Bgc Group, Inc. · NASDAQ:BGC
Bgc — BGC Partners — Q2 2013 Earnings Presentation
33 slides from Bgc's earnings presentation, Aug 1, 2013
Slide 1: BGC Partners, Inc. 2Q2013 Earnings Presentation
BGC PARTNERS, INC. 2Q2013 EARNINGS PRESENTATION August |, 2013
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
Slide 3: eSpeed Transaction Details
ESPEED TRANSACTION DETAILS 3
Slide 4: Select 2Q2013 Results Compared to 2Q2012
SELECT 2Q2013 RESULTS COMPARED TO 2Q2012 4
Slide 5: 2Q2013 Global Revenue Breakdown
2Q2013 GLOBAL REVENUE BREAKDOWN 2Q2013 Revenues Hong London Kong APAC 10.5% EMEA Americas 37.4% 52.1% New York Paris Singapore 5
Slide 6: 2Q2013 Product Diversity
2Q2013 PRODUCT DIVERSITY Other revenues, Market data & interest income & software solutions related parties 1.3% 3.0% Real estate management services 8.5% Rates 29.4% Real estate brokerage 22.1% Equities and Credit other asset 14.3% classes 8.6% Foreign exchange 12.9% 6
Slide 7: 2Q2013 Segment Data
2Q2013 SEGMENT DATA 2Q2013 Revenues 2Q2013 Revenues Pre-tax Earnings Pre-tax Margin In USD millions Corporate Financial $316.3 $56.4 17.8% 2.3% Real Estate $143.9 $11.1 7.7% Real Estate Services Corporate $10.9 ($13.7) NMF 30.5% Pre-tax Pre-tax 2Q2012 Revenues Earnings Margin Financial Services Fina
Slide 8: 2Q Volatility Slightly Increased from Recent Lows
2Q VOLATILITY SLIGHTLY INCREASED FROM RECENT LOWS 8
Slide 9: Business Overview: Rates
BUSINESS OVERVIEW: RATES Example of Products % of 2Q2013 Total Distributable Earnings Revenue Interest Rate Derivatives US Treasuries Global Government Bonds Agencies Interest Rate Futures Rates 29.4% Dollar Derivatives Repurchase Agreements Non-Deliverable Swaps Interest rate Swap
Slide 10: BGC Electronic Rates Revenues Generally Outperform
BGC ELECTRONIC RATES REVENUES GENERALLY OUTPERFORM 35.0% CME Rates Volume 33% 30.0% BGC Fully Electronic Rates Revenue 25.0% excluding eSpeed 24% 20.0% 15.0% 10.0% Eurex Rates Volume BGC Fully Electronic Rates Revenue BGC Overall Rates 8% 5.0% Revenue 7% 3% 0.0% (3%) Fed UST -5.0% Primary Dealer Vol
Slide 11: Business Overview: Credit
BUSINESS OVERVIEW: CREDIT Example of Products % of 2Q2013 Total Distributable Earnings Revenue Credit Derivatives Credit Asset-Backed Securities 14.3% Convertibles Corporate Bonds High yield Bonds Emerging Market Bonds Drivers Credit Revenue Growth Industry derivatives volumes generall
Slide 12: BGC's Credit Desks Reflect Mixed Industry Trends
BGC’S CREDIT DESKS REFLECT MIXED INDUSTRY TRENDS 2Q2013 YoY Growth 20% TRACE All Bond Dollar Volumes 8% BGC Fully Electronic Credit Revenue BGC Total Credit (4%) Revenue Dealer to Dealer Notional Outstanding (12%) Creditex Revenue (14%) -20% -15% -10% -5% 0% 5% 10% 15% 20% 25% 12
Slide 13: Business Overview: Foreign Exchange
BUSINESS OVERVIEW: FOREIGN EXCHANGE Example of Products % of 2Q2013 Total Distributable Earnings Revenue In virtually all currency pairs FX 12.9% Options Exotics Spot Forwards Non-deliverable forwards Drivers Foreign Exchange Revenue Growth FX volume returned to normal levels $208.0 $218
Slide 14: BGC's Fully Electronic FX Revenues Outperformed Market
BGC’S FULLY ELECTRONIC FX REVENUES OUTPERFORMED MARKET 2Q2013 YoY Growth April 2013 YoY OTC Central Bank FX Average 50% Daily Volume Growth BGC’s Fully Electronic FX Volume 40% 38% 40% 40% 35% (ADV Growth) BGC’s Spot FX Revenue 30% 30% 27% (Growth) 25% EBS FX BGC Total FX 20% 20% Average Daily CME F
Slide 15: Business Overview: Equities & Other Asset Classes
BUSINESS OVERVIEW: EQUITIES & OTHER ASSET CLASSES Example of Products % of 2Q2013 Total Distributable Earnings Revenue Equity Derivatives Equities & Other Cash Equities 8.6% Index Futures Commodities Energy Derivatives Other Derivatives and Futures Drivers Equities & Other Asset Classes
Slide 16: Equities and Other: Reflects Lower European Volumes
“EQUITIES AND OTHER”: REFLECTS LOWER EUROPEAN VOLUMES 2Q2013 YoY Change 20% 12% 10% 0% Euronext Eurex Equity Deutsche BGC Equity & OCC Equity Equity Derivative Borse's Xetra Other Asset Option -10% Derivative Volume Volume Classes Volume Volume -18% Revenues -3% -20% -18% -30% -40% -42% -50% 16
Slide 17: Business Overview: Real Estate Services
BUSINESS OVERVIEW: REAL ESTATE SERVICES Example of Products % of 2Q2013 Total Distributable Earnings Revenue Leasing Advisory Management Real Estate Global Corporate Services Services Brokerage Retail Services 8.5% 22.1% Property & Facilities Management Consulting Program and Project Man
Slide 18: NGKF Revenue Analysis
NGKF REVENUE ANALYSIS ($ in millions) 2Q2012 3Q2012 4Q2012 1Q2013 2Q2013 Actual Revenues $144.1 $141.1 $148.7 $114.2 $143.8 Actual YoY Revenue Change NA NA $91.6 $66.3 ($0.2) Actual YoY % Change NA NA 160% 139% 0% Adjusted Revenues $132.1 $135.9 $144.2 $112.4 $142.5 Adjusted YoY Revenue Change NA NA
Slide 19: Real Estate Market Improving Nationally
REAL ESTATE MARKET IMPROVING NATIONALLY US Office & Industrial Market Asking Rent & Vacancy Asking Rent & Vacancy (Industrial) Asking Rent & Vacancy (Office) 19
Slide 20: Quarterly Sales Market Trends Continue to Improve
QUARTERLY SALES MARKET TRENDS CONTINUE TO IMPROVE Average Cap Rates by Sector 9.5% 9.0% Suburban Office Industrial 8.5% U.S. Composite Indices: Equal- and Value-Weighted Data Through May 2013 8.0% 7.5% U.S. Composite - Value Weighted U.S. Composite - Equal Weighted 225 7.0% Retail 200 6.5% 175 Index
Slide 21: BGC's Front Office Overview
BGC’S FRONT OFFICE OVERVIEW Front Office Headcount Front Office Productivity (in thousands) $1,200 Y-on-Y change: (4.8%) $1,000 2,611 2,575 2,551 2,535 2,485 total 2,500 $776 (Front Office Employees) 854 840 830 894 $800 2,000 898 $639 1,500 $600 1,000 ($ thousands) 1,757 1,735 1,721 1,641 1,587 500
Slide 22: BGC's Fully Electronic Brokerage Metrics
BGC’S FULLY ELECTRONIC BROKERAGE METRICS Fully Electronic Brokerage Notional Volumes (in trillions) Fully Electronic Revenues (in millions)* $14.4 $45 $15 $39.6 $38.6 $13.4 $13.2 $40 $36.6 $35.8 $33.3 $35 $11.6 ($ millions) $30 ($ trillions) $9.7 $10 $25 $20 $15 $10 2Q2012 3Q2012 4Q2012 1Q2013 2Q201
Slide 23: BGC's Technology-Based Businesses Have Higher Margins
BGC’S TECHNOLOGY-BASED BUSINESSES HAVE HIGHER MARGINS Percentage of fully electronic from each of ≈110 e-brokered desks range from <10% to 100% Profit margins = highest for US Treasuries, spot FX, Market Data and Software Solutions Profit margins for retained electronic products vary, though a
Slide 24: BGC Will Retain Nearly Half of Technology-Based Revenues
BGC WILL RETAIN NEARLY HALF OF TECHNOLOGY-BASED REVENUES Technology-Based Products** = 14.2% of 2Q2013 Financial Services Segment Revenues Pre-tax margin ≈ 45% Voice/Hybrid 85.9% Retained Tech*** 6.9% eSpeed* 7.3% Pre-tax margin ≈60% *BGC sold its on-the-run, benchmark, 2-, 3-, 5-, 7-, 10-, and 30-y
Slide 25: Retained Tech-Based Products Have Grown Faster
RETAINED TECH-BASED PRODUCTS HAVE GROWN FASTER 120 30 $104.3 $97.9 100 $93.6 25 $23.4 $22.9 $21.9 80 $77.7 20 $19.5 $71.4 60 15 $48.3 10 40 5 20 0 0 2Q2012 2Q2013 2Q2012 2Q2013 FY2010 FY2011 FY2012 FY2010 FY2011 FY2012 Note: These eSpeed figures are only those recorded in the Financial Services segm
Slide 26: Tech-Based Products Have Much Higher Margins
TECH-BASED PRODUCTS HAVE MUCH HIGHER MARGINS Q2 2013 Q2 2012 Technology Voice / Corporate / Technology Voice / Corporate / - Based Hybrid Other Total - Based Hybrid Other Total Revenue $45 $415 $11 $471 $43 $410 $12 $465 Pre-Tax DE $23 $44 ($14) $54 $21 $51 ($17) $56 Pre-tax DE Margin 52% 11% NMF 11
Slide 27: BGC Partners Compensation Ratio
BGC PARTNERS COMPENSATION RATIO $1,100 100% $1,000 90% $900 80% $800 70% 60.9% 59.2% 61.4% $700 56.2% 53.8% ($ millions) 60% $600 $713.3 $1,036.8 $749.8 $793.5 50% $500 40% $400 $565.2 30% $300 $200 20% $100 10% $0 0% 2009 2010 2011 2012 1H 2013 Compensation and Employee Benefits Compensation and Em
Slide 28: Non-Compensation Expenses & Pre-Tax Margin
NON-COMPENSATION EXPENSES & PRE-TAX MARGIN 50% 40% 29.2% 30.0% 30.2% 29.6% 27.9% 30% 20% 16.1% 13.8% 11.2% 10.7% 10% 9.8% 0% FY 2009 FY 2010 FY 2011 FY 2012 1H 2013 Pre-tax distributable earnings as % of Total Revenue Non-comp Expenses as a % of Total Revenue 28
Slide 29: Adjusted EBITDA
ADJUSTED EBITDA BGC Partners, Inc Reconciliation of GAAP Income to Adjusted EBITDA (and Comparison to Pre-Tax Distributable Earnings, in $000s) Q2 2013 Q2 2012 Income from operations before income taxes $ 208,251 $ 4,450 Add back: Employee loan amortization 10,223 7,418 Interest expense 9,989 7,578
Slide 30: BGC Monthly Distributable Earnings
MONTHLY REVENUE EXCLUDING REAL ESTATE SERVICES ($MM) 150 $134 $132 $131 $129 $129 125 $122 122 122 118 119 $114 115 115 $112 113 $112 $112 108 $107 107 105 2010 Revenue Revenue for August BGC Monthly Distributable Earnings 100 97 2011 Revenue 2010 included $11.6M in 93 “other revenues” as the $84 re
Slide 31: BGC's Economic Ownership as of 6/30/13
BGC’S ECONOMIC OWNERSHIP AS OF 6/30/13 Employees, Executives, & Directors 34% Public Cantor 42% 24% 31
Slide 32: Average Exchange Rates
AVERAGE EXCHANGE RATES Average 2Q2013 2Q2012 July 1- 30th, 2013 July 1- 30th, 2012 US Dollar 1 1 1 1 British Pound 1.536 1.583 1.518 1.560 Euro 1.306 1.285 1.308 1.231 Hong Kong Dollar 0.129 0.129 0.129 0.129 Singapore Dollar 0.801 0.791 0.789 0.793 Japanese Yen* 98.770 80.130 99.740 79.060 * Invert
Slide 33: Distributable Earnings
DISTRIBUTABLE EARNINGS BGC Partners uses non-GAAP financial measures including "revenues for distributable earnings, performance that are used by management to evaluate the financial performance of the Company and its subsidiaries, BGC Company on a consolidated basis and are the earnings which manag