Welcome to the BGC Partners, Inc. First Quarter 2022 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. I'd now like to hand over the conference to your speaker today, Jason Chryssicas, Head of Investor Relations. Thank you and please go ahead.

Thank you and good morning. We issued BGC's first quarter 2022 financial results press release and the presentation summarizing these results yesterday after the market close. You can find these at ir.bgcpartners.com. Please note you can find additional details on our quarterly results in yesterday's press release and investor presentation. Unless otherwise stated, the results provided on today's call compare only the first quarter of 2022 with the prior-year period and compare revenue excluding insurance due to its sale on November 1st, 2021. We will be referring to our results in this call only on an adjusted earnings basis unless otherwise stated. We may also refer to adjusted EBITDA. We may refer to our liquidity, which we define as cash and cash equivalents plus marketable securities that have not been financed reverse repurchase agreements and securities owned less securities loaned and repurchase agreements. We define total capital as redeemable partnership interest, total stockholders' equity, and non-controlling interest in subsidiaries. Please see yesterday's press release for results under generally accepted accounting principles or GAAP. Please also see the relevant sections in the back of today's press release for the complete and updated definitions of any non-GAAP terms, reconciliations of these items to corresponding GAAP results, and how, when, and why management uses such terms. Additional information with respect to our GAAP and non-GAAP results mentioned on today's call is available on our website at ir.bgcpartners.com and in our investor presentation. We refer to the company's technology-driven business as Fenics. Fenics offerings include Fenics Markets and Fenics Growth Platforms. I also remind you that the information regarding our business on today's call that are not historical are forward-looking statements. These include statements about the effects of COVID-19, the impact on the company's business results, financial position, liquidity, and outlook. Any forward-looking statements involve risks and uncertainties, and except as required by law, BGC undertakes no obligation to update forward-looking statements. Any outlook and targets discussed on this call assume no material acquisitions, buybacks, extraordinary transactions, or meaningful changes to the company's stock price. For discussion of additional risks and uncertainties that could cause actual results to differ from those contained in the forward-looking statements, see BGC's SEC filings including but not limited to the risk factors and special note on forward-looking information set forth in these filings and any updates to such risk factors and special note on forward-looking information contained in subsequent reports on Form 10-K, Form 10-Q, or Form 8-K. I'm now happy to turn the call over to Howard Lutnick, Chairman of the Board and CEO of BGC Partners.

Thank you, Jason. Good morning, and thanks for joining us on our first quarter 2022 conference call. I have with me today BGC's Chief Financial Officer, Steve Bisgay, and our Chief Operating Officer, Sean Windeatt. BGC's adjusted earnings margins continue to improve, representing the sixth consecutive quarter of year-over-year margin expansion, which reflects the increased conversion of our voice hybrid revenue into our higher-margin technology-driven Fenics business. Fenics continued to grow at an industry-leading pace and represented 25% of BGC's overall revenue during the first quarter. We continue to make significant progress building out our FMX platform, which combines Fenics UST's leading U.S. treasury business with a new state-of-the-art U.S. interest rate futures platform. FMX, partnering with the LCH, will deliver a comprehensive and efficient cross-margining platform across U.S. dollar base futures and interest rate swaps. Our objective is to create a competitive offering in the enormous and currently monopolistic U.S. interest rate futures market. We are also progressing on our comprehensive cryptocurrency offering, which includes the expansion of Lucera's infrastructure across the cryptocurrency ecosystem, leveraging our wholesale global electronic trading network to connect the world's largest capital markets participants to the exchanges and market-makers of this asset class. Lucera is now connected to 26 of the deepest cryptocurrency liquidity pools with a strong pipeline of additional clients, venues, and digital custodians to be added throughout the year. Additionally, we are expanding our electronic and voice hybrid cryptocurrency execution capabilities globally. During the first quarter, for example, BGC brokered the first-ever block trade of micro Bitcoin options on CME. Case also added new clients to its cryptocurrency options offerings, which leverage its award-winning analytics, pricing, and distribution software. Our crypto platform is powered by our multibillion-dollar global infrastructure and state-of-the-art Fenics trading technology. FMX and cryptocurrencies represent extraordinary opportunities for BGC as they scale in 2023. On a personal note, I'm happy to report that I am cancer-free as of March 1st, and I want to say thank you to all of you for your support along the way. It really made a big difference. If you would like more details about my health, my most recent update video is available on our website on Rumble or on YouTube. And with that, I'll turn the call over to Steve.

Thank you, Howard, and hello everyone. BGC generated total revenue of $506.5 million, slightly lower by 1.7% as compared to last year, excluding insurance. Total revenue would have been over $10 million higher or up 0.2% over last year but for the strengthening of the U.S. dollar. Overall industry-wide trading volumes were mixed during the first quarter. Energy commodity volumes were higher due to global volatility across the complex. Rising interest rates and volatility drove trading activity higher in short-duration U.S. rates profits. However, a flattening and eventual inversion of the U.S. yield curve significantly impacted our medium and long-term cash rates and interest rates while volumes grew in the quarter. BGC's rates business continues to be well-positioned as the markets acclimate to the pace of rising interest rates and inflation. As this reserve unwinds a $9 trillion balance sheet at a pace of $95 billion per month, we continue to expect tailwinds on our rates business to begin in the latter half of this year. By geography and excluding insurance, Americas revenue increased by 4.9% while Europe, Middle East, and Africa and Asia Pacific revenues both decreased by 4.6% compared to last year. By asset class, energy commodities increased by 8.6% while rates, FX, equities, and credit decreased by 1.8%, 4.1%, 4.7%, and 6.8% respectively. Deeper integration of Fenics Technology across the entire business drove front office productivity 7.2% higher during the first quarter. As we continue to automate our business, we expect productivity and profitability to continue moving higher. Now, turning to Fenics quarterly performance. Fenics generated first quarter revenue of $125.3 million, an improvement of 16.4%. Fenics Growth Platforms recorded revenue of $13.1 million, an improvement of 23.5%. The next markets generated revenue of $112.3 million, an increase of 15.7% and had a pre-tax adjusted earnings margin of 34.2%, an improvement of 336 basis points. Moving on to expenses. Our compensation and employee benefits under both GAAP and adjusted earnings decreased in the first quarter of 2022 due to the sale of the insurance brokerage business and cost reduction initiatives. Our adjusted earnings compensation as a percentage of total revenue was 50.7%, which was over 300 basis points lower than a year ago. Our non-compensation expenses under GAAP and adjusted earnings decreased by 6.88% and 8.9% respectively, driven by lower occupancy and equipment expense due to the sale of our insurance brokerage business as well as lower interest and communications expenses. These expense reductions were partially offset by higher selling and promotion charges as COVID-19 restrictions have relaxed across many of the major geographies in which we operate. Moving on to our adjusted earnings. Our pre-tax income was $113.1 million with a 226 basis point margin expansion to 22.3%. We recorded post-tax adjusted earnings of $103.2 million, an increase of 2.1% and a 256 basis point margin expansion. We generated first quarter-adjusted EBITDA of $141.3 million down 4%. Returning to share count. Our weighted average share count decreased 1.2% sequentially, and 9.7% year-over-year to $502.9 million. Our fully diluted spot share count as of March 31st increased by 1.1% sequentially to $502.9 million shares. Compared to a year ago, BGC's fully diluted spot share count decreased by $54.1 million shares or 9.7%. As of March 31st, our liquidity was $539.6 million compared with $594.8 million as of year-end 2021. 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. Cash uses have historically been the greatest in the first quarter. Cash and cash equivalents were $509.2 million versus $553.6 million as of December 31st, 2021. Notes payable and other borrowings were $1,051.9 million compared with $1,052.8 million. Total capital was $753.5 million compared with $682.1 million as of year-end 2021. In February 2022, the U.S., UK, EU and other countries imposed sanctions on Russian counterparties and as a result, we have ceased trading with those clients. For context, we derive less than 1% of total revenue from both our Moscow branch and sanctioned Russian counterparties. As of March 31st, BGC has reserved $6 million in connection with unsettled trades and receivables with sanctioned Russian entities. And with that, I'm happy to turn the call over to Sean.

Thanks, Steve, and good day, everyone. Fenics, our technology-driven higher-margin business, continued to grow at a market-leading rate. Our Fenics strategy is focused on converting the company's $1.4 billion voice hybrid revenue base into higher-margin technology-driven Fenics Markets revenues while concurrently scaling its state-of-the-art fully-electronic Fenics Growth Platforms, including FMX and cryptocurrencies. Looking at Fenics in more detail, our Fenics UST platform revenue improved 23.5% from a year ago, driven by growth across Fenics U.S. Treasuries, Lucera, Fenics FX, and Fenics GO. Fenics U.S. Treasury revenues increased over 52% driven by market-leading ADV growth, new product offerings, and more traders using the platform. During the first quarter, Fenics UST had ADV growth of 18% outperforming the overall market. Fenics UST, CLOB market share increased approximately 320 basis points year-over-year to 20% in the first quarter. As of the end of the first quarter, all Fenics UST customers are paying to transact on the platform, which will drive revenue growth throughout 2022. Lucera, our infrastructure and software business, continued its strong growth trajectory with its revenue improving 56% year-over-year. This growth was driven by onboarding two large global investment banks, the expansion of existing relationships, and adding new cryptocurrency clients. Lucera is providing connectivity to the world's deepest crypto liquidity pools as part of world-class infrastructure. During the first quarter, Lucera added connectivity to an additional 19 cryptocurrency venues and liquidity providers. Fenics FX, our ultra-low latency electronic FX trading platform, had a record quarter generating strong double-digit volume growth, which drove revenue 47% higher versus last year. Fenics FX growth outpaced both its FX ECN peers and the overall market. Fenics GO, our global options electronic trading platform, saw revenue increase five-fold from a year ago, driven by the integration of MatchBox, as well as market share gains across HSCEI and KOSPI index options. Looking at Fenics Markets, revenues improved by 15.7% driven by strong growth across FX rates, credit, and market data. Fenics mid FX, the leading wholesale FX hedging platform, continued to generate solid double-digit volume and revenue growth across Spot FX and Asian NDX. March 2022 marked a record month for this business as heightened FX volatility attracted record volume to the platform as large global banks look to hedge FX risk on Fenics' mid highly efficient, risk-neutral platform. Fenics Market Data signed 47 new contracts during the first quarter with total contracted value increasing 63% versus a year ago. Fenics Market Data continues to see strong demand for its rates and regulatory service data packages with additional products rolling out throughout 2022. Fenics Market Data, which has a highly recurring and compounding subscription revenue model, grew over 21% year-over-year. Fenics Direct, our web-delivered multi-dealer FX options platform nearly doubled its ADV in the first quarter, driving revenue 101% higher versus the prior year period. Capitalab's NDF match business, which helps clients reduce foreign exchange exposure, continues to capture market share driving double-digit volume and revenue growth versus a year ago. Our Voice/Hybrid business generated revenues of $381.2 million, down 6.5% from last year due to the continued conversion of Voice/Hybrid to Fenics Markets revenue. BGC's Energy and Commodity business grew 8.6% in the first quarter, driven by solid double-digit growth across the energy complex including BGC's leading environmental business. Our Rates business declined by 1.8% primarily due to the challenging market conditions across medium and long-term rates products. For example, Interest Rate Swap volumes were down 35% compared to last year. Primary dealer volumes for U.S. Treasuries with maturities less than three years improved by 29% while volumes for maturities six years and greater were down 10%. Now turning to our second quarter 2022 outlook. BGC's revenues were approximately 2.5% lower for the first 19 trading days of the second quarter compared to the same period last year excluding insurance. We expect to generate total revenue of between $420 million and $470 million, as compared to $458 million last year, which excludes $54.4 million of insurance revenue. Because the company generates a significant portion of its revenue in euros, if the recent strengthening of the U.S. dollar were to remain for the balance of the quarter, BGC's revenues would be reduced by $20 million below the midpoint of the guidance. The strengthening of the dollar did not change the volumes of our revenues in euros; it just changes how we present ourselves in U.S. dollars. We anticipate pre-tax earnings to be in the range of $81 million to $101 million versus $97.4 million, and we anticipate our full-year 2022 adjusted earnings tax rate to be in the range of 8% to 10% versus 6.4% for full-year 2021. And with that, I'd like to turn the call back over to Howard.

Thank you, Sean. We are continuing to make important progress growing our Fenics business, which continues to drive our margin expansion. We are excited about our near-term initiatives, including the upcoming FMX Futures launch and our continued roll out of our comprehensive cryptocurrency offering. We believe that both of these initiatives will drive value for our BGC shareholders. Finally, we expect our Board of Directors and applicable committees to determine whether to proceed with a corporate conversion by the end of the second quarter. With that, Operator, we're happy to open the call for questions.

Thank you very much. And we do have a couple of questions. Our first question comes from Gautam Sawant from Credit Suisse. Your line is now open. Please go ahead with your question.

Hey, Howard. Good morning. This is Gautam. And thank you for taking my questions. It's also great to hear that you're cancer-free and doing well.

Thank you. Really good for me too.

Can you please expand on your macroeconomic perspective and how it translates into the 2Q revenue guidance? We understand that volumes were mixed in the first quarter and the firm could have a $20 million FX headwind, but can you walk through the businesses that are punching above their weight and where revenues could be pressured?

While rates are rising sharply, it is challenging for the rates community to determine where to trade. The yield curve is flattening and potentially inverting, with the longer end affecting volumes, as reflected in a 35% decline in interest rate swap volumes. These are short-term issues that may persist over the next couple of quarters. As the situation stabilizes and the Fed reaches its final target by the end of the year, it will create a significant tailwind for the company. Our rates business is substantial, and we are pleased that rates are returning. We have faced challenges with zero interest rates for years, making it exceptionally difficult to broker fixed income. As rates rise to a few hundred basis points, the business environment will become much more favorable. The short end of the rates spectrum is very active, while the long end remains constrained for the next couple of quarters. By the year's end, we anticipate a rise in rates volumes, which we expect to continue throughout 2023. This creates a great opportunity for the company, although we need to navigate a quarter to get through the current rates process. In the foreign exchange space, we face a headwind due to the dollar's significant appreciation. Last year, the euro was at 1.20, meaning our euro revenues were worth $1.20 each, but now they are worth only $1.05. However, it is expected that the European Central Bank will begin increasing rates soon, lagging behind the U.S. We believe this situation will improve as the European Central Bank aligns with the U.S. in consistently raising rates, providing stability. Overall, we view this as a two-quarter scenario in terms of presentation. From a macro perspective, the current foreign exchange rates are beneficial for business and will enhance volumes. These factors might not influence volumes directly but do affect presentation. Credit has been impacted by the rise in rates, with volumes down and likely to remain low until rates stabilize later this year. It's not just related to our firm; industry-wide credit volumes have seen a decline, which has affected many firms as they reassess their next moves. The market conditions for credit transactions are challenging, leading to decreasing credit volumes, while we forecast rates to remain difficult for two quarters before turning positive. Foreign exchange continues to be a bright spot, though our dollar-based reporting limits our presentation. We are considering reporting in constant currency to better showcase our euro revenue. In conclusion, while credit faces hurdles, the rest of our business, particularly in futures and cryptocurrencies, is generating excitement.

Got it. And just a follow-up on your mention of the futures business. Can you provide us with a progress update on bringing strategic investments into the FMX interest rate derivatives exchange as you're progressing towards the 4Q '22 launch with U.S. Treasury and dollar futures?

As you saw in our U.S. treasury business, our Fenics UST, we didn't have partners when we launched in '18, and now we've got a 20% market share at the end of the first quarter 2022. So that's four years. We’re not interested in waiting four years to do futures, so basically, we decided we’re going to bring in the banks as partners. We are in active conversation with banks and market-makers. Our objective is to bring them across the line together and these are significant institutions, thoughtful institutions, but ones with lots of committees and bureaucracy. Our objective is to bring them across the line together so we have a wide coalition of supporting institutions and that remains our pace. So that is our expectation that we will bring them in before we open and have closed their investment before we launch. However, it’s challenging to get everyone to commit at the same time; that remains our objective.

Thank you. And last question for me. Can you provide us with how the firm is thinking about capital deployment priorities this year, as well as equity compensation given the level of uncertainty in 2022? Is BGC still tracking to a 3% equity issuance target this year, and could you help us size the range for our purchases? I know in the past you’ve mentioned a potential 75% capital return target.

Number one, we will constrain our issuance — net issuance — to well below 3%. I think if you modeled 1%, you'd be closer to where we expect to go. Our days of issuing significant amounts of equity net are behind us. Our corporate objective is to restrain equity issuance, so if you modeled 1%, that would be a more accurate reflection of how the company is thinking. Regarding capital return policy, we balance two aspects: buying back our stock, which we find undervalued, and we will continue to do so. We bought back significant amounts of our stock last year. As Bisgay mentioned, the first quarter tends to involve paying bonuses and taxes, which are the two largest uses of cash in that period. So, we face constraints on cash uses in the first quarter, but that trend will ease going forward. Thus, we find balance between stock buybacks and acquisitions for business growth, where we’ve already invested in Futures and cryptocurrencies; significant capital expenses are no longer required for these ongoing initiatives. Therefore, those will continue as we managed capital returns. If you factor in acquisitions, I think you’d get a clearer picture of the company’s strategy.

Got it. Thank you for taking my question.

Thank you very much. Our next question comes from Rich from Piper Sandler. Your line is now open. Please go ahead.

Good morning, Howard, and congratulations on your health. I'm looking forward to meeting in June. My first question is about FMX. I understand your intention to bring everyone on board. Do you have any early insights into who is involved? Sometimes knowing this encourages others to join. How do you reconcile this approach with the need to assure investors that you have these individuals committed?

Our Futures initiative is not a secret. We are building a competitive offering, and I think our clients have expressed to us, the banks and market-makers have conveyed to us that we’re the only credible opportunity to compete with the Chicago Mercantile Exchange and its $80 billion monopoly market cap. So they are already aware of this, and they know who is at the table. We want this to be a broad-based, strong, capable initiative. However, we require certain commitments from the banks. They have to be supporting the platform in order to be equity players. These arrangements will come with both equity and volume commitments, which is a detailed process. They are all aware of who we're actively talking to, and we anticipate that they will come across the line together. The proof will be in the delivery and results, but that is our clear expectation, and I wouldn’t say it otherwise.

If I heard you correctly, Howard, we shouldn't expect any announcements until the launch. Is that what you're saying? And do you expect participation from all the major banks?

Let's just say the majority of them.

I expect an announcement of their participation before the launch. That is my expectation. We should have participation before we open for business. I would expect most of the participants who matter most for volume in U.S. Treasury and Futures and Swap Futures, Eurodollar Futures, and U.S. Treasury Futures to participate. However, never say all because all includes every single one.

Could you talk about what are the main factors now regarding corporate conversion and how it could impact the organization? What are the last points or issues that need to be resolved to effect that decision?

This decision rests with the Board of Directors and its committees as they weigh all of the balancing decisions on whether to convert the company into a simpler corporate form. There are benefits to remaining where we are, and they are considering those benefits. We know that our shareholders would prefer a simpler structure, so management would also like the company to move towards a simpler form. We believe it would make analysis easier and improve communication. We are currently awaiting their decision, which is expected in the current quarter. Once they reach a conclusion, we will announce the decision and proceed accordingly. It’s in their hands, not management's.

You anticipate increased activity in the longer dated part in the second half of the year. However, there is likely to be considerable volatility at the front end as the discussion continues regarding whether there will be seven, eight, or six Fed rate cuts. How confident are you that the second half will evolve into a more favorable environment for your complex?

I am incredibly optimistic that when the Fed clarifies its direction, meaning that the world doesn’t wait for the Fed to finish, volumes will shift to the long-end relatively quickly once people perceive that there are one or two more hikes anticipated and then it will stabilize. The volumes in the long-end will start to increase rapidly. The short end is showing improvement, up 29%, and I think that trend will continue. We anticipate the front-end to remain a strong volume area, while we expect the long-end to normalize and become a growth area once the market sees the Fed is finished with this round of rate hikes. When that occurs, the volumes in the long-end could equal those seen in the short end, which would be a fantastic tailwind for our rates franchise.

Got it. Thanks, Howard, and congrats, again, on the good health.

Thanks.

Thank you very much. I have no further questions now. So, I would like to hand it back to Howard for some closing remarks.

Thank you all for joining us this quarter. I deeply appreciate all of your support throughout the time I had cancer. I'm delighted to be cancer-free. I feel really good and I look forward to joining Richard at this conference and seeing all of you when I can now travel again, which I'm doing at a steady pace. So, I'm back to traveling and seeing people, feel great, and I have no lasting effects. Thank you for your support, and I look forward to speaking to you again next quarter.

Thank you very much, ladies and gentlemen. That now concludes this session. Thank you. Goodbye.