BGC Group - Earnings Call - Q1 2025

Executive Summary

• Record Q1 2025 revenue of $664.2M (+14.8% YoY) and Post-tax Adjusted EPS of $0.29 (+16.0% YoY); Adjusted EBITDA was $199.8M, down 4.1% YoY due to a $36.6M prior-period mark-to-market gain, implying underlying growth ex one-time items.
• Broad-based strength: Rates (+14.8%), ECS (+26.6%), FX (+31.0%); Americas revenue +23.3%, EMEA +12.2%, APAC +2.4%.
• Q2 2025 guidance: revenue $715–$765M and pre-tax Adjusted Earnings $156–$171M; full-year Adjusted Earnings tax rate expected at 10–12%.
• Strategic catalysts: FMX UST ADV >$60B and ~33% CLOB market share; FMX FX ADV ~$14.5B; OTC Global Holdings closed Apr 1 for $325M, expected to add >$400M annualized revenue and be immediately accretive.

What Went Well and What Went Wrong

• What Went Well

  • “We delivered record quarterly revenues of more than $664 million, a 15 percent increase versus last year's record first quarter” — Sean Windeatt, Co-CEO.
  • FMX momentum: UST ADV >$60B (+33% YoY), market share ~33%; FX ADV ~$14.5B (more than doubled), first >$100B daily volume on Feb 28.
  • ECS strength: revenues +26.6% to record $149.9M, with growth across environmental/energy transition and oil/refined products; Americas +23.3% growth.

• What Went Wrong

  • Adjusted EBITDA down 4.1% YoY to $199.8M, impacted by a $36.6M prior-period investment fair value gain; underlying EBITDA would have been +16.3% YoY excluding that item.
  • Credit revenues -0.7% to $86.9M due to weaker EM and European volumes (offset by record PortfolioMatch and strong U.S. credit).
  • Non-comp expenses rose 6.6% (Adjusted) and 5.2% (GAAP); comp expenses +17.5% on higher commissionable revenues, pressuring near-term margins.

Transcript

Operator (participant)

Greetings and welcome to the BGC Group First Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce to you Jason Chryssicas, Head of Investor Relations. Thank you, Jason. You may begin.

Jason Chryssicas (Head of Investor Relations)

Thank you and hello, everyone. This morning, we issued BGC's first quarter 2025 financial results, which can be found at ir.bgcg.com. Any historical results provided on today's call compare only to the first quarter of 2025 with the prior year period unless otherwise specified. 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 or reconciliations of these items to the corresponding GAAP results and how, when, and why management uses them. 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.

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 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. I am now happy to turn the call over to Sean Windeatt, Co-Chief Executive Officer of BGC Group.

Sean Windeatt (Co-CEO)

Thank you, Jason. Good morning and welcome to our First Quarter 2025 Conference Call. With me today are my fellow Co-Chief Executive Officers, John Abularrage and JP Aubin, along with our Chief Financial Officer, Jason Hauf. We delivered record quarterly revenues of more than $664 million, a 15% increase versus last year's record first quarter. Our strong results were driven by robust organic growth across both our voice hybrid and ECS businesses, which each achieved new all-time highs. FMX had its best-ever quarter with record volumes and market share across both our FMX UST and FMX FX platforms, driven by strong support from our FMX equity partners. On April 1, we completed our transformative acquisition of OTC Global Holdings that is expected to add over $400 million in annualized revenue, nearly doubling the size of our existing ECS business.

This positions us as the world's largest ECS broker and makes BGC a more comprehensive and diversified company. We expect the acquisition of OTC to be immediately accretive and generate meaningful shareholder value. We're happy to welcome the entire OTC team to BGC. Our respective strengths and complementary businesses enhance our combined value, and we're excited about the benefits of integrating OTC into BGC's global platform. In the second quarter, we've continued to build on our success with global market volatility leading to broad organic growth across our businesses. As a reminder, volatility benefits BGC by increasing secondary trading volumes as market participants seek to hedge their or risk their capitalize on price fluctuations. These activities are most efficiently executed in our wholesale markets known for their depth and liquidity.

With that, I'd like to turn the call over to John to go over the quarterly results of the business in more detail.

John Abularrage (Co-CEO)

Thank you, Sean. It's an honor to join all of you for the first time as BGC's Co-CEO. As Sean mentioned, we registered record quarterly results reflecting substantial growth across every region in our largest asset classes. Our rates revenue increased 14.8% to a record $200.9 million, reflecting higher volumes across all our major interest rate products. ECS revenue grew by 26.6% to a record $149.9 million, driven by strong growth across environmental and energy transition products, as well as our oil and refined products. Foreign exchange revenues were up 31% to a record $110 million, reflecting broad-based growth across all FX products. Credit revenues decreased by 0.7% to $86.9 million due to lower emerging market and European credit volumes, partly offset by record Portfolio Match volumes and strong U.S. credit activity.

Equities revenues were flat at $62.9 million as a result of higher European and U.S. equity volumes being offset by lower Asian equity derivative volumes. Data, network, and post-trade revenues increased by 5.2% to $32.5 million. This growth was primarily driven by Fenics market data and Lucera, partly offset by lower post-trade revenues due to the sale of our Capital Lab business in the fourth quarter of 2024. Excluding Capital Lab, revenues grew by circa 10% year over year. We expect growth in these businesses to accelerate throughout the year as we work through the large revenue pipelines in place. Now turning to Fenics. In the first quarter, Fenics revenues improved by 15.6% to $172.7 million. Fenics Markets reported revenues of $145.5 million, an increase of 14.2%. This growth was primarily driven by record electronic volumes across rates and foreign exchange. Fenics Growth Platforms grew by 23.7% to $27.1 million.

This growth was primarily driven by FMX, Portfolio Match, and Lucera, partly offset by the sale of Capital Lab. Excluding Capital Lab, FMX Growth Platforms revenues grew by approximately 30% year over year. FMX UST generated record average daily volume of over $60 billion in the first quarter, a 33% increase compared to last year. This growth was driven by strong support from FMX's equity partners, which drove market share to approximately 33% for the first quarter, up from 30% last quarter and 28% a year ago. Notably, FMX daily volume exceeded $100 billion for the first time on the 28th of February 2025. FMX FX more than doubled its ADV to a record $14.5 billion in the first quarter, driven by deepening support from FMX's equity partners as well as onboarding new participants onto the platform.

FMX Futures Exchange continued to make progress connecting new large FCMs while preparing for the launch of US Treasury futures, which, following the extreme volatility in April, is scheduled for this month. As FMX continues to integrate more FCMs, ADV and open interest on the exchange are expected to meaningfully accelerate. In periods of high volatility, liquidity typically migrates to established trading platforms and the exchanges with the deepest liquidity pools. Our successful work over the past few years to develop FMX UST into a leading Treasury platform enabled us to achieve and seamlessly process record volumes during the recent periods of extreme volatility. During the first and second weeks of April, FMX UST set consecutive daily records, including record daily volume of more than $142 billion on April 9, 2025. Portfolio Match ADV doubled due to strong growth across both U.S. and European credit volumes.

Portfolio Match continues to capture market share in this rapidly growing segment of the credit market. Lucera, ECS network business providing critical real-time trading infrastructure to the capital markets, increased its revenue by more than 15% and grew its client pipeline for sustained future growth. Lucera plans to launch new foreign exchange and rates products throughout 2025, which are expected to drive new growth opportunities. I would now like to turn the call over to Jason.

Jason Hauf (CFO)

Thank you, John. Hello, everyone. BGC generated first quarter revenue of $664.2 million, reflecting growth across all of our geographies. Americas revenues increased by 23.3%. Europe, Middle East, and Africa revenues increased by 12.2%, and Asia-Pacific revenues increased by 2.4%. Turning to expenses, compensation and employee benefits under both GAAP and for adjusted earnings increased by 17.5% versus the first quarter of 2024 due to higher commission revenues during the period. Non-compensation expenses under GAAP and adjusted earnings increased by 5.2% and 6.6%, respectively. Moving to earnings, our pre-tax adjusted earnings grew by 18.4% to $160.2 million. Post-tax adjusted earnings increased by 16.1% to $143 million, and post-tax adjusted earnings per share improved by 16% to $0.29 per share. Adjusted EBITDA decreased by 4.1% to $199.8 million due to a $36.6 million mark-to-market gain in the prior period related to a firm investment.

Excluding this gain from the prior period, adjusted EBITDA would have increased by 16.3%. Turning to share counts, BGC's fully diluted weighted average share count for the adjusted earnings was 501.5 million shares during the period, a 1.2% increase compared to the fourth quarter of 2024, and a 1.3% increase compared to a year ago. As a reminder, we repurchased the fewest amount of shares in the first quarter due to seasonal capital requirements. In addition, we acquired OTC Global Holdings on April 1st, 2025. We have significant runway under our share repurchase authorization, and buybacks continue to be an integral part of our capital allocation policy. We expect our share repurchases to increase throughout the remainder of the year. As of March 31st, our liquidity was $1,146.1 million compared to $897.8 million as of year-end 2024.

With that, I'd like to turn the call back to Sean to go over our second quarter outlook.

Sean Windeatt (Co-CEO)

Thank you, Jason. I'm pleased to provide the following guidance for the second quarter of 2025. We expect to generate total revenues of between $715 million and $765 million as compared to $550.8 million in the second quarter of 2024, which at the midpoint of our guidance would represent approximately 34% revenue growth. Excluding OTC, we expect second quarter revenues to grow between 10% and 17%. We anticipate pre-tax adjusted earnings to be in the range of $156 million-$171 million versus $125.8 million last year, which at the midpoint of guidance would represent 30% earnings growth. We expect our adjusted earnings tax rate to be between 10% and 12% for the full year 2025. Operating with that, we'd like to open the call for questions.

Operator (participant)

Thank you. We will now be conducting the question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. The first question comes from the line of Patrick Moley with Piper Sandler. Please proceed with your question.

Patrick Moley (Director and Senior Research Analyst)

Hey, good morning, guys. I wanted to just start off talking about the FMX launch. It's been slightly delayed here. You're still planning to launch this month, though. I was hoping you could just maybe elaborate on what's driven the delay so far. Is this entirely due to the environment and just not wanting to launch into some of the extreme volatility that we've seen? Are there any other technological or specific onboarding issues that have contributed to the delay? As a second part to that, there was an article that came out yesterday citing a source from inside the LCH that said that they were maybe dealing with some settlement or delivery issues on their end. To the extent that you're willing to address that, is there any validity to those reports? Thanks.

JP Aubin (Co-CEO)

Hello, Patrick. JP here. You're correct. The extreme volatility in April created an environment not ideal for a successful launch. The good news is we're launching this month in May. To come back to the article, we are aware of this article. While we don't comment on rumors, we can say that we spoke with our clearing partner, LCH. By the way, we spoke to them every day. We spoke to LCH as recently as last evening following the release of this article. Guess what? They are ready. LCH is ready. We are ready. We will be launching in this month's period.

Patrick Moley (Director and Senior Research Analyst)

Okay. Thanks for that. As a follow-up, one more. You closed OTC Global Holdings about a month ago. You've had a little while now to look under the hood. I was hoping to get your updated expectations on how accretive this acquisition could be, what the revenue upside looks like in terms of cross-sales between the two customer bases. On the margins, it seemed like the second quarter margins were maybe a little bit softer than we were expecting. Any color you can give on how you're expecting margins to trend from here would be great. Thanks.

Sean Windeatt (Co-CEO)

Yeah, sure. Thanks. I mean, it's good, right? We've had a total of, I think, 37 days of owning OTC. But rest assured, as you know, as Patrick, we're hard at work with the integration. And we're very happy with what we've seen so far. I mean, look, in the implied guidance, we separated guidance out for you. So you saw at the sort of midpoint of guidance, we expect $115 million, which, as you would guess, shows decent growth from the $400 million that we initially expected. Look, in terms of the margin itself, I think we'd said on the previous call that BGC as a group has margins in excess of pre-tax margins in excess of 20%. Whereas when you're buying a larger company like OTC, that has smaller margins to start with. And as you can see, you can work out the implied margin from our guidance.

That's why we did that work for you. That's immediately. We've done huge amounts of small transactions, and we get the economies of scale. We're also very experienced at the larger transactions, such as GFI. What I would expect is, as I said before, whilst we don't think the OTC business will get up to the BGC margins in the short term, you will definitely see a growth in those margins by the end of year one, beginning of year two. Maybe, John, you wanted to add something in terms of the business itself and the synergy.

John Abularrage (Co-CEO)

Yeah. Hey, Patrick. Just what I would say is what I think we said last time. We've spent a lot of time and effort mapping both front office, back office. The best example I can give you in terms of what synergies look like from the product side is it seems counterintuitive to broker an underlying product and ship an underlying product and not have those two connected. That work has already begun. The people inside OTC are fantastic. Everything we've seen is as good or better than we expected. We expect to generate serious shareholder value in both the short term and the long term.

Patrick Moley (Director and Senior Research Analyst)

Okay. Great. That's it for me. Thanks, guys.

Operator (participant)

The next question comes from the line of Eli Abboud with Bank of America. Please proceed with your question.

Eli Abboud (Research Analyst)

Good morning, everyone. Thanks for taking the question. After Treasury futures, what are the next key milestones or product launches that investors should be on the lookout for? When should we expect longer-tenure Treasury futures and options on futures to go live?

JP Aubin (Co-CEO)

Hey, hello, JP here. Look, as you know, our year one is about connectivity. We're in year one, right? And as I mentioned previously, we are launching this month in May our UST futures. Our bank partners, equity partners, are the main users of UST futures. It's great news. We do expect their respective trading desks to become highly active on our exchange, which will drive volumes up. It's our target today. Obviously, you know our plan, right? As a reminder, year one, connectivity; year two, deepening client connectivity and increasing volumes and open interest; and year three, full competition with CME. We stick to our plan. It's a three-year plan. We are one. For the time being, it's matching our expectations.

Eli Abboud (Research Analyst)

Got it. Thanks. Based on the non-controlling interest deduction, it looks like FMX still hasn't reached profitability. Can you help us quantify the cash burn related to FMX futures? Once the futures exchange starts to break even, what do you think the normalized profit margins of FMX should look like?

Sean Windeatt (Co-CEO)

Obviously, we do not break out FMX independently. However, to be clear, the cash burn to BGC is zero. As part of the deal with FMX's partners, we contributed the business, and they are funding, if you like, the future development of futures. How about that? The cash burn to BGC is zero. In terms of profitability and where the margin will get to, I think in the short term, we certainly get to break even and slightly beyond. In terms of the medium to long term, I think it is commensurate with other exchanges, which is around the 40%-50% level.

Eli Abboud (Research Analyst)

Got it. And then just the last one for me. Do we have any additional clarity yet on the outcome for Howard's shares? If my math's right, I think we're getting close to the 90-day mark for divestment.

Sean Windeatt (Co-CEO)

Look, I think, probably as you'd expect, Eli, all we can say is that Howard will comply with all the Senate Ethics Committee standards, including divesting his holdings. The public SEC filings will be required when he does so. As we previously stated, we don't expect any sales in the open market, and we expect no changes equally to the corporate structure. On your point of maths, I would agree with you, 90 days is fast approaching.

Eli Abboud (Research Analyst)

Got it. Thanks, everyone.

Operator (participant)

The next question is a follow-up from Patrick Moley with Piper Sandler. Please proceed with your question.

Patrick Moley (Director and Senior Research Analyst)

Yes. Thanks for taking the follow-up. I just have two modeling items to ask about. The first is on the tax rate. It came in at 11.9% by my calculation this quarter. It was the highest it has been in a little while. Any color you can give on tax rate expectations going forward? Secondly, on the acquisition of OTC Global Holdings, what should we assume in terms of the cash outlay this quarter for that acquisition? Thanks.

Sean Windeatt (Co-CEO)

Sure. So yeah, look, the reason we added, as we have done before in my prepared remarks, I suggested that the expected tax rate is between 10% and 12% for 2025. In terms of cash outlay for OTC, it was $325 million. As now it's sort of fully disclosed. That was paid on April the 1st.

Patrick Moley (Director and Senior Research Analyst)

All right. Thank you.

Operator (participant)

Ladies and gentlemen, there are no further questions at this time. I would like to turn the floor back over to Mr. Windeatt for closing remarks.

Sean Windeatt (Co-CEO)

Thanks, everybody. Thanks for joining us today on our earnings call. I just wish you all a great day and look forward to updating you again very soon. Thanks very much.

Operator (participant)

Thank you. This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.