Greetings. Welcome to BGC Group Incorporated Second Quarter 2024 Earnings Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to Jason Chryssicas, Head of Investor Relations. Thank you. You may begin.

Thank you and good morning. We issued BGC's second quarter 2024 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. Except as otherwise specified, any historical results provided on today's call compare only the second quarter of 2024 with the prior year period, and we will be referring to our results only on a non-GAAP basis which include the terms adjusted earnings and adjusted EBITDA. Please refer to today's press release, investor presentation, supplemental tables and our website for additional details on our quarterly results and for complete updated definitions of any non-GAAP terms, reconciliations of these items to the corresponding GAAP results and how when and why management uses them, as well as relevant industry or economic statistics. The information discussed today assumes no material acquisitions or meaningful changes in our stock price. Our expectations are subject to change based on various macroeconomics, social political and other factors, none of our targets or goals beyond 2024 should be considered formal guidance. Also I remind you that information on this call contains forward-looking statements, including, without limitation, statements concerning our economic outlook and business. Such 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 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 regarding forward-looking information in our most recent SEC filings, which are incorporated by reference. Now before opening the call, I’d like to address some recent inaccurate statements made by FMX by the CME. Mr. Duffy, the CEO of the CME, mistakenly spoke of FMX seeking to clear US treasuries in the UK. We are not. FMX UST, identically like the CME’s BrokerTec, clears US treasuries at the FICC in the United States. The LCH is our fully approved CFTC derivatives clearing organization and holds $225 billion of interest rate swap margin, which is available for cross-margin efficiencies against futures. This is essentially more than the approximately $37 billion the CME holds. SOFR futures are near perfect offsets for interest rate swaps and FMX. SOFR futures will produce enormous cross-margin efficiencies against the much larger LCH collateral pool to which the CME does not have access. Over time, we expect our cross margin efficiencies to be many multiples of theirs. With that, I'm 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 2024 Conference Call. With me today is Sean Windeatt, our Chief Operating Officer; and Jason Hauf, our Chief Financial Officer. BGC delivered record second quarter revenues and adjusted earnings with continued growth across our business and geographies. Our revenue growth of 12% delivered earnings growth of over 19%, demonstrating BGC's operating leverage. Higher revenues along with improved profitability in our FMX and Fenics businesses contributed significantly to our profit growth and margin expansion in the second quarter. We are excited about FMX which continues to outperform its peers. FMX UST volumes were up 37% and FX was up 30%. The FMX together with its clearing partner, LCH has full CFTC approval to open our futures exchange. Together with our 10 partners, Bank of America, Barclays, Citadel, Citi, Goldman Sachs, JPMorgan, Jump Trading, Morgan Stanley, Tower Research and Wells Fargo, we look forward to the launch of SOFR Futures, the largest notional futures contract in the world in September next month. With that, I would like to turn the call over to Sean.

Thanks and good day everyone. Our second quarter revenues grew by 11.7% to $550.8 million, representing record second quarter revenues and reflecting broad-based growth across all geographies. BGC generated strong double-digit revenue growth across its three largest businesses; rates, ECS and foreign exchange. Total brokerage revenues grew by 11.3% to $493.5 million. Rates revenues increased by 15.1% to $166 million reflecting higher volumes across interest rate derivatives, including our euro, US dollar and new Yen rates businesses. ECS revenues grew by 19.3% to $117.7 million, driven by strong organic growth across the business. Foreign exchange revenues improved by 14.7% to $88.9 million driven by emerging markets products and G10 options volumes. Credit revenues increased by 5.4% to $69.4 million on higher trading volumes across European emerging markets and US credit products partially offset by lower Asian credit activity. Equities revenues decreased by 10.4% to $51.4 million, due to lower equity derivative trading volumes, partially offset by higher cash equity derivative. Data, network and post-trade revenues improved by 14.1% to $30.8 million, driven by broad-based revenue growth across Fenics Market Data, Lucera and Capitalab. Turning to Fenics. In the second quarter, Fenics revenues grew by 9.7% to $137.3 million driven by higher electronic trading activity, as well as strong improvement in data, network and post-trade subscription revenues. Fenics markets produced revenue of $115.1 million in the second quarter, an increase of 7.5%. This growth was driven by strong electronic foreign exchange credit and rates volumes along with higher Fenics market data revenues. We are excited about our ECS business, which will provide future electronic growth opportunities for our Fenics markets business. Our Fenics growth platforms generated second quarter revenues of $22.2 million, up 22.4%, driven by portfolio match Lucera and FFX. Portfolio match more than doubled its US credit volumes versus a year ago and increased its European volumes by nearly five-fold. Lucera revenues grew by 16%, its 18th consecutive quarter of double-digit year-over-year revenue growth. Lucera continues to expand its customer base and deepen its existing customer agreements, adding to its recurring revenue base. FMX includes the world's fastest-growing cash US treasuries marketplace and its spot foreign exchange platform, along with its fully approved US futures exchange. FMX is challenging the CME's monopoly in US interest rate futures and its leading position in cash US treasuries and spot foreign exchange. FMX UST produced record market share of 30% for the second quarter, up from 28% last quarter and 23% a year ago. FMX UST average daily volumes improved by 37% versus the prior year period achieving new record ADV of $47 billion for the second quarter. This translated to revenue growth of 34%. FMX FX average daily volumes improved by over 30% versus the prior year period, on record ADV of $8.1 billion. FMX FX continues to grow faster than the overall market and is expected to significantly grow its market share in the enormous global foreign exchange market. Turning to our outlook, I'm pleased to provide the following guidance for the third quarter of 2024. We expect to generate total revenue of between $505 million and $555 million as compared to $482.7 million in the third quarter of 2023. We anticipate pretax adjusted earnings to be in the range of $110 million to $127 million versus $101.9 million last year. With that, I'd like to turn the call over to Jason.

Thank you, Sean, and hello, everyone. BGC generated total second quarter revenue of $550.8 million, reflecting growth across all geographies. Europe, Middle East and Africa revenues increased by 14.4%. Americas revenues increased by 9.5% and Asia Pacific revenues increased by 7.9%. Turning to expenses. Our compensation and employee benefits under adjusted earnings increased by 13.1%, driven by higher revenues as well as an increase in newly hired brokers and new business lines. Non-compensation expenses under adjusted earnings increased by 5.1%, driven by high selling and promotion, communications and interest expense. Moving on to earnings, our profitability increased across all earnings metrics during the quarter. Our pretax adjusted earnings grew by 19.2% to $125.8 million with a margin of 22.8%. This is our 15th consecutive quarter of year-over-year margin expansion. Post-tax adjusted earnings increased by 14.7% to $114.7 million, and post-tax adjusted earnings per share improved by 15% to $0.23 per share. Our second quarter adjusted EBITDA was $162.4 million a 20.2% improvement. Turning to share count. Our fully diluted weighted average share count for adjusted earnings was $496.8 million during the second quarter, a 1.7% decrease compared to the second quarter of 2023. BGC continues to expect its fully diluted weighted average share count to remain approximately flat for the full year 2024, excluding acquisitions or extraordinary transactions. As of June 30, our liquidity was $759.1 million compared with $701.4 million as of the year-end 2023. With that operator, we would like to open the call for questions.

Thank you. Our first question comes from Patrick Moley with Piper Sandler. Please proceed.

Yes. Good morning. Thanks for taking my question. So starting off, maybe, Howard, you could just elaborate on Jason's remarks and where you viewed the inaccuracies in the comments made by the CME. And then when it comes to FMX or LCH potentially looking to clear US treasuries. I don't know if that was ever in the cards that you would look to do it in-house. I know that you've mentioned potentially looking to strike a similar partnership that as like the CME has with the DTCC if you were going to offer margin offsets with treasuries, but maybe just update us on your thoughts and any future plans that FMX could have in offering treasury offsets?

Let's begin with some updates. FMX and LCH are fully approved to launch in September with SOFR futures, which will be cleared by LCH, an accredited CFTC derivatives clearing organization. We are set to open in September, and LCH also clears interest rate swaps, enabling cross-margining between futures on FMX and interest rate swap collateral. Notably, 97.8% of all dollar-based swaps are collateralized at LCH, resulting in gross margin efficiencies amounting to $225 billion in collateral, compared to CME's $37 billion. This positions LCH to offer significant efficiencies. It's important to note that this initiative is unrelated to clearing US treasuries, which isn't part of our current plan. FMX has announced a 30% market share in US treasuries and clears them similarly to BrokerTec and FICC in the U.S. There appears to have been some misunderstanding or confusion surrounding this topic, as we've received numerous inquiries. However, I want to clarify that FMX and LCH are all set to open in September, which is imminent, and there's no obstacle in our path. We are equipped to launch SOFR futures that will provide excellent cross-margin efficiencies with LCH's clearing model. While CME has $20 billion in efficiencies based on their $37 billion in collateral, LCH's $225 billion offers a significantly higher potential for capital efficiencies and gross margin. I hope this clears things up.

No, definitely. Thanks for clearing that up. But going back to FMX and some of the comments you just made about nothing being in your way, launching in September. I'm assuming that's kind of a done deal. Have you set a date yet? And are there any potential bogeys at all that could push that out? And then once you launch, what kind of KPIs are you looking to disclose? And could you share any updated milestones that investors should be looking out for whether it's volumes or open interest or market share that you are expecting to get to?

As I mentioned before, this is a long-term journey, not something that will happen overnight. When we started, there was nothing pivotal about the opening days. The goal for our first year is to get everyone involved. There are around 50 clearing members globally, and our task is to onboard them all and ensure they are operational. I'll need to communicate with all our clients. Naturally, some of our partners will be ready to engage in trading, but reaching the wider client base will require more time. By the end of the first year, our aim is to have all participants active, with all accounts opened, and we anticipate achieving record open interest for a new exchange. In the second year, our focus will be on building trading volume and connectivity, ensuring all clients are active participants. We will continuously develop our operations. By year three, we expect to be fully operational with everyone connected, ready to compete strongly with both FMX and CME. This is a gradual process, and the specific opening date in September is not critical to our coordination with LCH. While unforeseen delays could occur, it is certainly our expectation to launch in September. Our team is diligently preparing, and while not every detail is finalized, everyone is aware that September is approaching. We believe our opening will exceed expectations in terms of pricing. However, I want to manage expectations - the actual opening day is just the start of creating a more competitive landscape against the current market dominated by CME. Reflecting on previous comments I made to the Financial Times back in 2007 regarding the CME and CBOT merger, I expressed concerns about creating two monopolies. Our entry with FMX will introduce competition, enhanced by LCH's efficiencies and strong support from our notable partners, which will unfold over the next three years, rather than hinge on any specific day.

Okay. So if we move on to the second quarter, I'll keep asking questions as I've been handling things on my own for the past few quarters. If anyone else is in the queue looking to ask something, feel free to jump in after this and I’ll rejoin the queue. Regarding the quarter, you mentioned that FMX UST revenues increased by 34% year-over-year. Last quarter, you indicated there would be a revenue boost as partners transitioned from variable fee plans to subscription plans, which I believe took effect on May 1. I'm interested to know how much of the growth in UST revenues was driven by that fee plan switch. Additionally, before FMX was established, you were quite a distance from breakeven. Where does FMX currently stand in relation to breakeven, and if it hasn't reached it yet, when do you anticipate FMX might hit that point?

FMX is focused on US treasuries and cash foreign exchange, both of which are experiencing strong growth. The futures exchange is set to open in September, and we have all the necessary personnel and equipment in place, prepared since we received CFTC approval. We're incurring expenses for the futures exchange until it opens. Upon opening, our goal is to increase volume rather than charge high fees. We expect FMX to be profitable by the end of the year, with improved performance anticipated in the third quarter. The initial economic boost was aimed at increasing volume, which should drive growth, but we haven't seen significant changes yet. Our market share has grown steadily, increasing from 23% to 30% over the year, averaging just under 2 points. We are optimistic about potential transactions in the upcoming quarters, as banks may begin to invest more in companies they are closely involved with. While we anticipate FMX to experience revenue growth, we will keep our fees low. This position favors our profitability. It’s essential to note that FMX is up against a $70 billion competitor, while our market cap is between $4 billion and $5 billion. Our competitive edge has even drawn attention from the CME in their public discussions. In collaboration with LCH, which has significant gross margin efficiency, we see immense opportunities ahead. We are excited about FMX's trajectory, expecting attractive near-term profits with 11.7% revenue growth and 19.2% profit growth. We believe these trends will continue, giving us confidence in our future and the value of FMX. There’s much more to come.

Looking at the second half of the year, revenues increased by approximately 10% in the first half. You mentioned that you anticipate finishing the year with around 10% growth, but you are facing a challenging comparison in the fourth quarter where revenues rose by about 18% year-over-year, marking a record fourth quarter. Could you clarify if you are still expecting that growth of over 10% this year? Additionally, do you believe this level of growth is sustainable moving forward?

Look, Patrick, it's Sean. As you've seen in the third quarter, the mid guidance was 9.8% with over 16.3% mid-guidance for profit. So that's for Q3. For Q4, you're right in saying it’s more challenging because the marketplace is changing and continues to evolve. If you look at the growth we had in our main products with ECS showing 19% at 15%, we've guided a midpoint of 9.3%. Therefore, we feel confident around those levels at 10%, as we mentioned at the end of Q1 and are reiterating now, so we definitely expect to stay around those levels. All right. Thanks guys. That’s it from me.

Thank you. With no further questions at this time. I would like to turn the conference back over to Mr. Lutnick for closing remarks.

I want to point out that our stock has performed well over the last year and a half. We're ranked in the top 20% of the S&P 600, which is notable. Meanwhile, other companies with similar revenue growth of 10 to 11% and profit growth around 19% are trading at about 30 times earnings, while we're at just 10 times earnings. Currently, we're approximately 30% above our recent lows within the S&P 600. Other companies in a similar earnings range have negative revenue growth yet are priced comparably. This presents an attractive buying opportunity for our stock, which is likely why we've been repurchasing shares. Our performance outstrips our trading value, making it a great time for potential investors. Moreover, this doesn’t even take into account FMX, which holds significant promise. We've had great results last year and so far this year, and I anticipate continued strong performance ahead. Our shareholders, including employees and management, can expect a positive experience with our stock. Thank you all for joining us this quarter, and we look forward to keeping you updated. We’ll see you for the FMX launch in September. Thank you, everyone.

Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.