BGC Group, Inc (NYSE:BGC) Q4 2024 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call presented strong financial results with significant revenue and earnings growth. Despite some competitive and regulatory risks, the guidance was optimistic with revenue and earnings growth projections. The Q&A revealed positive sentiment from analysts on margin expansion and acquisition contributions. Although there was no shareholder return plan, the strong financial performance, optimistic guidance, and positive analyst sentiment suggest a positive stock price movement over the next two weeks.

Key Financial Performance

Total Revenues $572.3 million, an increase of 10.8% year-over-year, driven by strong growth across every region and major asset classes.

Brokerage Revenues $516.1 million, an increase of 11.8% year-over-year, reflecting higher trading volumes.

Rates Revenues $169.6 million, an increase of 8.8% year-over-year, due to higher volumes across interest rate derivatives, listed rates products, and U.S. treasuries.

ECS Revenues $134.1 million, an increase of 28% year-over-year, driven by strong growth across the energy complex and the acquisition of Sage Energy Partners.

Foreign Exchange Revenues $93.6 million, an increase of 21.3% year-over-year, primarily due to higher options and emerging market foreign exchange volumes.

Credit Revenues $62.4 million, a decrease of 4.9% year-over-year, due to lower CDS and emerging market credit volumes.

Equities Revenues $56.3 million, a decrease of 3.5% year-over-year, primarily due to lower Asian equity derivative volumes.

Data, Network and Post-Trade Revenues $32.6 million, an increase of 10.3% year-over-year, driven by strong subscription-based revenue growth, offset by lower post-trade revenues due to the sale of Capitalab.

Fenics Revenues $142.1 million, an increase of 8.6% year-over-year, driven by higher electronic volumes across rates and foreign exchange.

Adjusted Earnings $123.5 million, an increase of 21.9% year-over-year.

Pretax Adjusted Earnings $129.5 million, an increase of 16.9% year-over-year.

Adjusted EBITDA $192 million, an increase of 26.7% year-over-year.

Post-Tax Adjusted Earnings Per Share $0.25, an increase of 19% year-over-year.

Liquidity $897.8 million, an increase from $701.4 million year-over-year.

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Operating Highlights

Fenics Growth Platforms Revenue: Fenics Growth Platforms generated revenues of $25.5 million, a 20.2% increase, primarily driven by FMX, PortfolioMatch and Lucera.

FMX UST Average Daily Volumes: FMX UST generated average daily volumes of over $52 billion for the fourth quarter, up 28% compared to last year.

FMX FX Volumes: FMX FX volumes improved by approximately 80% compared to last year on record ADV of more than $11 billion.

Lucera Revenue Growth: Lucera, Fenics network business, grew its revenue by over 33%.

Acquisition of Sage Energy Partners: At the beginning of the fourth quarter, we closed our acquisition of Sage Energy Partners and expect to close OTC Holdings around the end of the first quarter.

Market Share in UST: FMX UST now holds over 30% market share.

Market Share in FX: FMX FX continues to expand its market share in the enormous global foreign exchange market.

Revenue Growth: BGC delivered record fourth quarter and full-year revenues, growing by 11% and 12%, respectively.

Compensation and Employee Benefits Increase: Compensation and employee benefits increased by 16.3% due to higher commissionable revenues.

CEO Nomination: Howard Lutnick was nominated as the 41st United States Secretary of Commerce.

First Quarter 2025 Guidance: Expect total revenues of between $610 million and $660 million, representing approximately 10% revenue growth.

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Risk or Challenges

Macroeconomic Factors: Expectations are subject to change based on various macroeconomic, social, political and/or other factors.

Regulatory Risks: Forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from expectations.

Acquisition Risks: The outlook assumes no material acquisitions or dispositions, indicating potential risks associated with future acquisitions.

Competitive Pressures: The company operates in a competitive environment, particularly in the ECS and foreign exchange markets, which may impact revenue growth.

Supply Chain Challenges: The call does not explicitly mention supply chain challenges, but the mention of acquisitions and market conditions implies potential risks in operational execution.

Economic Factors: The company’s performance is influenced by economic conditions, which can affect trading volumes and revenue generation.

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Guidance & Outlook

Acquisitions: Closed acquisition of Sage Energy Partners and expect to close OTC Holdings around the end of Q1 2025, contributing more than $450 million of annual revenues.

Market Position: BGC aims to become the largest ECS broker in the world.

Revenue Growth: Strong revenue growth driven by ECS, rates, and foreign exchange businesses.

Trading Volumes: Trading volumes currently outpacing Q1 2024’s record.

Fenics Growth: Fenics Growth Platforms generated revenues of $25.5 million, a 20.2% increase.

Q1 2025 Revenue Guidance: Expect total revenues of between $610 million and $660 million, representing approximately 10% revenue growth.

Q1 2025 Earnings Guidance: Anticipate pretax adjusted earnings to be in the range of $145 million to $161 million, representing 13% earnings growth.

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Shareholder Return Plan

Shareholder Return Plan: BGC Group, Inc. did not announce any specific share buyback program or dividend program during the earnings call.

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Key Q&A

Q:Can you walk us through your expectations around the timeline of the executive leadership transition and the planned sale of Howard’s BGC shares?

A:Howard will comply with all of the Senate Ethics Committee standards, including divesting his holdings within 90 days of Senate confirmation. There will be public SEC filings required when he divests his holding.

Q:How many percentage points of growth did the Sage acquisition contribute in 4Q?

A:Sage added between 1 and 2 percentage points of our 11.7% growth in the fourth quarter.

Q:What’s driving the pretax adjusted earnings guidance margin expansion?

A:When revenue is growing, our cost base does not grow in line with revenue, leading to great gearing. Small acquisitions generate economies of scale, contributing to margin expansion.

Q:Is the timeline for FMX launch still on track?

A:We remain absolutely on track. Year one is about connectivity, and we expect to have 10 FCMs by the end of Q1 2025.

Q:Can you provide clarity on the expected annual revenues and margins from the OTC acquisition?

A:Around $400 million for OTC sounds good, and I’d expect the margin to be lower than our current margin, around the 15% level initially.

Q:Can you clarify your usage and treatment of stock-based comp?

A:We believe paying in stock-based comp is important for retention and growth. The overall level of stock-based comp has come down a little bit, and we will continue to monitor it.

Q:Review of Unclear Management Responses

A:Management did not provide a direct answer regarding any future plans to align GAAP EPS with adjusted figures, leaving the response somewhat vague.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

BGC Transcript

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The earnings call reveals strong financial performance with record volumes and significant revenue growth across regions, bolstered by the acquisition of OTC. Despite increased expenses, the company anticipates cost reductions and synergies. The Q&A highlights optimism about FMX growth and FX business expansion. Although some management responses were vague, the overall sentiment is positive, supported by optimistic guidance and strategic growth initiatives. Given the company's market cap of $4 billion, the stock price is likely to see a moderate positive reaction over the next two weeks.

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BGC Report

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