Bgc Group, Inc. · NASDAQ:BGC
Bgc — BGC Partners — Q3 2015 Earnings Presentation
41 slides from Bgc's earnings presentation, Oct 27, 2015
Slide 1: BGC Partners, Inc. Earnings Presentation Q3 2015
1 BGC PARTNERS, INC. Earnings Presentation Q3 2015 Date NASDAQ: BGCP
Slide 2: Disclaimer
DISCLAIMER 2 Discussion of Forward-Looking Statements by BGC Partners and GFI Group Statements in this document regarding BGC Partners' and GFI Group’s businesses that are not historical facts are "forward-looking statements" that involve risks and uncertainties. Except as required by law, BGC and G
Slide 3: General Overview
BGC PARTNERS 3 GENERAL OVERVIEW Date
Slide 4: Select Q3 2015 Results Compared to Q3 2014
SELECT Q3 2015 RESULTS COMPARED TO Q3 2014 4 Highlights of Consolidated Results (USD millions, except per share data) Q3 2015 Q3 2014 Change (%) Revenues for distributable earnings $700.9 $449.8 55.8% Pre-tax distributable earnings before non-controlling interest in subsidiaries and taxes 88.1 65.8
Slide 5: Global Revenue Breakdown
GLOBAL REVENUE BREAKDOWN 5 Q3 2015 Revenues APAC 8% Americas 62% EMEA 30% Americas revenue up 51% yr/yr Date Europe, Middle East & Africa revenue up 68% yr/yr Asia Pacific revenue up 55% yr/yr Strengthening of the U.S. dollar reduced non-U.S. Financial Services revenues by more than $24 mill
Slide 6: Q3 2015 Segment Data (Distributable Earnings Basis)
Q3 2015 SEGMENT DATA (DISTRIBUTABLE EARNINGS BASIS) 6 (In USD millions) Q3 2015 REVENUES Q3 2015 Revenues Pre-tax Earnings Pre-tax Margin Corporate Financial $417.7 $72.8 17.4% 1% Real Estate $275.2 $42.5 15.5% Corporate $8.0 ($27.3) NMF Financial Real Estate Services 60% (In USD millions) 39% Q3 20
Slide 7: BGC's Businesses at a Glance
BGC'S BUSINESS SHOWS STRONG REVENUE DIVERSITY 7 Corporate 1% Real Estate Management & Other 7% BGC’s Businesses at a Glance Rates BGC maintains a highly diverse 16% revenue base Real Estate Capital Markets 12% Corporate Wholesale Financial 1% Brokerage revenues and Real Estate earnings typically
Slide 8: BGC's Front Office Productivity Growth
BGC’S FRONT OFFICE PRODUCTIVITY GROWTH 8 FRONT OFFICE HEADCOUNT FRONT OFFICE PRODUCTIVITY (USD Thousands) 3,872 3,851 3,845 2,863 1,293 1,308 2,755 1,347 1,135 1,244 619 636 2,579 2,543 2,498 1,620 1,619 153 159 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q3 2014 Q3 2015 FY 2013 FY 2014 Financial Broker
Slide 9: Financial Services Overview
9 Overview FINANCIAL SERVICES Date
Slide 10: Q3 2015 Financial Services Summary
Q3 2015 FINANCIAL SERVICES SUMMARY 10 BGC Financial Services Segment Highlights Quarterly Drivers Revenues up 60% Acquisitions of GFI and R.P. Martin Pre-tax profit up over 32% FENICS1 (fully electronic) revenues and pre- Increased activity across energy and tax profits up 142% and 82%, re
Slide 11: Industry Volumes Mixed; Volatility Up
INDUSTRY VOLUMES MIXED; VOLATILITY UP 11 Yr/Yr Change in Capital Markets Activity Yr/Yr Change in Average Daily Volatility (ADV, except Eurex and credit derivatives outstanding) -23% Dealer-Dealer CDS Outstanding -9% Interest Rate Futures (ICE) U.S. Rates (MOVE) 39% -7% U.S. Corp. Bonds (Primary Dea
Slide 12: Financial Services Revenue Breakout
FINANCIAL SERVICES REVENUE BREAKOUT 12 FINANCIAL SERVICES REVENUE COMPOSITION % Change $417,698 +60% Trayport 18,911 NMF 28,450 +96% 50,430 +70% 54,827 +297% Market data, software $261,283 and other1 14,538 Equity & other 29,634 68,055 Energy & commodities +27% 13,795 Credit 53,545 83,706 +49% Forei
Slide 13: BGC's FENICS (Fully Electronic) Growth (Excluding Trayport)
BGC’S FENICS (FULLY ELECTRONIC) GROWTH (EXCLUDING TRAYPORT) 13 FENICS (Fully Electronic) Brokerage Volumes FENICS (Fully Electronic) Revenues1 (USD Billions) (USD Millions) $60.7 $4,659.0 $25.1 $3,919.4 Q3 2014 Q3 2015 Q3 2014 Q3 2015 Date FENICS revenues up over 142% from Q3 2014; pre-tax earning
Slide 14: Strong Growth Seen in Fully Electronic Business
STRONG GROWTH SEEN IN FULLY ELECTRONIC BUSINESS 14 Q3 2015 Yr/Yr Change Voice / Hybrid Corporate / Voice / Hybrid Corporate / FENICS / Other Real Estate Other Total FENICS / Other Real Estate Other Total Revenue $60.7 $357.0 $275.2 $8.0 $700.9 142.2% 51.1% 53.6% -15.1% 55.8% Pre-Tax DE $25.3 $47.6 $
Slide 15: Recent Developments Regarding the BGC / GFI Merger
RECENT DEVELOPMENTS REGARDING THE BGC / GFI MERGER 15 BGC owns approximately 67% of GFI’s outstanding common stock; full merger expected by the end of January 2016. We are nearing the conclusion of the sales process for Trayport, and anticipate the completion of the transaction before the end of
Slide 16: Volumes Generally Down; Volatility Mixed from a Year Ago
VOLUMES GENERALLY DOWN; VOLATILITY MIXED FROM A YEAR AGO 16 Q4 2015TD Volume Change Y/Y Q4 2015TD Implied Volatility Change Y/Y 10/01/2015 – 10/23/2015 10/01/2015 – 10/23/2015 -38% ICE Equity Derivatives - FX Futures (CME) -20% Commodity Volatility Index -33% (JMABKCVO) -13% U.S Equities U.S. Treasu
Slide 17: Sell-Side Balance Sheets Continue to Shrink as Buy-Side AUM Swells
SELL-SIDE BALANCE SHEETS CONTINUE TO SHRINK EVEN AS ASSETS UNDER MANAGEMENT AT BUY-SIDE SWELL 17 Buy-side AuM has grown by 78% since 2008 Changes in Sell-side Balance Sheet 5% fueling greater demand for market liquidity, By Asset Class, 2010-2014 while large bank Balance Sheets and RWAs are down 2
Slide 18: Small Slice of Global Execution Revenues = Huge Potential for IDBs
SMALL SLICE OF GLOBAL EXECUTION REVENUES = HUGE POTENTIAL FOR IDBs 18 2014 Global Sales & Trading Revenues ≈ $220B (in USD billions) BGC and other IDBs current comprise only a small percentage of the total global sales & trading market Reductions in Bank balance sheets may provide opportunities
Slide 19: Real Estate Overview
Newmark Grubb Knight Frank Overview REAL ESTATE SST
Slide 20: Business Overview: Real Estate Services
BUSINESS OVERVIEW: REAL ESTATE SERVICES 20 NGKF Highlights Q3 2015 Real Estate Segment Breakdown Q3 2015 Real Estate Services revenues increased by 54% as compared to last year Real estate Capital markets revenues increased 184% from Q3 capital markets Management services & 2014 29% other revenu
Slide 21: NGKF Projected Revenues Outpace Industry and Peer Estimates
NGKF PROJECTED REVENUES OUTPACE INDUSTRY AND PEER ESTIMATES 21 NGKF remains on track to achieve its $1 billion revenue outlook for FY 2015, representing at least 38% growth rate from FY 2014 40% FY 2015 Estimated Growth Rate 38%+ 30% 20% 18% 16% 17% 10% 0% Date 0% to -5% -10% Estimated U.S. CRE Sa
Slide 22: NGKF Revenue and Earnings Continue Strong Growth
NGKF REVENUE AND EARNINGS CONTINUE STRONG GROWTH 22 NGKF Trailing Twelve Month Revenue & Pre-tax Distributable Earnings (USD 000’s) 1,000,000 140,000 900,000 TTM Pre-tax Distributable Earnings 120,000 800,000 700,000 100,000 TTM Revenues 600,000 80,000 500,000 400,000 60,000 300,000 40,000 200,000 2
Slide 23: Commercial Real Estate Remains an Attractive Investable Asset Class
COMMERCIAL REAL ESTATE REMAINS AN ATTRACTIVE INVESTABLE ASSET CLASS 23 U.S. Commercial RE Cap Rates vs. 10 Year U.S. Treasuries (All Commercial Property Types) 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Date Spread Cap Rate 10yr UST Avg. Spread Source: Moody’s Real Capital Analytics Spread
Slide 24: Vacancy Rates Continue to Improve
VACANCY RATES CONTINUE TO IMPROVE SIGNALING STRONG DEMAND FOR COMMERCIAL REAL ESTATE 24 20.0% U.S. Vacancy Rates by Asset Class 16.0% 12.0% 8.0% 4.0% 0.0% Date Office Industrial Retail Multifamily Unweighted Average Source: CoStar, REIS, and NGKF Research Vacancy rates continue to improve reflecti
Slide 25: Significant Opportunities for Consolidation & Growth in CRE Services
SIGNIFICANT OPPORTUNITIES FOR CONSOLIDATION & GROWTH IN COMMERCIAL REAL ESTATE SERVICES 25 FY 2014 Global Commercial Real Estate Services Revenues ≈ $146 Billion NGKF (U.S. Only) $0.7 Other CRE Services Companies $120.8 Top 5 $24.5 Date Top 5 Full Service Brokerages + NGKF Market Share ≈ 17% Sources
Slide 26: Outlook
26 BGC PARTNERS OUTLOOK Date
Slide 27: Outlook Comparison
OUTLOOK COMPARISON 27 Fourth Quarter 2015 Outlook Compared with Fourth Quarter 2014 Results BGC anticipates distributable earnings revenues to increase by between approximately 33 percent and 41 percent and to be between $685 million to $725 million, compared with $515.5 million. The Company’s o
Slide 28: Appendix
APPENDIX TMNT ANTI INT ss 1
Slide 29: BGC Partners Compensation Ratio
BGC PARTNERS COMPENSATION RATIO 29 $1,200 100% $1,128.5 $1,091.2 $1,036.8 $1,000 90% $800 $793.5 80% (USD millions) $600 70% 61.7% 61.3% 62.5% 59.2% 60.4% $400 60% 53.8% $200 $437.9 50% $271.8 $0 40% 2011 2012 2013 2014 Q3 2014 Q3 2015 Compensation and Employee Benefits Compensation and Employee Ben
Slide 30: Non-Compensation Expenses & Pre-Tax Margin
NON-COMPENSATION EXPENSES & PRE-TAX MARGIN 30 50% 40% 30% 30.2% 28.0% 25.3% 29.6% 24.9% 20% 16.1% 10% 13.4% 12.6% 11.2% 10.3% 0% FY 2011 FY 2012 FY 2013 FY 2014 Q3 2015 Pre-tax distributable earnings as % of Total Revenue Non-comp Expenses as a % of Total Revenue Date Non-comp expenses were 24.9%
Slide 31: BGC's Economic Ownership as of September 30, 2015
BGC’S ECONOMIC OWNERSHIP AS OF SEPTEMBER 30, 2015 31 Cantor 25% Public 44% Employees, Executives, & Directors 31% 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
Slide 32: 2015 NGKF Highlights
2015 NGKF HIGHLIGHTS 32 NEW OFFICES: Acquired Computerized Facility Integration, LLC (CFI) A premier real estate strategic consulting and systems integration firm that manages over three billion square feet globally for Fortune 500 companies, owner-occupiers, government agencies, healthcare and hi
Slide 33: Expected GFI Cost Synergies
EXPECTED GFI COST SYNERGIES 33 Planned GFI Integration Cost Savings / Synergies: Network infrastructure Telephone lines Interest expense Vendors Data centers Duplicative real estate Other support expenses Year 1 Year 2 Date $50 Million $90 Million (annualized run rate) (annualized run
Slide 34: Average Exchange Rates
AVERAGE EXCHANGE RATES 34 Q3 2015 Q3 2014 Oct 1 – Oct 23, 2015 Oct 1 – Oct 23, 2014 US Dollar 1 1 1 1 British Pound 1.550 1.671 1.531 1.608 Euro 1.112 1.371 1.130 1.267 Hong Kong Dollar 0.129 0.129 0.129 0.129 Singapore Dollar 0.720 0.799 0.712 0.784 Japanese Yen (Inverted) 122.230 103.840 119.800 1
Slide 35: Distributable Earnings Defined
DISTRIBUTABLE EARNINGS DEFINED 35 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 th
Slide 36: Distributable Earnings Defined (Continued)
DISTRIBUTABLE EARNINGS DEFINED (CONTINUED) 36 BGC’s distributable earnings per share calculations assume either that: The fully diluted share count includes the shares related to the dilutive instruments, such as the Convertible Senior Notes, but excludes the associated interest expense, net of tax,
Slide 37: Adjusted EBITDA Defined
ADJUSTED EBITDA DEFINED 37 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 depr
Slide 38: Reconciliation of GAAP Income to Adjusted EBITDA
RECONCILIATION OF GAAP INCOME TO ADJUSTED EBITDA 38 BGC PARTNERS, INC. Reconciliation of GAAP Income to Adjusted EBITDA (and Comparison to Pre-Tax Distributable Earnings) (in thousands) (unaudited) Q3 2015 Q3 2014 GAAP Income from continuing operations before income taxes $ 83,322 $ 29,937 Add back:
Slide 39: Reconciliation of Income Under GAAP to Distributable Earnings
RECONCILIATION OF INCOME UNDER GAAP TO DISTRIBUTABLE EARNINGS 39 BGC PARTNERS, INC. RECONCILIATION OF GAAP INCOME TO DISTRIBUTABLE EARNINGS (in thousands, except per share data) (unaudited) Q3 2015 Q3 2014 GAAP income before income taxes $ 83,322 $ 29,937 Pre-tax adjustments: Non-cash (gains) losses
Slide 40: Reconciliation of Revenues Under GAAP and Distributable Earnings
RECONCILIATION OF REVENUES UNDER GAAP AND DISTRIBUTABLE EARNINGS 40 BGC PARTNERS, INC. RECONCILIATION OF REVENUES UNDER GAAP AND DISTRIBUTABLE EARNINGS (in thousands) (unaudited) Q3 2015 Q3 2014 GAAP Revenue $ 685,295 $ 436,216 Plus: Other Income (losses), net 63,487 43,252 Adjusted GAAP 748,782 479
Slide 41: bgcpartners.com
41 bgcpartners.com Date