Greetings and welcome to the BGC Group Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder this conference is being recorded. It is now my pleasure to introduce your host, Jason Chryssicas, Head of Investor Relations. Thank you, Jason. You may begin.

Thank you, and good morning, everyone. We issued BGC's second quarter 2023 financial results press release and the presentation summarizing these results this morning prior to the market open. You can find these at ir.bgcg.com. We will provide 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 second quarter of 2023 with the prior year period. Certain revenue figures are provided for the current period 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. You 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 financial instruments owned at fair value, less securities loans and repurchase agreements. We define total capital as redeemable partnership interest, total stockholders' equity and non-controlling interest in subsidiaries. Please see today'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 the 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 ir.bgcg.com and in our investor presentation. We refer to the company's technology-driven businesses as Fenics. Fenics's offerings include Fenics markets and Fenics growth platforms. I also remind you that information regarding our business on today's call that are not historical are forward-looking statements. These include statements about the company's business results, financial position, liquidity and outlook. Any forward-looking statements involve risks and uncertainties. Except as required by law, BGC undertakes 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 statement, see BGC's SEC filings including but not limited to the risk factors and the special note on forward-looking information set forth in these filings. And any updates of such risk factors, especially not on forward-looking information contained in subsequent reports on Form 10-K, Form 10-Q or Form 8-K. I am now happy to turn the call over to Howard Lutnick, Chairman of the Board and CEO of BGC Group.

Thank you, Jason. Good morning and welcome to our second quarter 2023 conference call and our first call after our corporate conversion as the BGC Group. With me today are our Chief Operating Officer, Sean Windeatt; and our Chief Financial Officer, Jason Hauf. We generated strong revenue growth of over 13% in the second quarter as our business continued to improve following the end of manufactured zero interest rates. BGC's outperformance reflects the breadth and scale of our global platform. We are and expect to remain a growth company. At the beginning of the third quarter, we completed our corporate conversion and reduced our fully diluted weighted average share count to approximately 484 million shares, which is a $21 million share reduction, thereby lowering our share count by approximately 4%. With respect to FMX, we are awaiting CFTC approval. We expect to announce our strategic investors and the transaction details in the fourth quarter. FMX's US treasury platform continues to outperform the industry and capture market share from the CME. In US interest rate futures, we will execute the same playbook, but now with the added support of these strategic partners who are the largest users of these products. FMX represents the unique opportunity to reshape the US interest rate cash and futures markets.

Thanks, and good day everyone. Our revenue grew by 13.2% to $493.1 million in the second quarter of 2023, with revenues increasing across all geographies. This growth was primarily driven by the Americas, which improved 21.9% as we continue to execute our growth strategy to increase market share in the region. Our revenue growth was led by a 48% improvement in our Energy and Commodities business, driven by our leading environmental broking business alongside strong double-digit growth across our energy complex and ship broking businesses. Energy and Commodities now represent our second largest asset class behind rates. Our Rates, Credit and Foreign Exchange businesses generated solid year-over-year growth, driven by strength in inflation products as well as European, emerging market fixed income and foreign exchange products. We expect continued improvement across fixed income and foreign exchange markets going forward. We generated double-digit growth across all adjusted earnings metrics during the quarter. Pre-tax adjusted earnings grew by 17.1% to $105.5 million, and post-tax adjusted earnings increased by 18% to $100 million or $0.20 per share, reflecting a 17.6% improvement. Adjusted EBITDA improved by 18.5% to $135.1 million for the second quarter. Turning to Fenics, Fenics grew at an industry-leading pace of 14.2%, generating revenue of $125.1 million, which represented 25.4% of BGC's total revenue during the quarter. This strong growth was led by Fenics Rates, Fenics Credit and our data network and post-trade businesses. Beginning this quarter, we've renamed the line item from data software and post-trade to data network and post-trade to better reflect the nature of these businesses. Our Fenics Markets revenues increased by 10.1%, and Fenics growth platform generated record revenue of $18.1 million, a 46.1% improvement versus last year. Fenics US Treasury revenue increased by over 40% and captured significant market share during the quarter. Our CLOB market share during the second quarter grew to 23%, up over 200 basis points from 21% in the first quarter. Portfolio Match, our fully electronic credit platform, grew its US credit volumes over five-fold from the second quarter of 2022. Portfolio Match continues to outperform the industry and increase its market share across the credit markets. Fenics GO, our fully electronic equity options platform, saw revenue growth more than double in the second quarter, primarily driven by significant market share gains across Asian index products. Data network and post-trade revenue grew by 15.4%, driven by strong double-digit revenue growth across Lucera, Fenics Market Data and our Capitalab post-trade business. Our data network and post-trade businesses surpassed $100 million of revenue over the last 12 months for the first time. We expect continued growth as we execute on our customer pipeline and roll out additional offerings. These businesses generally have longer-term recurring revenue contracts supported by high renewal rates. Turning to our outlook, I'm pleased to provide the following guidance for the third quarter of 2023. We expect to generate total revenue of between $445 million and $500 million as compared to $416.6 million in the third quarter of 2022. This represents growth of 13.4% at the midpoint of our outlook range. We anticipate pre-tax adjusted earnings to be in the range of $87 million to $110 million versus $82.8 million last year. With that, I'd like to turn the call over to Jason.

Thank you, Sean, and hello everyone. BGC generated total revenue of $493.1 million, an increase of 13.2% as compared to last year. By asset class, Energy and Commodities increased by 48%. Excluding our Trident acquisition, organic growth in Energy and Commodities was 35.2%. Credit increased by 7.4%, rates increased by 5.2%, FX increased by 4.3%, and equity decreased by 1.6%. By geography, Americas revenue increased by 21.9%. Excluding Trident, organic growth in the Americas was 16.2%. Europe, Middle East and Africa revenues increased by 9.5%, and Asia Pacific revenue increased by 5.4%. Turning to expenses, our compensation and employee benefits under GAAP and adjusted earnings increased by 14.9% and 13.9% respectively. This increase was led by greater hiring to enhance our growth across both our Fenics and voice hybrid businesses. Our non-compensation expenses under GAAP and adjusted earnings increased by 3.2% and 10.6% respectively. Moving on to our adjusted earnings, our pretax income was $105.5 million, a 17.1% improvement, with a 72 basis point margin expansion to 21.4%. We recorded post-tax adjusted earnings of $100 million, an 18% increase from last year and an 84 basis point margin expansion. Our adjusted EBITDA was $135.1 million, an 18.5% improvement. Turning to share count, our spot share count as of June 30 decreased by 0.3% sequentially to 503.5 million shares. Our fully diluted weighted average share count increased 0.9% sequentially, but decreased 0.3% year-over-year to 505.5 million shares. However, as Howard mentioned, at the beginning of the third quarter, our corporate conversion resulted in an approximate $21 million share reduction of our fully diluted weighted average share count to approximately 484 million shares, which lowered our share count by 4%. As of June 30, our liquidity was $766.8 million compared with $524.3 million as of the year-end 2022. This change primarily reflects net proceeds received from our $350 million 8% senior notes offering completed on May 25, less the reduction of paying down our revolver. In July, we repaid the $450 million 5.375% senior notes. Because both of these senior notes were outstanding for the last five weeks of the quarter, interest expense was higher than it otherwise would have been. We largely offset this additional interest expense with interest income during the period. We incurred an additional $5.6 million of interest expense. However, we earned an additional $4.8 million of interest income, effectively mitigating the duplicated interest expense and higher note rate. On July 1, 2023, BGC completed its corporate conversion to a full C-corporation, which included a change in our name to the BGC Group Inc. and the ticker symbol to BGC. Our new structure is aimed at attracting a broader and more diversified investor base, which we believe will deliver significant value to our shareholders. Upon corporate conversion, all former partnership units were converted to restricted stock and/or restricted stock units. In connection with the conversion, a GAAP equity-based compensation charge of $60.9 million was recorded in the second quarter for the redemption of certain partnership units and issuance of net shares of BGC Class A common stock. There are no expected material charges related to the corporate conversion going forward under GAAP or adjusted earnings. Today, we published our second quarter earnings presentation on our Investor Relations website. This presentation contains information about our corporate conversion including our estimated adjusted earnings tax rate, operational synergies and pro forma share count following the conversion. In addition to lowering our fully diluted weighted average share count, we are also targeting operational synergies of $4 million to $7 million. We are working toward unlocking capital that sits across multiple entities and geographies following the conversion. In terms of post-corporate conversion, estimated tax rate under adjusted earnings, we expect the balance of 2023 to be in the range of 6% to 9%. For 2024, we are currently expecting our adjusted earnings tax rate to tick up slightly to a range of 7% to 10%. With that, I'd like to turn to Howard for closing remarks.

Thanks, Jason. BGC's strong competitive advantage lies in our global breadth and scale, which sets us apart from other execution platforms and market intermediaries. We offer a truly global and comprehensive product suite across the financial, energy and commodity markets. Our strategic position alongside a steadily improving macro trading landscape provides significant opportunities for BGC's continued growth. We look forward to updating you on FMX, and we are pleased to have completed our corporate conversion. We are happy to be reporting here today for the first time, as the BGC Group. And as Jason said, with a new simple ticker BGC. Operator, we'd now like to open the call for questions.

Thank you. I will now be conducting a question-and-answer session. Our first question is from Patrick Moley with Piper Sandler. Please proceed with your question.

Yes, good morning. Thanks for taking my question. So, congratulations on the strong quarter. It seems like revenues really accelerated in May and June, which is consistent with what some of your peers have said, but you significantly outperformed the industry. So I guess my question is, what do you think drove this outperformance? If you could dive into that a little bit more? And wondering Howard, if you could just update us on how you see the back half of 2023 playing out. The 13% growth of revenues in the third quarter seems pretty strong. So I'm just wondering if that's maybe what we should expect going forward or if you would maybe expect that to come down after the third quarter. Thanks.

It's Sean. I'll start by discussing the previous quarter. As I mentioned in my prepared remarks, we experienced significant growth in America, with a 21.4% increase. We've consistently noted that we were undersized in this market, which presented a great opportunity for growth, and we are successfully capitalizing on that. This is a key reason for our outperformance compared to the industry. Regarding asset classes, we have previously stated that our Energy & Commodity business was underperforming, so it's noteworthy that we achieved 48% growth this quarter, as we are now capturing more market share in this large asset class. Additionally, even without considering the small acquisition we made, our Energy & Commodity business still grew by 35%. As for rates, credit, and FX, we saw modest single-digit increases, which aligns with the improving marketplace and our continued market share gains. Our European business also experienced growth of just under 10%. Overall, we are effectively implementing the strategy we established over the past year.

And as we look forward, the macro market structure is healing. It was beaten upon by this manufactured zero interest rate scenario that we all lived through for 14 years. 14 years of that oddity produces people who think that is reality instead of realizing it is a 14-year oddity. So as it was mentioned earlier today that the Fed is planning to now issue more coupons and fewer treasury bills, that's a healing process. What that's going to do is raise longer-term rates simply by supply coming into the market; that would just create more volatility and more volume of trading not only in US treasuries, but across the credit and foreign exchange markets. We now talk about foreign exchange, right? Bouncing all around based on interest rates. For 14 years, all we talked about was foreign exchange based on the macro economy of Europe versus the US. That's kind of a slow-moving boat. Now, you have interest rates moving kind of every month, so what you're going to see, and you're going to feel, is a healing macro environment, of which BGC has a broad, deep set of businesses that are going to benefit from. We have a giant sail; for 14 years it wasn't windy. Now the wind is picking up, and you're starting to see this boat move. You have seen nothing yet. I think there are great opportunities ahead of us. I don't feel this quarter is impressive. I don't feel it's coming down. I feel this is who we are and I think we have a really, really good business beneath our feet. We feel really good about this quarter. I'm not going to project the fourth quarter because I don't know what that world will bring, but certainly we just finished the quarter at 13.2%. The midpoint of our guidance was 13.4%. Obviously, this company feels pretty comfortable with the way the world is rocking going forward. It's coming our way. Finally, after 14 years, it's now coming our way and it's going to stay our way for a long, long time.

Thank you. That's very helpful color. So, my next question was going to be on FMX. And Howard, maybe if you could give any color on your thoughts on the recent announcement from CME in their expanded cross-margining opportunities with the DTCC. And given the delays that you've seen in getting the CFTC approval, do you think these delays have given CME any time to counter in terms of any possible advantages that FMX is planning to offer their customers?

Well, so let's take that apart. So, the CME has a long-standing relationship with the DTCC. Those are two pots, meaning the DTCC holds the treasuries, the CME holds the futures. They want to work together to try to give the market some cross-margin benefits, but the fact is when you have two different people holding the money, we have a certain healthy skepticism of the other one. They hope to get to a 70% benefit, meaning if you're long the treasury and you're short the treasury future they expect to get to a 70% margin offset. Our view with the LCH is a one-pot model where LCH will hold both pieces and when you're holding both pieces, you actually care only about the actual risk, and that should be a sort of 95% to 97% reduction in margin. If you have an interest rate swap with the LCH, which has the gigantic marginal percentage of all swaps, and you have Eurodollars or treasuries against it, you would get 95% to 97% margin offset. The CME, which is an excellent company and extraordinary monopoly in America, are smart capable competitors. But having never had an actual competitor, I think this will shock them into thinking 70% sounds good. However, when the other guy offers 95% to 97%, I think we are going to be a really thoughtful, capable and clever competitor. That’s the baseline. Seventy percent is good, but we think 95% to 97% is better. That's number one. We are waiting for CFTC approval. We do not think it's an 'if'; we just believe it’s a 'when.' It’s a process we are thoughtfully, carefully working through, and we are confident to a certain degree that it will come—and what day it will come, we don't control, but it will come. What I've tried to say today is it is our intention to announce in the fourth quarter the details of our strategic relationships with our investors, both who they are and the details of that transaction.

Great. Great color there as well. And then I guess lastly, my last question would just be around capital return. Howard, I think you've said on the last quarter call that—or maybe hinted that there could be accelerated share repurchases in the second half. So just wondering maybe if you could give us an update there and what we should expect in the second half?

Sure. So because of the seasonality of the business, our best two quarters start at the beginning of the year and then slightly decline each quarter thereafter. But we collect the money, let's assume it's between 90 and 120 days later. So we earn our money in the first two quarters and we collect the cash in the second two quarters. In the first quarter, we paid bonuses and we paid taxes, so we have lots of uses for the beginning of the year, right? We generate more cash in the second half of the year, so we tend to be bigger spenders of our cash in the second half of the year; we’re going into the second half of the year, so I think it feels good right now. Capital return with the company growing—there are two ways to return capital: buying back shares and increasing dividends. Right now, with the stock trading where it is with us being a growth company and doing much better, we're obviously interested in buying back shares. If you looked at us for the last two years, we had a 560 million fully diluted share count and now we have 484 million fully diluted share count. So we've cut our share count by 80 million shares, which I think most people would consider a lot. We like that model of relentlessly using our cash to reduce our shares. The corporate conversion resulted in allowing us to issue net shares, sending the cash to the government, which serves as an effective buyback. It has the same effect of a buyback, meaning reducing the fully diluted weighted average share count. So I would think in the near-term, share repurchases are at the top of the list. Over time, I could see our Board revisiting the dividend and considering increasing it going forward. But short-term, I would think share repurchases are our priority; however, we are not taking the dividend off the table but I don't think that would be for a while.

Great. I’ll leave it there. Congrats to you on another strong quarter.

Thanks, Patrick.

Thank you. There are no further questions at this time. I'd like to hand the floor back over to Howard Lutnick, Chairman and Chief Executive Officer for any closing comments.

Thank you all for joining us today. It is a pleasure to come to you as BGC Group, and we look forward to many, many quarters of growth together. Thanks, everybody.