Bgc Group, Inc. · NASDAQ:BGC

Bgc — BGC Partners — Q4 2013 Earnings Presentation

46 slides from Bgc's earnings presentation, February 2014

  1. Slide 1: BGC Partners, Inc. 4Q 2013 Earnings Presentation

    BGC PARTNERS, INC. 4Q 2013 EARNINGS PRESENTATION

  2. Slide 2: Disclaimer

    DISCLAIMER Discussion of Forward-Looking Statements by BGC Partners Statements in this document regarding BGC Partners’ business that are not historical facts are "forward-looking statements" that involve risks and uncertainties. Except as required by law, BGC undertakes no obligation to release any

  3. Slide 3: General Overview

    Tb gC voice + electronic brokerage

  4. Slide 4: Select 4Q 2013 Results Compared to 4Q 2012

    SELECT 4Q 2013 RESULTS COMPARED TO 4Q 2012 Highlights of Consolidated Results Change 4Q 2013 4Q 2012 ($ millions, except per share data) (%) Revenues for distributable earnings $432.9 $436.3 (0.8) Pre-tax distributable earnings before non-controlling interest 46.0 35.1 31.0 in subsidiaries and taxes

  5. Slide 5: 4Q 2013 Global Revenue Breakdown

    4Q 2013 GLOBAL REVENUE BREAKDOWN  Americas Revenue up 4% Y-o-Y (excluding eSpeed Americas Revenue up 14%)  Europe, Middle East & Africa Revenue down 7% Y-o-Y  Asia Pacific Revenue down 13% Y-o-Y 4Q2013 Revenues Hong London Kong APAC 8.3% EMEA Americas 27.5% 64.2% New York Paris Date Singapore  R

  6. Slide 6: BGC's Front Office Overview

    BGC’S FRONT OFFICE OVERVIEW Front Office Headcount Front Office Productivity (in thousands) $1,200 Y-o-Y change: (6.5%) $1,000 2,551 2,535 2,485 2,432 2,385 2,500 (Front Office Employees) $800 830 894 $646 2,000 898 887 $619 ($ thousands) 884 1,500 $600 1,000 1,721 1,641 1,587 1,545 1,501 $400 500 $

  7. Slide 7: 4Q 2013 Product Diversity

    4Q 2013 PRODUCT DIVERSITY Date Note: percentages may not sum to 100% due to rounding. 7

  8. Slide 8: 4Q 2013 Segment Data (Distributable Earnings Basis)

    4Q 2013 SEGMENT DATA (DISTRIBUTABLE EARNINGS BASIS) 4Q 2013 Revenues 4Q2013 Revenues Pre‐tax Earnings Pre‐tax Margin In USD millions Financial $246.3 $32.5 13.2% Corporate 2% Real Estate $176.7 $27.2 15.4% Real Corporate $9.9 ($13.7) NMF Estate Financial Services Services 41% 57% Pre‐tax Pre‐tax 4Q2

  9. Slide 9: Volatility Levels Continue Trending Below Historical Averages

    VOLATILITY LEVELS CONTINUE TRENDING BELOW HISTORICAL AVERAGES Date Interest rate and foreign exchange volatilities based on the annualized standard deviation of daily price returns. Source: FactSet, Bloomberg, Credit Suisse data as of 1/13/2014. 9

  10. Slide 10: Elevated Debt Levels and Fed Tapering Expected to Aid Rates Business

    ELEVATED DEBT LEVELS AND FED TAPERING EXPECTED TO AID RATES BUSINESS • Most OECD countries expected to maintain elevated debt levels well into the future to finance net liabilities. • Elevated sovereign debt, in conjunction with reduced Quantitative Easing measures should provide tailwinds to our Ra

  11. Slide 11: Current Monetary Policy Likely to Remain Accommodative

    CURRENT MONETARY POLICY LIKELY TO REMAIN ACCOMMODATIVE Global Monetary Policy Global Monetary Policy Effect On BGC Operations • Fed tapering at a rate of $10 billion per FOMC • Current easy monetary policy expected to support meeting – 8 meetings scheduled in 2014 continued recovery of U.S. Economy,

  12. Slide 12: Financial Services Segment Overview

    FINANCIAL SERVICES SEGMENT OVERVIEW

  13. Slide 13: Business Overview: Rates

    BUSINESS OVERVIEW: RATES Example of Products % of 4Q 2013 Total Distributable Earnings Revenue  Interest Rate Derivatives  US Treasuries (off-the-run)  Global Government Bonds  Agencies Rates 23%  Interest Rate Futures  Dollar Derivatives  Repurchase Agreements  Non-Deliverable Swaps  Inter

  14. Slide 14: Fully Electronic Rates Continues Trend of Solid Growth

    FULLY ELECTRONIC RATES (EX. ESPEED) CONTINUES TREND OF SOLID GROWTH  BGC continues to exhibit solid growth in its higher margin retained fully electronic Rates business  Industry-wide Rates volumes were mixed-to-up on a year-over-year basis 50% Comparable Rates Volume Growth Y-o-Y 43% 40% 31% 30%

  15. Slide 15: Business Overview: Credit

    BUSINESS OVERVIEW: CREDIT Example of Products % of 4Q 2013 Total Distributable Earnings Revenue  Credit Derivatives  Asset-Backed Securities  Convertibles Credit 12%  Corporate Bonds  High-Yield Bonds  Emerging Market Bonds Drivers Credit Revenue Growth  Industry derivative volumes generally

  16. Slide 16: Credit Volumes Broadly Tempered; Fully Electronic Credit Solid Growth

    CREDIT VOLUMES BROADLY TEMPERED: BGC’S HIGH MARGIN FULLY ELECTRONIC CREDIT VOLUMES EXHIBITED SOLID GROWTH 15% 13% 10% 5% Outstanding Dealer BGC Total Credit CDS Creditex Revenue Revenue 0% BGC Fully Electronic ‐5% Credit Revenue ‐10% ‐15% ‐ 15% ‐14% ‐20% ‐19% ‐25% Date Source: ICE, SIFMA 16

  17. Slide 17: Business Overview: Foreign Exchange

    BUSINESS OVERVIEW: FOREIGN EXCHANGE Example of Products % of 4Q 2013 Total Distributable Earnings Revenue In virtually all currency pairs:  Options FX 10%  Exotics  Spot  Forwards  Non-deliverable forwards Drivers Foreign Exchange Revenue Growth 2.0%  FX volumes tracked lower globally for $212

  18. Slide 18: BGC's Fully Electronic FX Volumes Outperform Industry

    BGC’S FULLY ELECTRONIC FX VOLUMES OUTPERFORM INDUSTRY 4Q 2013 Y-o-Y Change 60% 50% 50% 40% 30% 20% EBS FX CME FX Singapore FX 10% Futures Volume BGC Total FX Average Daily FX Volumes 2% Revenue Volumes Reuters Spot Volumes Survey 0% FED FX BGC Fully Volume Electronic ‐10% ‐5% Survey ‐5% Spot FX Date

  19. Slide 19: Business Overview: Equities & Other Asset Classes

    BUSINESS OVERVIEW: EQUITIES & OTHER ASSET CLASSES Example of Products % of 4Q 2013 Total Distributable Earnings Revenue  Equity Derivatives  Cash Equities 8%  Index Futures Equities & Other  Commodities  Energy Derivatives  Other Derivatives and Futures Drivers Equities & Other Asset Classes R

  20. Slide 20: BGC Energy & Commodities Revenues Outpaced General Industry Trends

    BGC ENERGY & COMMODITIES REVENUES OUTPACED GENERAL INDUSTRY TRENDS 4Q 2013 Y-o-Y Change 20% All Volumes in ADV 17% 10% Euronext Equity Derivative Total US Equity BGC Equity & 5% 6% Volume Volumes Other Revenues 0% CME Energy ICE Energy BGC Energy & ‐2% Volumes Volumes Commodities Revenue ‐10% ‐9% ‐2

  21. Slide 21: BGC's Fully Electronic Brokerage Metrics

    BGC’S FULLY ELECTRONIC BROKERAGE METRICS Fully Electronic Brokerage Notional Volumes (in billions)1 Retained Technology Revenues (in millions)2 $45 $3,000 $2,755.0 $2,622.5 $2,416.3 $40 $2,500 $2,167.0 $35 $2,000 $1,701.0 ($ millions) $30 ($ billions) $1,500 $25 $22.7 $21.9 $1,000 $17.9 $17.8 $18.2

  22. Slide 22: Tech-Based Products Have Much Higher Margins

    TECH-BASED PRODUCTS HAVE MUCH HIGHER MARGINS Date Revenue and Pre-Tax DE amounts denoted in USD millions Note: For all periods, “Technology-Based” revenues include fully electronic trading in the “total brokerage revenues” GAAP income statement line item, the portion of “fees from related parties” l

  23. Slide 23: Real Estate Overview

    REAL ESTATE OVERVIEW

  24. Slide 24: Business Overview: Real Estate Services

    BUSINESS OVERVIEW: REAL ESTATE SERVICES Example of Products % of 4Q 2013 Total Distributable Earnings Revenue  Leasing Advisory  Global Corporate Services  Retail Services  Property & Facilities Management  Consulting  Program and Project Management  Industrial Services  Valuation  Capital

  25. Slide 25: NGKF Revenue Analysis

    NGKF REVENUE ANALYSIS  On April 13, 2012, BGC purchased certain assets of Grubb & Ellis. Because of this, NGKF collected $4.5 million and $21.7 million during years ended 2013 and 2012, respectively, not related to the Company’s ongoing Real Estate Services business. These revenues were primarily a

  26. Slide 26: Commercial Real Estate Recovery Expected to Continue

    COMMERCIAL REAL ESTATE RECOVERY EXPECTED TO CONTINUE Date 26

  27. Slide 27: U.S. Commercial Office Recovery Continues

    U.S. COMMERCIAL OFFICE RECOVERY CONTINUES % Vacant Rent* 18% $28 17% $27 16% $26 15% $25 % Vacant 14% $24 $ Rent* 13% $23 12% $22 11% $21 10% Date $20 * Weighted average '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14-F asking rent % Vacant 15.6% 13.8% 12.7% 12.8% 14.2% 16.3% 16.8% 16.4% 15.7% 14.9% 14.

  28. Slide 28: Avg. Cap Rate Spread Over 10-Year U.S. Treasuries Still High

    AVG. CAP RATE SPREAD OVER 10 YEAR U.S. TREASURIES STILL HIGH 12% 600  Commercial Real Estate has historically performed strongly in 10% 500 past periods of modestly rising Cap Rate & 10-year Yield interest rates Spread (basis points) 8% 400  Rising rates will have least impact 6% 300 on institutio

  29. Slide 29: NGKF's Superior Service Awarded

    NGKF’S SUPERIOR SERVICE AWARDED # 5& 6 Brokerage (2013) # Property Managers # 4&7 Most Powerful # Top Property Brokerage Firms Managers (2013) Top 25 “Best of the Best” 2013 # 10 Awards in the 1 # 4 Top Manhattan Retail New York’s Largest Last 11 Years Brokerages for 2013 Commercial Property Manager

  30. Slide 30: 2013 Significant NGKF Transactions

    2013 SIGNIFICANT NGKF TRANSACTIONS Date 30

  31. Slide 31: Outlook

    Tb gC voice + electronic brokerage OUTLOOK

  32. Slide 32: First Quarter 2014 Outlook Compared with First Quarter 2013 Results

    FIRST QUARTER 2014 OUTLOOK COMPARED WITH FIRST QUARTER 2013 RESULTS  The Company expects to generate distributable earnings revenues of between approximately $410 million and $440 million compared with $449.8 million.  BGC Partners expects pre-tax distributable earnings to be between approximately

  33. Slide 33: BGC Partners, Inc. 2014 Operational Outlook

    BGC PARTNERS, INC. 2014 OPERATIONAL OUTLOOK  We expect to continue to profitably hire and make accretive acquisitions across both of our segments while investing in our technology-based businesses.  This, combined with our focus on cost reduction, gives us confidence in our ability to grow BGC’s r

  34. Slide 34: Announced 2014 Acquisitions

    ANNOUNCED 2014 ACQUISITIONS Cornish & Carey Commercial HEAT ENERGY GROUP • BGC’s Newmark Knight Frank • BGC Partners Announces It to Acquire Cornish & Carey Has Entered Into an Commercial, Northern Agreement to Acquire the California’s Premiere Assets of HEAT Energy Group Commercial Real Estate Firm

  35. Slide 35: Appendix

    Tb gC voice + electronic brokerage APPENDIX

  36. Slide 36: Reconciliation of Revenues Under GAAP and Distributable Earnings

    BGC Partners, Inc. RECONCILIATION OF REVENUES UNDER GAAP AND DISTRIBUTABLE EARNINGS (in thousands) (unaudited) Q4 2013 Q4 2012 YTD 2013 YTD 2012 GAAP Revenue $ 426,605 $ 482,177 $ 2,498,086 $ 1,766,993 Adjustments: Gain on divestiture - - (723,147) - NASDAQ OMX Earn-out Revenue (1) 2,895 - (21,001)

  37. Slide 37: Reconciliation of GAAP Income to Distributable Earnings

    BGC Partners, Inc. RECONCILIATION OF GAAP INCOME TO DISTRIBUTABLE EARNINGS (in thousands, except per share data) (unaudited) Q4 2013 Q4 2012 YTD 2013 YTD 2012 GAAP income before income taxes $ 1,310 $ 28,763 $ 265,921 $ 55,737 Pre-tax adjustments: Dividend equivalents to RSUs 17 30 22 310 Non-cash l

  38. Slide 38: Adjusted EBITDA

    ADJUSTED EBITDA BGC Partners, Inc Reconciliation of GAAP Income to Adjusted EBITDA (and Comparison to Pre-Tax Distributable Earnings, in $000s) (in thousands) (unaudited) Q4 2013 Q4 2012 FY 2013 FY 2012 GAAP Income from operations before income taxes $ 1,310 28,763 $ 265,921 $ 55,737 Add back: Emplo

  39. Slide 39: BGC Partners Compensation Ratio

    BGC PARTNERS COMPENSATION RATIO $1,200 100% 90% $1,000 80% 70% $800 60.9% 59.2% 61.7% 56.2% 53.8% ($ millions) 60% $600 $713.3 $1,036.8 50% $749.8 $793.5 $1,091.2 40% $400 30% 20% $200 10% $0 0% 2009 2010 2011 2012 2013 Compensation and Employee Benefits Compensation and Employee Benefits as % of To

  40. Slide 40: BGC Partners, Inc. 2H13 Share Count Movement

    BGC PARTNERS, INC. 2H13 SHARE COUNT MOVEMENT BGC Partners, Inc. Share count growth from June 30, 2013 to December 31, 2013 (in millions) As of As of June 30, December 2013[1] 31, 2013 Difference Class A common stock 154 203 48 Treasury stock (18) (21) (3) [2] Total Outstanding Class A 136 182 45 LPU

  41. Slide 41: Non-Compensation Expenses & Pre-Tax Margin

    NON-COMPENSATION EXPENSES & PRE-TAX MARGIN 50% 40% 29.2% 30.0% 30.2% 29.6% 28.0% 30% 20% 16.1% 13.8% 11.2% 10.3% 9.8% 10% 0% FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 Pre-tax distributable earnings as % of Total Revenue Non-comp Expenses as a % of Total Revenue Date  Non-comp expenses were 27.3% of d

  42. Slide 42: BGC Monthly Distributable Earnings

    MONTHLY REVENUE EXCLUDING REAL ESTATE SERVICES ($MM) BGC Monthly Distributable Earnings Revenues ($MM) • Revenues for January 2014 and the first 7 trading days of February 2014 were down about 8.5% and 6.4% Y-o-Y, respectively, excluding our Real Estate Segment and eSpeed. Date Notes: January and Fe

  43. Slide 43: BGC's Economic Ownership as of 12/31/2013

    BGC’S ECONOMIC OWNERSHIP AS OF 12/31/2013 Employees, Executives, & Directors 34% Public 43% Cantor 23% Date 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 share

  44. Slide 44: Average Exchange Rates

    AVERAGE EXCHANGE RATES Average 4Q2013 4Q2012 January 1- February 10, 2014 January 1- February 10, 2013 US Dollar 1 1 1 1 British Pound 1.619 1.606 1.645 1.593 Euro 1.361 1.297 1.361 1.334 Hong Kong Dollar 0.129 0.129 0.129 0.129 Singapore Dollar 0.800 0.818 0.786 0.813 Japanese Yen* 100.400 81.140 1

  45. Slide 45: Distributable Earnings

    DISTRIBUTABLE EARNINGS BGC Partners uses non-GAAP financial measures including "revenues for distributable earnings," "pre-tax distributable earnings" and "post-tax distributable earnings," which are supplemental measures of operating performance that are used by management to evaluate the financial

  46. Slide 46: Adjusted EBITDA

    ADJUSTED EBITDA BGC also . provides an additional non-GAAP financial measure, “adjusted EBITDA,” which it defines as GAAP income from operations before income taxes, adjusted to add back interest expense as well as the following non-cash items:  Employee loan amortization;  Fixed asset depreciatio

BGC Partners — Q4 2013 Earnings Presentation on 6ix