Yahoo Finance BGC Group Inc (BGC) Q1 2024 Earnings Call Transcript Highlights: Robust Growth and Strategic ...
Total First Quarter Revenue: $578.6 million, up 8.6% year-over-year.
Brokerage Revenues: $528 million, increased by 7.3%.
Rights Revenues: $175.1 million, up 6.3%.
Energy, Commodities, and Shipping Revenues: $118.5 million, surged by 32.1%.
Foreign Exchange Revenues: $84 million, rose by 4.8%.
Credit Revenues: Decreased by 2.2%.
Equities Revenues: $62.9 million, down 7.7%.
Fenics Generated Revenues: $149.3 million, a new quarterly record.
Pretax Adjusted Earnings: $135.4 million, up 8.6% with a margin of 23.4%.
Post-tax Adjusted Earnings: $123.2 million or $0.25 per share, improved by 8.7%.
Adjusted EBITDA: $208.4 million, increased by 37.9%.
Liquidity: $615.7 million as of March 31.
Dividend: Increased to $0.02 per share.
Release Date: April 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Can you talk about the pricing structure and the incentives that are being offered to these partners and how that may evolve over time? A: Howard Lutnick, CEO of BGC Group Inc, explained that the 10 partners involved in the FMX transaction have volume targets related to their equity across the business ecosystem, including treasuries, foreign exchange, and futures. The partners, who are some of the top FCMs, will connect their clients to BGC's platforms, enhancing the transaction's value through subscription arrangements that are expected to grow over time. This model aims to drive business and volume through the ecosystem without marginal cost, promoting a subscription-based pricing model.
Q: What impact do you expect the formation of FMX to have on BGC's top line in the short term, and how do you see the market share evolving? A: Howard Lutnick noted that revenues are expected to grow as the subscription price from the partners exceeds current revenues. He highlighted potential substantial growth in the U.S. Treasury platform and the foreign exchange business, driven by the new partnerships. The futures business is anticipated to start with low to no pricing to build volume and market familiarity, with significant market share competition expected in the third year.
Q: Can you update us on the timeline for growing market share in futures and taking share from CME? A: Lutnick described a gradual process where the first year post-launch would focus on connecting global trading firms and building volume. He anticipates that by the end of the first year, all major players will be active, setting the stage for aggressive market share competition in the following years.
Q: How do you prioritize capital allocation between share repurchases, dividend increases, and investing for growth? A: Lutnick emphasized a balanced approach to capital allocation, highlighting the importance of share repurchases and the potential for strategic acquisitions that align with BGC's technology and scale. He also mentioned the recent increase in dividends as part of returning value to shareholders.
Q: Are there any plans to sell parts of the Fenics businesses, and how would the proceeds be used? A: While not actively looking to sell, Lutnick stated that BGC is open to offers for its Fenics businesses if the terms are favorable. Proceeds from any potential sales would likely be used to enhance shareholder returns through mechanisms like share buybacks, considering the company's strong performance and growth prospects.
Q: What is the expected run rate for stock-based compensation going forward? A: Sean Windeatt, COO of BGC, indicated that stock-based compensation is expected to decrease from the first quarter levels, estimating a more normalized rate of around 5% going forward.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
