Bgc Group, Inc. · NASDAQ:BGC
Bgc — BGC Partners — Q1 2013 Earnings Presentation
37 slides from Bgc's earnings presentation, May 2, 2013
Slide 1: 1Q2013 Earnings Presentation
1Q2013 EARNINGS PRESENTATION May 2, 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 1Q2013 Results Compared to 1Q2012
SELECT 1Q2013 RESULTS COMPARED TO 1Q2012 4
Slide 5: 1Q2013 Global Revenue Breakdown
1Q2013 GLOBAL REVENUE BREAKDOWN 1Q2013 Revenues Hong London Kong APAC 10.9% Americas EMEA 48.7% 40.4% New York Paris Singapore 5
Slide 6: 1Q2013 Product Diversity
1Q2013 PRODUCT DIVERSITY Other revenues, Market data & interest income & software solutions related parties 1.5% 3.5% Real estate management services 8.7% Rates 32.2% Real estate brokerage 16.6% Equities and other asset classes 8.9% Credit 15.4% Foreign exchange 13.2% 6
Slide 7: 1Q2013 Segment Data
1Q2013 SEGMENT DATA 1Q2013 Revenues 1Q2013 Revenues Pre-tax Earnings Pre-tax Margin In USD millions Corporate 2.6% Financial $323.8 $64.1 19.8% Real Estate Real Estate $114.2 $2.3 2.0% Services 25.4% Corporate $11.7 ($21.2) NMF Financial Services 72.0% 7
Slide 8: 1Q Volatility Remained Low
1Q VOLATILITY REMAINED LOW May „10 August ‟11 2H08 Flash Crash US Debt Downgrade AIG/Lehman/etc. Sept „12 QE 3 Announced 5 Year Average = .51 8
Slide 9: Quantitative Easing = Current Headwind and Future Tailwind
QUANTITATIVE EASING = CURRENT HEADWIND AND FUTURE TAILWIND Central Banks Balance Sheet Growth, 2008 - Present (2008 = 100) 9
Slide 10: Business Overview: Rates
BUSINESS OVERVIEW: RATES Example of Products % of 1Q2013 Total Distributable Earnings Revenue Interest Rate Derivatives US Treasuries Global Government Bonds Agencies Rates Interest Rate Futures 32.2% Dollar Derivatives Repurchase Agreements Non-Deliverable Swaps Interest rate Swap
Slide 11: BGC Rates Revenues Reflect Industry Headwinds
BGC RATES REVENUES REFLECT INDUSTRY HEADWINDS 30.0% 24% 25.0% Eurex Rates Volume 20.0% 15.0% 10.0% 5% BGC Fully Electronic Rates Revenue 5.0% 1% CME Rates Volume 0.0% BGC Overall Rates -5.0% Fed UST Revenue Primary Dealer Volume (1%) (4%) -10.0% 11
Slide 12: Business Overview: Credit
BUSINESS OVERVIEW: CREDIT Example of Products % of 1Q2013 Total Distributable Earnings Revenue Credit Derivatives Credit Asset-Backed Securities 15.4% Convertibles Corporate Bonds High yield Bonds Emerging Market Bonds Drivers Credit Revenue Growth Industry volumes generally lower La
Slide 13: BGC's Credit Desks Impacted by Weaker Market Trends
BGC‟S CREDIT DESKS IMPACTED BY WEAKER MARKET TRENDS 1Q2013 YoY Growth 1% TRACE All Bond Dollar Volumes Fed Corporate Bond Volume (2%) BGC Total Credit (18%) Revenue GFI Fixed Income Revenue (24%) Creditex Revenue (25%) -30% -25% -20% -15% -10% -5% 0% 5% 13
Slide 14: Business Overview: Foreign Exchange
BUSINESS OVERVIEW: FOREIGN EXCHANGE Example of Products % of 1Q2013 Total Distributable Earnings Revenue In virtually all currency pairs FX 13.2% Options Exotics Spot Forwards Non-deliverable forwards Drivers Foreign Exchange Revenue Growth BGC‟s fully electronic FX revenues have $208.0
Slide 15: BGC's Fully Electronic FX Revenues Outperforms Market
BGC‟S FULLY ELECTRONIC FX REVENUES OUTPERFORMS MARKET 1Q2013 YoY Growth BGC’s Fully Electronic FX Volume 40% 37% 35% BGC’s Fully Electronic 30% FX Revenue 25% (Growth) 25% CME FX Futures Volumes 20% EBS FX Average Daily Volumes 16% 15% 12% 10% Reuters Spot BGC Total FX Revenue FX Volumes 5% 1% 1% 0%
Slide 16: Business Overview: Equities & Other Asset Classes
BUSINESS OVERVIEW: EQUITIES & OTHER ASSET CLASSES Example of Products % of 1Q2013 Total Distributable Earnings Revenue Equity Derivatives Equities & Other Cash Equities 8.9% Index Futures Commodities Energy Derivatives Other Derivatives and Futures Drivers Equities & Other Asset Classes
Slide 17: Equities and Other: Reflects Lower Industry Volumes
“EQUITIES AND OTHER”: REFLECTS LOWER INDUSTRY VOLUMES 1Q2013 YoY Change 0% Eurex Equity OCC Equity BGC Equity & GFI Equity Deutsche Derivative Option Other Asset Revenues Borse's Xetra Volume Volume Classes Volume Revenues -6% -9% -9% -10% -12% -18% -20% 17
Slide 18: Business Overview: Real Estate Services
BUSINESS OVERVIEW: REAL ESTATE SERVICES Example of Products % of 1Q2013 Total Distributable Earnings Revenue Leasing Advisory Mangament Real Estate Global Corporate Services Services Brokerage Retail Services 8.7% 16.6% Property & Facilities Management Consulting Program and Project Mana
Slide 19: Real Estate Market Improving Nationally
REAL ESTATE MARKET IMPROVING NATIONALLY US Office & Industrial Market Asking Rent & Vacancy Asking Rent and& Vacancy Asking AskingRent Rentand& Vacancy Vacancy (Industrial) Asking Rent Vacancy (Office) $27.00 18.0% $5.75 12.5% $26.00 16.0% $5.50 10.0% $25.00 14.0% $5.25 7.5% $24.00 12.0% $5.00 5.0%
Slide 20: Quarterly Sales Market Trends Continue to Improve
QUARTERLY SALES MARKET TRENDS CONTINUE TO IMPROVE Average Cap Rates by Sector U.S. Composite Indices: Equal– and Value-Weighted Data Through Feb 2013 Transaction Volume Value-Weighted up 5.1% YoY Equal-Weighted up 6.0% YoY Real Capital Analytics commercial sales volumes up 35% YoY Cap rates
Slide 21: BGC's Front Office Overview
BGC‟S FRONT OFFICE OVERVIEW Front Office Headcount Front Office Productivity (in thousands) $1,200 $1,000 2,611 2,575 2,551 2,535 (total) 2,500 $776 (Front Office Employees) 2,170 $800 854 840 830 894 2,000 409 $639 1,500 $600 ($ thousands) 1,000 1,761 1,757 1,735 1,721 1,641 $400 500 $180 $154 0 $2
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)* $15 $45 $13.5 $13.4 $13.2 $39.6 $38.3 $40 $36.5 $35.8 $11.6 $33.3 $35 ($ millions) $30 ($ trillions) $9.7 $10 $25 $20 $15 $10 $5 1Q2012 2Q2012 3Q2012 4Q2012 1Q
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 ≈105 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: Technology Based Breakdown 1Q2013
TECHNOLOGY BASED BREAKDOWN 1Q2013 Technology-Based Products** = 14.3% of Total Financial Services Revenues Voice/Hybrid 85.7% Retained Tech*** 7.0% eSpeed 7.3% *BGC is selling only its on-the-run, benchmark 2-, 3-, 5-, 7-, 10-, and 30-year fully electronic trading platform for U.S. Treasury Notes an
Slide 25: Newer Tech Based Products Show Faster Growth
NEWER TECH BASED PRODUCTS SHOW FASTER GROWTH $120.0 2010-2012 $104.3 CAGR $30.0 YoY Change $97.9 YoY Change $100.0 $93.6 -2% $25.3 2010-2012 $23.6 (7%) 11% $25.0 $22.7 CAGR $34.1 $20.4 $1.7 18% $34.2 $80.0 $20.0 $8.8 $1.4 $32.2 -3% $77.7 27% $7.8 (11%) $71.4 $6.2 1% $6.0 $60.0 $15.0 $48.3 $10.0 $21.
Slide 26: Revenue and Profit by Execution Method
REVENUE AND PROFIT BY EXECUTION METHOD Q1 2013 Q1 2012 Technology Voice / Corporate / Technology Voice / Corporate / - Based Hybrid Other Total - Based Hybrid Other Total Revenue $46 $392 $12 $450 $46 $347 $11 $404 Pre-Tax DE $25 $41 ($21) $45 $24 $53 ($19) $58 Pre-tax DE Margin 54% 10% NMF 10% 53%
Slide 27: Large Banks and IDBs Expected to Grow Electronic Trading Industry-Wide
LARGE BANKS AND IDBS EXPECTED TO GROW ELECTRONIC TRADING INDUSTRY-WIDE 85 80 75 70 65-75 55-65 60 60 50 40-50 40 30 2012 2015 estimate CDS Index FX Spot European Govt Precious U.S. Treasuries Cash Equities Bonds Metals Estimates per McKinsey, Oliver Wyman, Greyspark, JP Morgan 27
Slide 28: BGC Partners Compensation Ratio
BGC PARTNERS COMPENSATION RATIO $1,100 100% $1,000 90% $900 80% $800 70% 60.9% 59.2% 61.7% $700 56.2% 53.8% ($ millions) 60% $600 $713.3 $1,036.8 $749.8 $793.5 50% $500 40% $400 30% $300 $200 20% $277.6 $100 10% $0 0% 2009 2010 2011 2012 1Q2013 Compensation and Employee Benefits Compensation and Emp
Slide 29: Non-Compensation Expenses & Pre-Tax Margin
NON-COMPENSATION EXPENSES & PRE-TAX MARGIN 50% 40% 29.2% 30.0% 30.2% 29.6% 28.3% 30% 20% 16.1% 13.8% 11.2% 10.0% 10% 9.8% 0% FY 2009 FY 2010 FY 2011 FY 2012 1Q2013 Pre-tax distributable earnings as % of Total Revenue Non-comp Expenses as a % of Total Revenue 29
Slide 30: Adjusted EBITDA
ADJUSTED EBITDA BGC Partners, Inc Reconciliation of GAAP Income to Adjusted EBITDA (and Comparison to Pre-Tax Distributable Earnings, in $000s) Q1 2013 Q1 2012 FY 2012 FY 2011 Income from operations before income taxes $ 13,697 $ 18,912 $ 55,737 $ 54,359 Add back: Employee loan amortization 9,459 6,
Slide 31: 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 97 2011 Revenue 100 93 2010 included $11.6M in “other revenues” as the $84 re
Slide 32: BGC's Economic Ownership as of 3/31/13
BGC‟S ECONOMIC OWNERSHIP AS OF 3/31/13 Employees, Executives, & Directors 39% Public 38% Cantor 23% 32
Slide 33: NGKF Revenue Analysis
NGKF REVENUE ANALYSIS Newmark Grubb Knight Frank ($ in millions) 2Q2012 3Q2012 4Q2012 1Q2013 SUM Actual Revenues $144.1 $141.1 $148.7 $114.2 $548.0 Actual YoY Revenue Change NA NA $91.6 $66.3 NA Actual YoY % Change NA NA 160% 139% NA Adjusted Revenues $132.1 $135.9 $144.2 $112.4 $524.5 Adjusted YoY
Slide 34: Average Exchange Rates
AVERAGE EXCHANGE RATES Average 1Q2013 1Q2012 April 2013 April 2012 US Dollar 1 1 1 1 British Pound 1.554 1.571 1.530 1.600 Euro 1.321 1.311 1.301 1.317 Hong Kong Dollar 0.129 0.129 0.129 0.129 Singapore Dollar 0.808 0.791 0.808 0.799 Japanese Yen* 92.210 79.270 97.780 81.430 * Inverted 34
Slide 35: Recent Financial Industry Recognition
RECENT FINANCIAL INDUSTRY RECOGNITION 35
Slide 36: Recent NGKF Industry Recognition
RECENT NGKF INDUSTRY RECOGNITION 36
Slide 37: Disclaimer
DISCLAIMER BGC Partners uses non-GAAP financial measures including "Revenues for distributable earnings," "pre-tax distributable earnings" and "post-tax distributable earings," which are supplemental measures of operating performance that are used by management to evaluate the financial performance