BGC Group (NASDAQ:BGC) Q1 2026 Earnings Call

0:00 Greetings, and welcome to the BGC Group First Quarter twenty twenty six Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Jason Kraseckis, Head of Investor Relations. Thank you. You may begin. Hello, everyone. This morning, we issued BGC's first quarter two thousand twenty six financial results, which can be found at ir.bgcg.com. Any historical results provided on today's call compare only the first quarter of twenty twenty six with the prior year period unless otherwise specified.

0:46 All references on today's call to historic record and strongest results are to BGC's scandal and financial results excluding Newmark prior to the spin off in November 2018. We will be referring to our results on a non GAAP basis, which include the terms adjusted earnings and adjusted EBITDA. Please refer to today's investor materials on our website for additional details on our financial results and for complete and updated definitions of any non GAAP terms, reconciliations of these items to the corresponding GAAP results, and how, when, and why management uses them, as well as relevant industry and economic statistics. The outlook discussed today assumes no material acquisitions or dispositions. Our expectations are subject to change based on various macroeconomic, social, political, and or other factors. Information on this call contains forward looking statements, including without limitation statements about our economic outlook and business.

1:36 These statements are subject to risks and uncertainties which could cause our actual results to differ from expectations. Except as required by law, we undertake no obligation to update any forward looking statements. For information on factors that could cause actual results to differ from the forward looking statements and a complete discussion of the risks and other factors that may impact these forward looking statements, see our SEC filings, including, but not limited to, the risk factors and disclosures within these SEC documents. With that, I am now happy to turn the call over to John Boulourage, Chief Executive Officer of BGC Group. Thank you, Jason. Good morning and welcome to our first quarter twenty twenty six conference call. With me today are my fellow Co Chief Executive Officers, Sean Windiett and JP Obaneth, along with our Chief Financial Officer Jason Hoff.

2:23 BGC delivered another record quarter. Revenues increased 44% to $955,000,000 with growth across every asset class and geography. Excluding OTC, revenues grew 23% to $817,000,000 which was also a record. Pretax earnings hit an all time high up more than 44%. Our ECS revenues more than doubled to $330,000,000 reinforcing our position as the world's largest energy broker. FMX posted its best ever quarter, setting ADV records for US Treasuries, FX and futures. FMX UST ADV grew 51% in the first quarter to a record $90,000,000,000 representing 41% market share.

3:12 We built on last year's $25,000,000 cost reduction program, which is now expected to result in $35,000,000 of annualized cost savings. We will continue to identify and execute cost savings throughout 2026 to drive further margin expansion. A final point on the macro backdrop. The Iran conflict, which began on February 28, drove elevated volatility across energy, rates, and FX through the final month of the quarter. Through February 27, before the conflict began, revenues were tracking up 41%. Finishing the full quarter up 44% reinforces that our record results this quarter were driven primarily by our underlying business with the conflict serving only as an incremental contributor.

4:03 With that, I'd like to turn the call over to Sean to go over the quarterly results of the business in more detail. Thank you, John. We delivered record revenues of 9 and $55,500,000 a 43.8% increase versus last year. Our total brokerage revenues grew by 46.7 to $895,800,000 driven by growth across all asset classes. ECS revenues grew by 120.1% to $330,000,000 driven by the acquisition of OTC and strong organic growth across our broader energy complex and shipping businesses. Rates revenues increased 27.5% to $256,200,000 reflecting strong growth across listed futures and options, interest rate swaps and government bonds supported by continued FMXUST market share gains.

5:07 Foreign exchange revenues were up 19.1 to $131,000,000 primarily due to strong volume growth in emerging market and G10 products. Credit revenues increased by 8.2% to $94,100,000 driven by higher emerging market credit, portfolio match and structured credit volumes. Equities grew by 34.3% to $84,500,000 reflecting strong market share gains across all major geographies and global equity volatility. Data, network and post trade revenues grew by 23.2% to $34,500,000 excluding Case, which we sold in the fourth quarter of twenty twenty five.

6:00 This growth was driven by Lucera and Fenics Market Data. Including Case, data network and post trade revenues grew by 6.1%. Now turning to Fenics. Fenics revenues increased by 19.8% to a first quarter record of $206,900,000 Fenics Markets generated revenues of $176,700,000 an increase of 20.3%. This growth was driven by higher electronic trading volumes across rates, credit, foreign exchange and increased Fenics market data revenues. On 12/31/2025, we completed the sale of our Case Financial business for up to $119,000,000 Excluding Case, Fenics markets grew by 24.1%.

6:58 Phoenix Growth Platforms revenues grew to $30,200,000 a 17.4 increase, primarily driven by FMX, Portfolio Match and Lucera. FMXUST generated record quarterly ADB of $89,700,000,000 51% higher compared to last year. FMXUST grew its first quarter market share to 41%, up from 39% last quarter and 33% a year ago. In March, ADV reached $107,000,000,000 the single highest month in the platform's history. FMX futures exchange delivered another quarter of significant growth.

7:47 SOFR ADV climbed to more than 39,000 contracts in the first quarter of twenty twenty six, up from 2,200 contracts a year ago, while quarter end open interest reached approximately 143,000 contracts compared to 8,000 in the prior year period. FMX's U. S. Treasury futures developed momentum in April with volume building throughout the month to a new high of approximately 30,000 contracts on 04/29/2026. FNX FX average daily volumes increased by 42% to a record $20,500,000,000 driven by strong growth across spot FX and NDF volumes, resulting in continued market share gains.

8:37 Portfolio match ADV grew by 42% in the first quarter setting a new all time high. Growth was driven by higher client activity across US and EMEA corporate credit, reflecting new and deepening customer relationships and broad based adoption of recently launched trading functionalities. Average trade size grew to record levels supported by an increase in the platform's global maximum trade size. Portfolio match continues to capture market share in this critically important part of the credit market. Lucera, Phoenix network business providing critical real time trading infrastructure to the capital markets grew revenues by 22.8 in the first quarter.

9:27 Growth was led by continued momentum in its FX offering and increasing client adoption across fixed income solutions including U. S. Treasuries and futures. Looking ahead, a pipeline of new products across both FX and fixed income is set to come online, which is expected to provide meaningful sources of new incremental growth. And with that, I'd now like to turn the call over to Jason. Thank you, Sean, and hello everyone. BGC generated record revenues of $955,500,000 during the quarter, reflecting growth across all of our geographies. EMEA revenues increased by 56.7%, Americas revenues increased by 29.9%, and Asia Pacific revenues increased by 31.1%.

10:18 Turning to expenses. Compensation and employee benefits under GAAP and for adjusted earnings increased by fifty seven point three percent and fifty one point five percent, respectively. The increase in compensation and employee benefits under GAAP was related to the acquisition of OTC, higher commissionable revenues, charges incurred as part of the cost reduction program, and the weaker US dollar. The increase in compensation and employee benefits for adjusted earnings was driven by OTC, higher commissionable revenues, and the weaker U. S. Dollar. Non compensation expenses under GAAP and for adjusted earnings increased by 33.427.4% respectively, primarily driven by the acquisition of OTC.

11:06 Excluding OTC, non compensation expenses under GAAP and for adjusted earnings increased by 19.312.7%, respectively. During the quarter, we realized an additional $10,000,000 of savings and now expect our cost reduction plan to result in $35,000,000 of annualized savings. We remain committed to continuing our cost reduction initiatives throughout 2026 with the goal of achieving further margin expansion. Moving on to our record adjusted earnings. Our pretax adjusted earnings grew by 44.9% to $232,100,000 representing a pre tax margin of 24.3%. Post tax adjusted earnings increased by 40.6% to $201,100,000 resulting in a post tax adjusted earnings per share of 41¢, 41.4% higher versus last year.

12:06 Our adjusted EBITDA increased by 26.7% to $253,200,000 Turning to share count. BGC's fully diluted weighted average share count for adjusted earnings was 495,200,000 shares during the period, a 1% increase compared to last quarter and a 1.3% decrease compared to last year. As of March 31, our liquidity was $878,400,000 compared with $979,100,000 as of year end twenty twenty five. The change in our liquidity reflects payments for year end bonuses, tax payments, and timing differences between commissions earned in the seasonally busier first quarter and commissions collected from the seasonally slower fourth quarter.

12:55 As cash uses are generally the greatest in the first quarter, we typically repurchase fewer shares during this period and we expect share repurchases to increase throughout the remainder of the year. With that, I'd like to turn the call back to John to go over our second quarter outlook. Thank you, Jason. I'm pleased to provide the following guidance for the second quarter of twenty twenty six. We expect to generate revenues of between $785,000,000 and $845,000,000 compared to $784,000,000 in the second quarter of twenty twenty five, which at the midpoint of our guidance would represent 4% revenue growth increase for the second quarter and 22% revenue growth for the first half of the year or 13% organically.

13:43 We anticipate pre tax adjusted earnings to be in the range of $178,000,000 to $196,000,000 versus $173,600,000 last year, which at the midpoint of guidance would represent 8% earnings growth for the second quarter and 26% earnings growth for the first half of the year. We expect our adjusted earnings tax rate to be between eleven percent and fourteen percent for the full year 2026. With that, operator, we would like to open the call for questions. Thank Our first question comes from the line of Patrick Molley with Piper Sandler. Congrats on the record quarter. So I wanted to ask about energy commodity and shipping revenues. They're very strong this quarter. In the release, you noted that total revenues, though, were already tracking up 41% year over year before the Iran conflict broke out, finished at 44% increase in the quarter year over year. So how much of that growth do you view as structural versus cyclical?

15:07 And then I'm just curious, how do you think investors should think about the ECS revenue run rate from here as you lap the OTC Global Holdings acquisition in April of last year and as we think about maybe some of the geopolitical driven volatility normalizing from here? Thanks. Good morning, Patrick. So I think in terms of structural, as John said in his prepared remarks, we pointed out that the business was up 41% pre the start of the conflict and ended up 44%. If you just, if you do the maths on that, you'll see our opinion is that around about call it 20,000,000 of incremental revenue, one could ascribe to the conflict, the balance of that, but most of the growth in Q1 was part of our normal business. So that's incredibly positive.

16:05 I think with ECS in particular, I don't think anything has changed between Q1 and Q2 and therefore the rest of the year. We've now owned OTC for one year and the integration of that business is virtually complete, and therefore I think we will continue, what you'll now see is you'll see growth across the ECS spectrum for our multi brands and we won't be breaking it out between OTC and our core business. Okay, that's helpful. And then as a follow-up, expanded the cost reduction program this quarter. In the press release, I think you said that you were going to continue to identify and execute cost savings throughout 2026 to drive further margin expansion. So could you walk us through what's driving that incremental $10,000,000 How much additional runway you see beyond the $35,000,000 now?

17:09 And how should we just think about the pace of margin expansion flowing through the P and L over the remainder of the year? Yeah, I like that. We increase our cost reduction program in the Q1 by 40% and you asked for what we're going to do next after that. I like that. It's, look, I think, as you know, covered us for a while, as a result of the OTC acquisition, we identified that we should be able to save 25,000,000 in cost reduction. Once we started on that journey, of course we wanted to exceed that and we found an additional 10,000,000 so now that $35,000,000 The bulk of that is within the compensation lines, There are some infrastructure lines as well, and for example, we closed one of the non profit making businesses that OTC had in its logistics business, which resulted in decreases in compensation and a small amount of non comp as well.

18:25 I think once you do these exercises, will continue to do that across the business. Will we expect to get more than the 35? Of course, that's why we said it in our prepared remarks, but I think having just done that incremental 40%, we'll perhaps update you on what we think and an updated thing in the next quarter. Okay, that's helpful. Looking forward to that. I got another question, but I'm going hop back in the queue. Thanks. Thank you. Our next question comes from the line of Eli Aboud with Bank of America. Please proceed with your question.

19:14 Good morning. Thanks for taking the question. You pointed out a moment ago to Patrick the revenues are tracking 41% higher year on year before the Iran war even began. So my question is, if the Iran war was not a major tailwind for you guys in 1Q twenty twenty six, how do I bridge the 31% organic revenue growth in 1Q twenty twenty six with the 4% revenue growth implied by the guide for 2Q twenty six? Thanks Eli. So why don't I take that one? Was interesting actually, John, JP and I, doing guidance, I'd probably say it was one of the more challenging times to give you guidance and that's really for two reasons. Firstly, as we pointed out in Q1 this year, around $20,000,000 incremental revenue was there in Q1 in our estimate as part of the as a result of the Iran conflict.

20:15 And last year, you of course remember that April was an interesting month in The US because April 25 was, I think was called Liberation Day and therefore it was the introduction of the tariffs, which had significant increases in volumes for and trading in the month of April. So if you put the 20,000,000 of Q1 this year and circa 20,000,000 of Q2 last year, that will help you bridge. And I think also, we didn't mention it in our numbers, in prepared remarks, I apologize, but we did sell the case business and we did also close down the logistics business, now that's $10,000,000 of quarterly revenue.

21:08 So, but if you add those three things together, that's $50,000,000 difference and that's why also we gave you the six month in John's prepared remarks, he gave you the six month numbers which said that organically we're growing at 12.7% assuming mid guidance organically. April was and in giving our guidance, April of course therefore was challenged by comparison to last year, but what we've seen and of course, today is May 7, what we've seen is we've started to see trading levels return back to what I would call normality and try to reflect that in our guidance.

21:59 Got it. And then in the deck, you gave us some new data that shows listed revenues are actually outpacing exchange volumes. I think conventional wisdom is that electronification is a one way trend and that your business, which is primarily voice, should be actually slower growth than that of the exchanges. These numbers, obviously, they suggest that maybe that isn't true, so I was hoping you could help us understand why. Why does it make sense for the high touch flow that BGC does to be higher growth than the fully electronic low touch flow that comprises the majority of listed volume? Okay, so two things, as my Co CEO JP pointed out in last quarter, what we were trying to explain is we are an exchange, we act like an exchange except for we do it not just for electronic marketplace, but for voice, for hybrid and for electronic.

23:01 And the interesting point was, when there's volatility in the marketplace, we couldn't understand why the exchanges of course, the exchange share prices would do well and ours not so much, and we're pointing out that we act like an exchange. So the difference is the clients can come to us and execute their business in one of three ways. So it shouldn't be surprising therefore that when electronic volumes at, for example, CME and ICE are up, of course the trading that's going to be happening in both voice hybrid and electronic with intermediaries like BGC, that's going to be positive as well. So that's why there is a correlation between the two. And again, you've seen that very much in April, where the exchange volumes were lower, we still grew, and why are we outperforming them? I think we're outperforming them for two reasons, number one is because of from a strategy of what's led to our market share gains in multiple asset classes, number one, obviously our acquisitions and secondly, just overall increased volume. So I think that's why we continue to outperform the market.

24:28 Got it. And I'll squeeze one more in here before I hand it back to Patrick. Could you help us understand the decline in FMX futures open interest quarter to date versus 1Q? What can be done to course correct there? It's John. So the drop in OI on the futures is just simply a reflection of a risk off mentality in terms of what's going on in the market. And so OI as you know is just standing orders and so that is something that we would expect to happen as the conflict starts and something that we are seeing now start to recover in the same way that you're seeing those volumes start to recover. So I guess the way that we think of it is it kind of in general in the nascent exchange is that it of course we're always looking at, you never want to see volumes go down for any reason but this is exactly what we saw in the UST cash platform when that was the nascent exchange and obviously now it's not. And so you saw our cash platform performed beautifully when the conflict started and I think that this is what we would have expected. And clearly if there was ever an opportunity where the climb back to the market share that we had before and we're virtually there now and you'll see that the next time we speak, we believe we'll be there and above, proves what participants in the market and the partners been telling

25:59 us, which is you need a second player in this market. And we are that second player and that's why we believe that we're seeing our market share and volumes climb back to where they were and it'll be higher than that. We're quite confident of the next time we speak. So the risk parameters in the market are changing, but our place in the market has only been reinforced by the recovery in our volumes and our OI that you're starting to see. Got it. Thanks guys. Thank you. Our next question is a follow-up from the line of Patrick Molley with Piper Sandler. Please proceed with your question. Thanks for taking the follow-up. Just a quick one. I don't have the live transcript in front of me, but in your prepared remarks, you said something about new products that you were looking forward to launching. I think you might have said FX.

26:51 Could you just elaborate on what those are and then any way to quantify maybe from a revenue or top line perspective, what sort of impact that could have in the timing of those launches? Thanks. Yeah, as you and I have discussed, Lucera is a gem within the BGC portfolio. I think in terms of quantifying that you'll continue to see it grow around the rates that it has grown historically despite the larger revenue size. It grows at 20% plus. In terms new products, the single thing that is most important in the Lucera world and growing importance in our world is connectivity. And so Lucera is constantly rolling out other products within asset classes. The way to think about it is yes, Lucera is dominant in FX and to a slightly lesser extent but growing in rates, but there are other parts of a rates complex where Lucero is growing in and getting more buy in from existing and from new customers.

27:50 As Lucero's connectivity within big clients continues to grow, it continues to expand in other asset classes and the trust factor and white glove service that come along with Lucera is really genuinely taking hold and we're pleased to see that they're doing a great job. Okay, great. That's it for me. Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to Mr. Aboularoz for final comments. Thanks very much everyone. As always, we appreciate your time and look forward to speaking to you next quarter. Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.