , Inc. and Subs idiaries Is s uer Maturity 6/3
Slide 32: 2Q17 Industry Volumes Mixed; Volatility Down
2Q17 INDUSTRY VOLUMES MIXED; VOLATILITY DOWN 32 2Q17: Yr/Yr Change in Capital Markets Activity 2Q17: Yr/Yr Change in Average Daily Volatility (ADV excl. Eurex Equity Derivatives) Energy & Commodities Futures (FIA)(22%) FX (CVIX) (15%) Thomson Reuters FX Spot (14%) Equity Indices (ICE) (7%) Eurex Equ
Slide 33: Volumes Generally Mixed; Volatility Down From a Year Ago
VOLUMES GENERALLY MIXED; VOLATILITY DOWN FROM A YEAR AGO 33 3Q17TD Change in Capital Markets Activity 3Q17TD Change in Average Daily Volatility (7/1/2017 – 7/14/2017) (7/1/2017 – 7/14/2017) Investment Grade Credit (15%) European Equities (V2X) (27%) Energy (ICE) (10%) European Equities (9%) Commodit
Slide 34: Vacancy Rates Continue to Improve
VACANCY RATES CONTINUE TO IMPROVE SIGNALING SUSTAINED DEMAND FOR COMMERCIAL REAL ESTATE 34 20.0% U.S. Vacancy Rates by Asset Class 16.0% 12.0% 8.0% 4.0% 0.0% 2Q11 2Q12 2Q13 2Q14 2Q15 2Q16 2Q17 Office Industrial Retail Unweighted Average Source: CoStar, REIS, and Newmark Research Vacancy rates cont
Slide 35: Average Exchange Rates
AVERAGE EXCHANGE RATES 35 Q2 2017 Q2 2016 July 1 – July 20, 2017 July 1 – July 20, 2016 US Dollar 1 1 1 1 British Pound 1.280 1.435 1.296 1.315 Euro 1.100 1.129 1.145 1.107 Hong Kong Dollar 0.128 0.129 0.128 0.129 Singapore Dollar 0.718 0.737 0.727 0.741 Japanese Yen 111.149 108.119 112.931 103.740
Slide 36: Differences Between Consolidated Results for Distributable Earnings and GAAP
DIFFERENCES BETWEEN CONSOLIDATED RESULTS FOR DISTRIBUTABLE EARNINGS AND GAAP 36 Differences between Consolidated Results for Distributable Earnings and GAAP The following sections describe the main differences between results as calculated for distributable earnings and GAAP for the periods discusse
Slide 37: Differences Between Consolidated Results for Distributable Earnings and GAAP (Continued)
DIFFERENCES BETWEEN CONSOLIDATED RESULTS FOR DISTRIBUTABLE EARNINGS AND GAAP (CONTINUED) 37 Differences between Compensation Expenses for Distributable Earnings and GAAP In the second quarter of 2017, the difference between compensation expenses as calculated for GAAP and distributable earnings incl
Slide 38: Distributable Earnings Defined
DISTRIBUTABLE EARNINGS DEFINED 38 Distributable Earnings Defined BGC Partners uses non-GAAP financial measures including, but not limited to, “pre-tax distributable earnings” and “post-tax distributable earnings”, which are supplemental measures of operating results that are used by management to ev
Slide 39: Distributable Earnings Defined (Continued)
DISTRIBUTABLE EARNINGS DEFINED (CONTINUED) 39 To make period-to-period comparisons more meaningful, one-quarter of each annual Nasdaq contingent earn-out amount, as well as gains or losses with respect to associated mark-to-market movements and/or hedging, will be included in the Company’s calculati
Slide 40: Distributable Earnings Defined (Continued)
DISTRIBUTABLE EARNINGS DEFINED (CONTINUED) 40 Each quarter, the dividend to BGC’s common stockholders is expected to be determined by the Company’s Board of Directors with reference to a number of factors, including post-tax distributable earnings per fully diluted share. In addition to the Company’
Slide 41: Distributable Earnings Defined (Continued)
DISTRIBUTABLE EARNINGS DEFINED (CONTINUED) 41 Pre-Tax Distributable Earnings Following the Closing of the Proposed BPF Transaction Following the closing of the Berkeley Point transaction, additional GAAP items will be excluded in order to calculate pre-tax distributable earnings for the Real Estate
Slide 42: Adjusted EBITDA Defined
ADJUSTED EBITDA DEFINED 42 Adjusted EBITDA 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 following items: • Interest expense; • Fixed asset dep
Slide 43: Adjusted EBITDA Defined
ADJUSTED EBITDA DEFINED 43 Adjusted EBITDA Following the Closing of the Proposed BPF Transaction Following the closing of the Berkeley Point transaction, additional GAAP items will be excluded in order to calculate BGC’s consolidated adjusted EBITDA. The most material items expected to be excluded f
Slide 44: Reconciliation of GAAP Income (Loss) to Adjusted EBITDA
RECONCILIATION OF GAAP INCOME (LOSS) TO ADJUSTED EBITDA (IN THOUSANDS) (UNAUDITED) 44 Q2 2017 Q2 2016 GAAP Net income (loss) available to common stockholders $ 21,768 $ 14,467 Add back: Provision (benefit) for income taxes 16,547 10,548 Net income (loss) attributable to noncontrolling interest in su
Slide 45: Reconciliation of GAAP Income to Distributable Earnings and EPS
RECONCILIATION OF GAAP INCOME (LOSS) TO DISTRIBUTABLE EARNINGS AND GAAP FULLY DILUTED EPS TO POST-TAX DISTRIBUTABLE EPS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) 45 Q2 2017 Q2 2016 GAAP income (loss) before income taxes $ 45,500 $ 29,204 Pre-tax adjustments: Non-cash (gains) losses related t
Slide 46: Reconciliation of FENICS GAAP Income Before Taxes to Pre-Tax Distributable Earnings
RECONCILIATION OF FENICS GAAP INCOME BEFORE TAXES TO PRE-TAX DISTRIBUTABLE EARNINGS (IN THOUSANDS) (UNAUDITED) 46 TTM Ended TTM Ended Q2 2017 Q2 2016 June 30, 2017 June 30, 2016 FENICS GAAP income before income taxes (1) $ 28,818 $ 28,502 $ 104,037 $ 102,149 Pre-tax adjustments: Grant of exchangeabi
Slide 47: Fully Diluted Weighted-Average Share Count for GAAP and Distributable Earnings
FULLY DILUTED WEIGHTED-AVERAGE SHARE COUNT FOR GAAP AND DISTRIBUTABLE EARNINGS (IN THOUSANDS) (UNAUDITED) 47 Q2 2017 Q2 2016 Common stock outstanding 286,840 275,997 Limited partnership units 98,483 77,885 Cantor units 51,183 50,558 Founding partner units 13,661 14,785 4.50% Convertible debt shares
Slide 48: Segment Disclosure – Q2 2017 vs Q2 2016
SEGMENT DISCLOSURE – Q2 2017 VS Q2 2016 (IN THOUSANDS) (UNAUDITED) 48 Q2 2017 Q2 2016 Financial Real Corporate Financial Real Corporate Services Estate Services Items Total Services Estate Services Items Total Total revenues $ 432,317 $ 295,317 $ 10,123 $ 737,757 $ 392,740 $ 253,762 $ 7,268 $ 653,77
Slide 49: Liquidity Analysis
LIQUIDITY ANALYSIS (IN THOUSANDS) (UNAUDITED) 49 June 30, 2017 December 31, 2016 Cash and cash equivalents $ 462,042 $ 502,024 Reverse repurchase agreements - 54,659 Securities owned 33,743 35,357 Marketable securities (1) 73,914 164,820 Total $ 569,699 $ 756,860 (1) As of June 30, 2017, $95.3 milli
Slide 50: Media and Investor Contacts
50 Media Contact: Karen Laureano-Rikardsen +1 212-829-4975 Investor Contact: Jason McGruder ir.bgcpartners.com twitter.com/bgcpartners +1 212-610-2426 linkedin.com/company/bgc-partners