Greetings and welcome to the BGC Partners' First Quarter 2023 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 conference over to your host Jason Chryssicas, Head of Investor Relations for BGC Partners. Thank you. You may begin.

Good morning. We issued BGC's first quarter 2023 financial results press release and the presentation summarizing these results this morning prior to market open. You can find me at ir.bgcpartners.com. Please note that you can find additional details on our quarterly results in today's press release and investor presentation. Unless otherwise stated, any historical results provided on today's call compare only the first quarter of 2023 with the prior year period. Certain revenue figures provided for the current period are as indicated. We will be referring to our results on this call only on an adjusted earnings basis unless otherwise stated. You 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, securities loan, and repurchase agreements. We define total capital as reviewable partnership interest, total stockholders' equity, and non-controlling interest in subsidiaries. BGC generated a significant amount of its revenues in non-US dollar denominated currencies, particularly the euro and pound sterling. BGC presents revenue comparisons on a constant currency basis to provide a better comparison of the company's revenues during the period, which exhibited volatile foreign exchange movements. BGC's constant currency movements assume foreign exchange rates used to terminate the company's prior period revenues applied to the current period revenues. Please see today's press release for results under generally accepted accounting principles. Please also see the relevant section at 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. We refer to the company's technology-driven businesses as Fenics. Fenics offerings include FedEx markets and Fenics growth platforms. I'd also remind you that the information regarding our business on today's call that is not historical are forward-looking statements. These include statements about the effects of the COVID pandemic, financial position, liquidity, and outlook. Any forward-looking statements about risks and uncertainties except as required by law, we undertake no obligation to update any 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 a discussion of additional risks and uncertainties, which 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, 10-Q, and Form 8-K. I now have to turn the call over to Howard Lutnick, Chairman of the Board and CEO of BGC Partners.

Thanks, Jason. Good morning and thank you for joining us for our first quarter 2023 conference call. With me today are BGC's Chief Operating Officer, Sean Windeatt; and our Chief Financial Officer, Jason Hauf. As we expected, long-term growth for BGC has begun. The first quarter saw growth across each of our business lines. Our quarterly revenue grew by over 5% or 7% in constant currency, with growth accelerating so far in the second quarter with revenue up 9% through the first 19 trading days. We expect BGC's revenue to continue to grow as the relationship between trading volumes and the enormous increase in buy issuance returns following the end of zero interest rates improves. Fenics had a record quarter with market-leading revenue growth of 12% or over 14% in constant currency, representing over 26% of our total revenue in the first quarter. We expect to complete our corporate conversion on June 30 and trade under our new ticker BGC at the beginning of July. With respect to FMX, progress continues with the CFTC on the final approval of our Futures Exchange and we intend to announce our strategic partners prior to the launch. With that, I'll turn the call over to Sean.

Thanks, and good day, everyone. Our revenue grew by 5.2% to $532.9 million in the first quarter of 2023, as our trading volumes increased following the end of zero interest rates. This represents our second-highest ever quarterly revenue, excluding insurance of course, second only to the first quarter of 2020 when the onset of the COVID-19 pandemic drove trading volumes to record levels. Both our voice hybrid and Fenics businesses saw solid growth with revenue up across all asset classes. Fenics grew by 12% or 14.4% in constant currency, generating a record $140.4 million in the first quarter representing 26.3% of BGC's total revenue. This growth was driven by higher trading volumes across all our asset classes. The combination of meaningful interest rates and improving trading conditions led to higher client activity across rates and credit, driven by shorter-dated interest rate products and strong credit volumes. Additionally, our renewable energy and ship chartering business saw strong double-digit growth driving our Energy and Commodities business higher. Data software and post-trading revenues improved by 12.4%, driven by Fenics Market Data and Lucera. We expect the growth of these recurring revenue businesses to continue to outperform the industry. Our growth has accelerated in the second quarter, with overall revenue up 9% through the first 19 trading days of the quarter. Higher revenue and record front-office productivity, which increased 9.2% versus last year, drove profitability higher across our business. Turning to Fenics. Fenics' industry-leading growth of 12% or 14.4% in constant currency was led by our growth platforms, which improved by 33.1%. This strong improvement in Fenics growth platforms was driven by Fenics UST's portfolio match and Fenics GO. Our Fenics markets revenues increased 9.5% or 12.2% in constant currency. This growth reflects the strength of our comprehensive Fenics offerings and conversion of our voice hybrid volumes to our higher-margin technology-driven Fenics businesses. We saw stronger trading volumes across our electronic fixed income products, particularly credit. With that, I'm pleased to provide the following outlook for the second quarter of 2023. We expect to generate total revenue of between $450 million and $500 million as compared to $435.8 million last year. We anticipate pre-tax adjusted earnings to be in the range of $90 million to $110 million versus $90.2 million. And we anticipate our pre-corporate conversion adjusted earnings tax rate to be in the range of 5% to 8% versus 7.3% for the full year 2022. With that, I'd like to turn the call over to Jason.

Thank you, Sean, and hello, everyone. BGC generated total revenue of $532.9 million, an increase of 5.2% as compared to last year. On a constant currency basis, our revenue was up 7% versus a year ago. By asset class, rates increased by 3.7% and 6.6% in constant currency. FX increased by 0.2% and 1% in constant currency. Credit increased by 6.7% and 9% in constant currency. Energy and commodities increased by 8.8% and 9.5% in constant currency, and equities increased by 1.5% and by 3.5% in constant currency. By geography, Americas revenue increased by 14% and Europe, Middle East, and Africa revenues increased by 3.4%, while Asia Pacific revenues decreased by 7.4%. Moving on to expenses. Our compensation and employee benefits under both GAAP and adjusted earnings increased by 3.9%. Our non-compensation expenses under GAAP and adjusted earnings increased by 2.1% and 4.2%, respectively. Moving on to our adjusted earnings. Our pre-tax income was $124.6 million, a 10.2% improvement with a 105 basis point margin expansion to 23.4%. We recorded post-tax adjusted earnings of $115.6 million, a 12.1% increase from last year. Adjusted EBITDA of $151.1 million was 7% higher. Turning to share count. Our weighted average share count increased 1.7% sequentially but decreased 0.4% year-over-year to 501.1 million shares. Our fully diluted spot share count as of March 31 increased by 2.3% sequentially to 505.2 million shares. The first quarter generally has greater share issuance due to annual broker bonuses. In April 2023, we repurchased approximately 3 million shares. We expect the majority of our share repurchases to take place in the second half of the year. As of March 30, our liquidity was $534.8 million compared with $524.3 million as of year-end 2022. On April 6, 2023, BGC Group Inc. filed a registration statement on Form S-4 with the SEC in connection with its previously announced corporate conversion. Following receipt of regulatory approvals and subject to other customer closing conditions, including shareholder approval, all of which are expected to be satisfied, we currently expect to close the corporate conversion effectively immediately after closing of BGC's second quarter on June 30, 2023. The company will be named BGC Group Inc. and its shares of Class A common stock will trade on NASDAQ under our new ticker BGC. We will provide additional information with respect to our expected tax rate going forward as soon as practical following the close of the corporate conversion. With that, I'd like to turn to Howard for closing remarks.

Thank you, Jason. As you can see from today's results, it is an exciting time to be part of BGC. Our business is continuing to improve with our growth accelerating through the first 19 trading days in the second quarter. Our corporate conversion will be complete at the end of this quarter and the two most recent examples of company conversions from an Up-C to a Full C-Corp saw average daily trading volumes increase by 40% and institutional ownership double the year following conversion. Recent updates to S&P's index policies mean that dual share class companies like us are now eligible for inclusion. A recent research note estimated that, if BGC's included in the S&P 600 alone, this could translate into 40 million shares of passive demand. So with that operator, we'd be happy to open the call for questions.

Thank you. Our first question comes from the line of Rich Repetto with Piper Sandler. Please proceed with your question.

Good morning, Howard and team, and congratulations on a strong quarter. My first question is for you, Howard. I see that guidance is up 9% for the second quarter. However, volumes have slowed down compared to a robust first quarter. You maintain a very positive outlook for fixed income, but is this just a temporary pause? I recognize that the year-over-year guidance is strong, but when we examine the volumes, CME volumes are significantly down compared to the first quarter.

Well, look we are seeing the healing process of the relationship between issuance and trading volume broadly around the world. We've got meaningful interest rates around the world and we've been expecting that healing process meaning volumes are starting to be more consistent with issuance. So we were up 9% for the month of April and our expectation is we will maintain that pace through the balance of this quarter. So we're not seeing a pullback. We know that certain areas have less volume. Certainly, more volume. There are very idiosyncratic issues in the banking system in America. But globally, we're feeling pretty confident that things feel good at BGC, volumes are growing, issuance is up big. We expect issuance to be up big for the rest of probably the rest of my life and that's our expectation.

Issuance is up over the longer term, but don't you think there has been a slight delay in issuance due to the debt ceiling? Do you believe that the second half will see a recovery in this regard? How would that affect BGCP?

I do. I think that the debt ceiling has created constraints in the short end of the treasury market. Issuance has been idiosyncratically modified by movements of the treasury to try to stay within balance of the US's particular issues with respect to the debt ceiling, which we assume will be resolved one way or the other in the relative near term. I don't see that impacting BGC and its global business, not even in the near term. I mean, I think if it resolves itself it will be beneficial for BGC. If it becomes chaotic, it will be beneficial to BGC. And if it's just sorted out ordinarily, I think the scale of issuance of the US deficit is so large that volumes will be at interest rates around 5% and then just continue to improve. So I think we're in a good spot pretty much either way. I mean, volumes have been constrained for so many years that as they heal whether they heal fast or they heal slow, they're improving every day. And I think you saw that the first quarter was up 5.2%. We started the second quarter up 9%. Our expectation is we'll keep that pace going and we feel pretty good.

I understand. Howard, you mentioned the corporate conversion will be completed after June 30th or on June 30th. I want to clarify that while you mentioned the tax rate and will update us on that later, can you provide more insight into the cost synergies and the type of cost savings we can expect from this?

We prefer to provide a comprehensive overview of our situation. Our tax rate is expected to increase, but our cost savings will help offset that to some extent. While it won't fully eliminate the increase, it will help. Overall, our effective costs will rise, but we will have a simpler company that can attract a wider institutional investor base, leading to a stronger group of shareholders. We are currently focused on completing this process by the end of the quarter. During the voting process, we are limited in what we can share. Once the voting is done, we plan to release a complete model, but our current activities are restricted while the voting is ongoing. We are very confident that the necessary votes will be secured, as we have had discussions with those who plan to vote positively, which should be enough to achieve the desired outcome. This is now just a matter of process. There is considerable work ahead to finalize everything, but we aim to present a strong model. As mentioned, the rate will increase, costs will decrease, providing some relief but not completely alleviating the situation, resulting in an overall higher cost that is not significant, but certainly higher.

Got it. If I could sneak one more in here. I guess on FMX, Howard, I know you believe you got all the submissions in for the regulatory approval. Since you last talked, it's received plenty of publicity. Could you provide any incremental update? Are the same potential investors and partners still involved? Is it the same as what you had lined up before? Also, could you share any updates on the discussions with customers as we get closer to the launch?

Sure. As we get closer, I feel our popularity is increasing. The interest in participating with us, whether as partners or clients, continues to grow. I haven't encountered anyone who is not interested in being part of the alternative to CME's monopoly in America. So far, I've not had that conversation. My feeling is that there will be more partners, not fewer. I anticipate that CME, which is a significant and influential organization in America, may hold private discussions with the CFTC to slow down the process. Therefore, I do not expect things to proceed quickly, as that is a possibility. We await the CFTC's approval, and when that process is complete, we anticipate receiving approval without any issues. We will navigate through that process in the coming months. Once we have CFTC approval, we will begin what we call our soft launch, meaning we will be ready to operate as an exchange. We will start bringing on clients, especially since we are aiming to launch one of the major US rate futures markets. Our plan is to onboard a wide range of clients immediately after receiving CFTC approval. This process marks the beginning of our soft launch. When we have enough clients onboard to support a broader opening, we will officially launch. The soft launch is just the initial phase of onboarding as many clients as possible. Do we have a significant number lined up? Yes. Do we expect to succeed? Yes. Is it just hard work involved? Yes. Is there more to it than that? No. We are committed to putting in the effort to establish a strong competitor and believe that what we are building is unprecedented.

And the announcement of the strategic partners or investors that would not occur prior to the soft launch?

I think that's a discussion with them, whether it's certainly before the full launch, maybe before the soft launch, or it may be somewhere after the soft launch but well before the full launch. So that's just a discussion of future.

Okay. Got it. Thanks for all the info Howard. Thank you.

Hi, operator?

Are there any more questions, or I'll just wrap up. Is that right?

Yes, I'm sorry, there are no further questions at this time.

Okay. Thanks, everyone. Thank you for joining us this morning. The process of BGC's growth as we head towards trading volumes growing more in line with really incredibly large fixed income issuance will continue to underpin BGC's growth going forward. We feel good and we look forward to speaking to you and updating you as we finish the corporate conversion going forward. Thanks, everybody. We look forward to speaking to you soon.