5/7/2025

speaker
Operator
Conference Call Operator

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. It is now my pleasure to introduce to you Jason Krasikis, head of investor relations. Thank you Jason you may begin.

speaker
Jason Krasikis
Head of Investor Relations

Thank you and hello everyone. This morning we issued BGC's first quarter 2025 financial results which can be found at .BGCG.com. Any historical results provided on today's call compare only the first quarter of 2025 with the prior year period unless otherwise specified. We will be referring to our results on a non-GAAP basis which include the terms adjusted earnings and adjusted EBITDA. 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 gap results and how when and why management uses them. The outlook discussed today assumes no material acquisitions or dispositions. Our expectations are subject to change based on various macroeconomic, social, political and or other factors. Information on this call contains forward-looking statements including without limitation statements about our economic outlook and business. These statements are subject to risks and uncertainties which could cause our actual results to differ from expectations. Except as required by law we undertake no obligation to update any forward-looking statements. 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 including but not limited to the risk factors and disclosures within these SEC documents. And with that I'm now happy to turn the call over to Sean Windyatt, Co-Chief Executive Officer of BGC Group.

speaker
Sean Windyatt
Co-Chief Executive Officer

Thank you Jason. Good morning and welcome to our first quarter 2025 conference call. With me today are my fellow COF Chief Executive Officers John Aboulaj and JP Oban along with our Chief Financial Officer Jason Hoff. We delivered record quarterly revenues of more than $664 million dollars, a 15% increase versus last year's record first quarter. Our strong results were driven by robust organic growth across both our voice hybrid and Fenix businesses which each achieved new all-time highs. FMX had its best ever quarter with record volumes and market share across both our FMX UST and FX platforms driven by strong support from our FMX equity partners. On April 1st we completed our transformative acquisition of OTC Global Holdings that is expected to add over $400 million dollars in annualized revenue nearly doubling the size of our existing ECS business. This positions us as the world's largest ECS broker and makes BGC a more comprehensive and diverse company. We expect the acquisition of OTC to be immediately accretive and generate meaningful shareholder value. We're happy to welcome the OTC team to BGC. 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. In the second quarter we've continued to build on our success with global market volatility leading to broad organic growth across our businesses. As a reminder volatility benefits BGC by increasing secondary trading volumes as market participants seek to hedge their or risk their capitalized on price fluctuations. These activities are most efficiently executed in our wholesale markets known for their depth and liquidity. With that I'd like to turn the call over to John to go over the quarterly results of the business in more detail.

speaker
John Aboulaj
Co-Chief Executive Officer

Thank you Sean. It's an honor to join all of you for the first time as BGC's co-CEO. As Sean mentioned we registered record quarterly results reflecting substantial growth across every region and our largest asset classes. Our rates revenue increased .8% to a record 200.9 million dollars reflecting higher volumes across all our major interest rate products. ECS revenue grew by .6% to a record 149.9 million dollars driven by strong growth across environmental and energy transition products as well as our oil and refined products. Foreign exchange revenues were up 31% to a record 110 million dollars reflecting broad-based growth across all FX products. Credit revenues decreased by zero spot 7% to 86.9 million dollars due to lower emerging market and European credit volumes partly offset by record portfolio match volumes and strong US credit activity. Equities revenues were flat at 62.9 million dollars as a result of higher European and US equity volumes being offset by lower Asian equity derivative volumes. Data network and post-trade revenues increased by .2% to 32.5 million dollars. This growth was primarily driven by Fenix market data and Lucera partly offset by lower post-trade revenues due to the sale of our Capital Lab business in the year over year. We expect growth in these businesses to accelerate throughout the year as we work through the large revenue pipelines in place. Now turning to Fenix. In the first quarter Fenix revenues improved by .6% to 172.7 million dollars. Fenix markets reported revenues of 145.5 million dollars an increase of 14.2%. This growth was primarily driven by record electronic volumes across rates and foreign exchange. Fenix growth platforms grew by .7% to 27.1 million dollars. This growth was primarily driven by FMX, portfolio match, and Lucera partly offset by the sale of Capital Lab. Excluding Capital Lab, Fenix growth platforms revenues grew by approximately 30% year over year. FMX UST generated record average daily volume of over 60 billion dollars in the first quarter, a 33% increase compared to last year. This growth was driven by strong support from FMX's equity partners which drove market share to approximately 33% for the first quarter up from 30% last quarter and 28% a year ago. Notably, FMX daily volume exceeded 100 billion dollars for the first time on the 28th of February 2025. FMX FX more than doubled its ADV to a record 14.5 billion dollars in the first quarter, driven by deepening support from FMX's equity partners as well as onboarding new participants onto the platform. FMX Futures Exchange continued to make progress connecting new large FCMs while preparing for the launch of US Treasury Futures which following extreme volatility in April is scheduled for this month. As FMX continues to integrate more FCMs, ADV and open interest on the exchange are expected to meaningfully accelerate. In periods of high volatility, liquidity typically migrates to established trading platforms and the exchanges with the deepest liquidity pools. Our successful work over the past few years to develop FMX UST into a leading treasury platform enabled us to achieve and seamlessly process record volumes during the recent periods of extreme volatility. During the first and second weeks of April, FMX UST set consecutive daily records including record daily volume of more than 142 billion dollars on April the 9th 2025. Portfolio match ADV doubled due to strong growth across both US and European credit volumes. Portfolio match continues to capture market share in this rapidly growing segment of the credit market. Lucera, Fenix network business providing critical real-time trading infrastructures to capital markets, increased its revenue by more than 15% and grew its client pipeline for sustained future growth. Lucera plans to launch new foreign exchange and products throughout 2025 which are expected to drive new growth opportunities. I would now like to turn the call over to Jason.

speaker
Jason Hoff
Chief Financial Officer

Thank you John and hello everyone. BGC generated first quarter revenue of $664.2 million dollars reflecting growth across all of our geographies. America's revenues increased by 23.3 percent, Europe, Middle East and Africa revenues increased by 12.2 percent and Asia-Pacific revenues increased by 2.4 percent. Turning to expenses, compensation and employee benefits under both GAAP and for adjusted earnings increased by 17.5 percent versus the first quarter of 2024 due to higher commission revenues during the period. Non-compensation expenses under GAAP and adjusted earnings increased by 5.2 percent and 6.6 percent respectively. Moving turns, our pre-tax adjusted earnings grew by 18.4 percent to 160.2 million dollars. Post-tax adjusted earnings increased by 16.1 percent to 143 million dollars and post-tax adjusted earnings per share improved by 16 percent to 29 cents per share. Adjusted EBITDA decreased by 4.1 percent to 199.8 million dollars due to a 36.6 million dollar mark to mark gain in the prior period related to a firm investment. Excluding this gain from the prior period, adjusted EBITDA would have increased by 16.3 percent. Turning to share counts, BGC's fully diluted weighted average share count for the adjusted earnings was 501.5 million shares during the period, a 1.2 percent increase compared to the fourth quarter of 2024, and a 1.3 percent increase compared to a year ago. As a reminder, we repurchased the fewest amount of shares in the first quarter due to seasonal capital requirements. In addition, we acquired OTC global holdings on April 1st, 2025. We have significant runway under our share repurchase authorization and buybacks continue to be an integral part of our capital allocation policy. We expect our share repurchases to increase throughout the remainder of the year. As of March 31st, our liquidity was ,146.1 million compared to $897.8 million as of year end 2024. With that, I'd like to turn the call back to Sean to go over our second quarter outlook.

speaker
Sean Windyatt
Co-Chief Executive Officer

Thank you, Jason. Please provide the following guidance for the second quarter of 2025. We expect to generate total revenues of between $715 and $765 million as compared to $550.8 million in the second quarter of 2024, which at the midpoint of our guidance would represent approximately 34 percent revenue growth. Excluding OTC, we expect second quarter revenues to grow between 10 percent and 17 percent. We anticipate pre-tax adjusted earnings to be in the range of $156 to $171 million versus $125.8 million last year, which at the midpoint of guidance would represent 30 percent earnings growth. And we expect our adjusted earnings tax rate to be between 10 and 12 percent for the full year 2025. Operator with that would like to open the call for questions.

speaker
Operator
Conference Call Operator

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.

speaker
Moderator
Conference Call Moderator

One moment, please, while we poll for questions. And the first question comes from the line of Patrick Molley with Piper Sandler. Please proceed

speaker
Operator
Conference Call Operator

with your question. Good

speaker
Patrick Molley
Analyst, Piper Sandler

morning, guys. So I wanted to just start off talking about the FMX 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 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 issues that have contributed to the delay? And then as a second part to that, there was an article that came out yesterday citing a source from inside the LCH that said that they were maybe dealing with some settlement or delivery issues on their end. So the extent that you're willing to address that, is there any validity to those reports? Thanks.

speaker
JP Oban
Co-Chief Executive Officer

Hello, Patrick. JP here. So you're correct. The extreme volatility in April created an environment not ideal for a successful launch. But the good news is we're launching this month in May. So to come back to the article, we are aware of this article. And while we don't comment on rumors, we can say that we spoke to our clearing partner, LCH. And by the way, we spoke to them every day. So we spoke to LCH as recently as last evening following the release of this article. And guess what? They are ready. LCH is ready. We are ready. And we will be launching in this month's

speaker
Analyst (Piper Sandler)
Analyst

period. Okay. Thanks for that. And then as a

speaker
Patrick Molley
Analyst, Piper Sandler

follow-up, one more. You closed OTC Global Holdings about a month ago. You've had a little while now to look under the hood. So I was hoping to get your updated expectations on how creative this acquisition could be, what the revenue website looks like in terms of cross-sells between the two customer bases. And then on the margins, it seemed like the second quarter margins were maybe a little bit softer than we were expecting. So any color you can give on how you're expecting margins to trend from here would be great.

speaker
Analyst (Piper Sandler)
Analyst

Thanks.

speaker
Sean Windyatt
Co-Chief Executive Officer

Yeah, sure. Thanks. It's good, right? You know, we've had a total of, I think, 37 days of owning OTC. But rest assured, as you know, as Patrick, we're hard at work with the integration. And we're very happy with what we've seen so far. I mean, look, in the implied guidance, we separated guidance out for you. So you saw at the sort of midpoint of guidance, we expect $115 million, which, as you would guess, shows decent growth from the $400 million that we initially expected. Look, in terms of the margin itself, I think we'd said on the previous call BGC as a group has margins in excess of pre-tax margins, in excess of 20%. Whereas when you're a larger company like OTC, that 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 that's immediately, we've done huge amounts of small transactions, and we get the economies of scale. We're also very experienced at the larger transactions, such as GFI. And what I would expect is, as I said before, whilst we don't think the OTC business will get up to the BGC margins in the short term, you will definitely see a growth in those margins by the end of year one, beginning of year two. Maybe John, you wanted to add something in terms of the business itself and the synergy.

speaker
John Aboulaj
Co-Chief Executive Officer

Yeah. Hey, Patrick, just what I would say is what I think we said last time, we've spent a lot of time and effort mapping both front office, back office. And the best example I can give you in terms of what synergies look like from the product side is it seems counter intuitive to broker an underlying product and ship an underlying product and not have those two connected. And so that work has already begun. The people inside OTC are fantastic. Everything we've seen is as good or better than we expected. And we expect to generate serious shareholder value in both the short term and the long term.

speaker
Analyst (Piper Sandler)
Analyst

Okay, great. That's it for me. Thanks, guys.

speaker
Moderator
Conference Call Moderator

And the next question comes from the line of Eli Aboud with Bank of America.

speaker
Operator
Conference Call Operator

Please proceed with your question.

speaker
Eli Aboud
Analyst, Bank of America

Good morning, everyone. Thanks for taking the question. After treasury futures, what are the next key milestones or product launches that investors should be on the lookout for? When should we expect longer tenure treasury futures and options on futures to go live?

speaker
JP Oban
Co-Chief Executive Officer

Hey, how are you? JP here. Look, as you know, our year one is about connectivity. We're in year one, right? And as I mentioned previously, we are launching this month in May our USD futures. Our bank partners, equity partners are the main users of USD futures. It's great news. We do expect their respective trading desk to become highly active on our exchange, which we drive volumes up. It's our target today. Obviously, you know our plan, right? As a reminder, your one connectivity, your two deepening client connectivity and increasing volumes and open interest and your three full competition with CME. We stick to our plan. It's a three year plan, year one. And for the time being, it's matching our expectations.

speaker
Eli Aboud
Analyst, Bank of America

Got it. Thanks. And based on the non-controlling interest deduction, it looks like FMX still hasn't reached profitability. Can you help us quantify the cash burn related to FMX futures? And once the futures exchange starts to break even, what do you think the normalized profit margins of FMX should look like?

speaker
Sean Windyatt
Co-Chief Executive Officer

So obviously, we don't break out FMX independently. However, however, to be clear, the cash burn to BGC is zero. So as part of the part of the deal with our with FMX partners, we contributed the business and they are funding, if you like, the future development of futures. How about that? So the cash burn to BGC is zero. And then in terms of profitability and where the margin will get to, I think in the short term, we get to break even and slightly beyond. And in terms of the medium to long term, I think it's commensurate with other exchanges, which is around the 40 to 50% level.

speaker
Eli Aboud
Analyst, Bank of America

Got it. And then just the last one for me. Do we have any additional clarity yet on the outcome for Howard shares? If my math's right, I think we're getting close to the 90 day mark for divestment.

speaker
Sean Windyatt
Co-Chief Executive Officer

Okay, I think all as probably as you'd expect, Eli, all we can say is that, you know, Howard will comply with all the Senate Ethics Committee standards, including his divesting his holdings. You know, the public SEC filings are required when he does so. And as we previously stated, we don't expect any sales in the open market, and we expect no changes equally to the corporate structure. And on your point of math is, I would agree with you 90 days is fast approaching. Got it. Thanks, everyone.

speaker
Moderator
Conference Call Moderator

And the next question is a follow up from Patrick Molley with Piper Sandler. Please proceed

speaker
Operator
Conference Call Operator

with your question.

speaker
Patrick Molley
Analyst, Piper Sandler

Yes, thanks for taking the follow up. So I just have two modeling items to ask 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 OTC global holdings, what should we assume in terms of the cash outlay this quarter for that acquisition? Thanks.

speaker
Sean Windyatt
Co-Chief Executive Officer

Sure. So yeah, look, the reason we added, as we have done before, in my prepared remarks, I suggested that the tax rate, our expected tax rate is between 10 and 12% for 2025. In terms of in terms of cash outlay for OTC, it was 325 million. So as you know, it's now sort of fully disclosed. So that was paid on April the 1st.

speaker
Analyst (Piper Sandler)
Analyst

All right. Thank you.

speaker
Operator
Conference Call Operator

Ladies and gentlemen, there are no further questions at this time. I would like to turn the floor back over to Mr. Wendy at closing remarks.

speaker
Sean Windyatt
Co-Chief Executive Officer

Oh, thanks, everybody. Thanks for joining us today on our on our earnings call. And I just wish you all a great day and look forward to update you again very soon. Thanks very much.

speaker
Operator
Conference Call Operator

Thank you. This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.

Disclaimer

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

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