Greetings, and welcome to the BGC Group Incorporated's Third Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow today's formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to introduce Jason Chryssicas, Head of Investor Relations. Mr. Chryssicas, you may now begin.

Thank you, and hello, everyone. This morning, we issued BGC's third quarter 2024 financial results press release and earnings presentation. You can find these at ir.bgcg.com. Except as otherwise specified, any historical results provided on today's call compare only to the third quarter of 2024 with the prior year period. 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 press release, investor presentation, and supplemental tables in our website for additional details on our quarterly results, and for complete and updated definitions of any non-GAAP terms, reconciliations of these items to corresponding GAAP results, and how and when management uses them. The outlook discussed today assumes no material acquisitions or meaningful changes in our stock price. Our expectations are subject to change based on various macroeconomic, 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 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. And with that, I'm now happy to turn the call over to Howard Lutnick, Chairman of the Board, and the CEO of BGC Group.

Thank you, Jason. Good morning, and welcome to our third quarter 2024 conference call. With me today is Sean Windeatt, our Chief Operating Officer; and Jason Hauf, our Chief Financial Officer. We delivered record third quarter revenues of $561 million, up 16% compared to last year. Our strong performance reflected growth across every asset class and region. We drove our pre-tax adjusted earnings up more than 24%. Earlier this month, we agreed to acquire OTC Global Holdings, the largest independent energy and commodities broker, and we closed our acquisition of Sage Energy Partners. We expect both transactions to be immediately accretive, and together, will add more than $450 million in annual revenues. FMX continues to outperform its peers, generating record volumes across our U.S. treasury and FX platforms. FMX Futures Exchange, which launched September 23, provides clients with much-needed innovation, superior pricing, and dramatically improved capital efficiencies. We expect to connect an additional five to 10 of the largest FCMs over the next couple of quarters.

Thanks, and good day, everyone. Our third quarter revenues grew by 16.2% to $561.1 million, representing record third quarter revenues and reflecting strong growth across every asset class and region. Total brokerage revenues grew by 15.1% to $500.6 million. Rates revenues increased by 19.6% to $174.3 million, reflecting higher volumes across the asset class. ECS revenues grew by 21.3% to $112.9 million, driven by strong organic growth across the energy complex and BGC's leading environmental business. As Howard mentioned earlier, we're excited about what the OTC and Sage acquisitions will bring to our ECS business. OTC, the world's largest independent energy and commodities broker, will transform our offering in oil and shipping, allowing us for the first time to broker the entire barrel. Sage seamlessly aligns with our business, further strengthening our leading environmental franchise. Foreign exchange revenues improved by 15.4% to $92.1 million, driven by emerging markets products and higher G10 options volumes. Credit revenues increased by 6.7% to $68 million, led by Fenics' PortfolioMatch and higher emerging market and European credit volumes. Equities revenues grew by 1.3% to $53.3 million, driven by U.S. and European equity derivatives volumes, partially offset by lower Asian equity derivative activity. Data, network, and post-trade revenues improved by 17.5% to $32.7 million, driven by strong subscription-based revenue growth across Fenics Market Data and Lucera. Turning to Fenics. In the third quarter, Fenics revenues improved by 13.3% to $142.1 million. Fenics Markets produced revenues of $116.8 million, an increase of 9.2%. This growth was driven by higher electronic volumes across rates and foreign exchange. Our Fenics Growth Platforms generated revenues of $25.3 million, up 37.3%, driven by FMX, PortfolioMatch, and Lucera. FMX UST generated record daily average volume of $53 billion for the third quarter, up 40% compared to last year. This translated to 29.4% market share for the third quarter compared to 25.3% a year ago. FMX FX average daily volumes improved more than 38% compared to last year on record ADV of more than $9 billion. FMX FX continues to outperform and grow its market share in the enormous global foreign exchange market. FMX Futures Exchange launched on September 23, trading SOFR futures, the largest notional futures contract in the world. The exchange launched with five FCMs: Goldman Sachs, JPMorgan, Marex, RBC, and Wells Fargo. We expect to connect an additional five to 10 of the largest FCMs for the launch of U.S. treasury futures in the first quarter of 2025. PortfolioMatch U.S. credit volumes increased more than 150% and its European volumes were up over nine-fold compared to last year. Lucera, our network business providing critical real-time trading infrastructure to the capital markets, grew its revenue by over 34%. Lucera is leveraging its strength in the FX markets and expanding across the rates landscape. Turning to our outlook. I'm pleased to provide the following guidance for the fourth quarter of 2024. We expect to generate total revenue of between $545 million and $595 million as compared to $516.8 million in the fourth quarter of 2023, which at the midpoint of our guidance would represent over 11% revenue growth for the full year 2024. We anticipate pre-tax adjusted earnings to be in the range of $122 million to $138 million, versus $110.8 million last year, which, at the midpoint of guidance, would represent around 17% earnings growth for the full year 2024.

Thank you, Sean, and hello, everyone. BGC generated third quarter revenue of $561.1 million, reflecting growth across all geographies. Americas revenues increased by 19%; Europe, Middle East and Africa revenues increased by 16.5%; and Asia Pacific revenues increased by 8.3%. Turning to expenses. Compensation and employee benefits under GAAP and for adjusted earnings increased by 16.4% and 16.3%, respectively, primarily due to higher commissionable revenues during the period. Non-compensation expenses under GAAP and for adjusted earnings increased by 17.5% and 11.5%, respectively, largely driven by higher interest expense, which was more than offset by higher interest income. Moving on to earnings. Our pre-tax adjusted earnings grew by 24.4% to $126.7 million. Post-tax adjusted earnings increased by 34.5% to $126.6 million and post-tax adjusted earnings per share improved by 36.8% to $0.26 per share. Our third quarter adjusted EBITDA was $151.4 million, an 11.4% improvement. Turning to share count. Our fully diluted weighted average share count for adjusted earnings was 494.8 million during the third quarter, a 0.4% decrease compared to the second quarter of 2024. BGC continues to expect its fully diluted weighted average share count to remain approximately flat for the full year 2024. As of September 30, our liquidity was $772.5 million compared with $701.4 million as of year-end 2023. With that, operator, we would like to turn open the call for questions.

Thank you. At this time, we'll be conducting a question-and-answer session. Our first question is from the line of Patrick Moley with Piper Sandler. Please proceed with your questions.

Yeah, good morning, Howard and team. How are you guys doing?

Good morning, Patrick.

So, I wanted to just start off with a question on FMX. It's been a little over a month now since you launched the SOFR contract. So Howard, I was hoping we could just maybe get a state of the union from you on how satisfied you've been with the launch and then on the additional five to 10 of the largest FCMs that you plan to connect over the next couple of quarters. I'm assuming a few of those are strategic investors. So, just wondering maybe what the holdup is and if there's any delays in getting them connected. What's kind of driving that? Thanks.

Sure. We're focusing on FMX Futures. We initially aimed to open with three to five FCMs, and we successfully opened with five, which we announced today. Over the next two quarters, we hope to connect the remaining partners, and that's our goal, along with a few others. Many FCMs only began the connection process after the approval, announcement, and opening, which we understand. As I've mentioned before, our first year is about getting all the players engaged, meaning all FCMs signed up. We expect it to take the full first year to get all 50 FCMs signed up, particularly the largest ones in the top 20. By the end of the first year, we aim to have all the FCMs signed up, and by the end of the second year, all their clients should be connected, preparing us in year three for full competition with the CME. Starting with five FCMs is at the higher end of our expectations, which is encouraging. However, with only five FCMs connected, only their clients can do business with us. We anticipate adding five to ten more FCMs over the next couple of quarters, and we should have most partners signed up with their added connectivity likely leading to increased treasury and foreign exchange trading as well. This could enhance our other FMX assets, specifically our U.S. treasury and foreign exchange platforms, which should improve our market share and volumes too. Overall, things are going slightly better than we anticipated, as we expected three to five FCMs and achieved five. They are conducting business, and there is open interest daily. We are addressing several initial challenges to streamline the process for the FCMs and LCH. I expect that many of these issues will be resolved by the end of this year, and as we move into next year, we should be in great shape.

Thanks for that. Just one other on FMX before you move on to the rest of the business. It looked like the CLOB market share declined sequentially in the third quarter for, I think, the first time ever. So just curious what the driver of that share loss was and then how we should think about market share trajectory from here in that business.

Last quarter, we reported a figure that was slightly rounded up, while this quarter reflects a slight rounding down, which is why I mentioned 29.4%. The previous quarter was around 29.8%. The differences are negligible. During this quarter, we observed a significant increase in trading volume, particularly among professional trading firms on the CME. However, as you know, that isn't our primary focus. The volatility was notably high, and trading among these firms altered our market share slightly; the overall market size increased. Our market share within the U.S. treasury business remains strong and unchanged. We expect positive trends to continue, especially as more of our partners integrate their trading teams. We anticipate substantial growth in our treasury business, have a clear understanding of where this growth is coming from, and are feeling very optimistic about the future.

Okay, understood. Shifting focus to the energy business and the acquisitions of Sage and OTC Global Holdings, which are quite transformative. This will provide much greater exposure to the energy sector. Considering the overall company, how should we interpret the implications for margin expectations and the growth trajectory moving forward? Why do you believe this is an opportune time for such acquisitions? Additionally, could you help us quantify the expected accretive impact of these acquisitions on your earnings? It would also be helpful to have a breakdown of the $450 million in revenues, specifying how much is derived from Sage versus OTC. Thank you.

We've been focused on acquiring businesses in areas where we've been smaller in the U.S. market, and we've seen significant growth lately. We've also identified opportunities in energy, commodities, and shipping, and are now expanding our presence in those areas. These acquisitions will help us solidify our position as a key player in a large and diverse market. Specifically, the two acquisitions from Sage will integrate smoothly with our existing operations, particularly our environmental branch. Additionally, OTC will enhance our strength in the U.S. and improve our standing in Europe, making us a formidable force in the oil industry. We're thrilled about these acquisitions as part of our broader strategy. We anticipate that once both transactions are finalized, the combined revenues will exceed $450 million annually. While we haven't provided EPS estimates yet, we expect both acquisitions to be immediately accretive. We've already completed the acquisition of Sage and expect to finalize OTC by the end of the first quarter, with both transactions positively impacting EPS right away.

Okay. Regarding the size breakout, I would like to ask about the revenue guidance for the fourth quarter. Of the anticipated 10% year-over-year growth, how much will come from these acquisitions? Specifically, what portion is organic versus non-organic? Going forward, as we incorporate these acquisitions into our models, should we assume the existing margins of the business will apply, and expect that they will be accretive while still remaining in the low 20% range for the energy business? Any additional insights would be appreciated.

In Q4, so, of the fractionally over 10% that we have is between 1% and 2% is acquisition, the balance still being between 8% and 9% is organic, and the balance acquisition, just 1% to 2%. And then, from a going forward, from a margin perspective, I think once OTC closes, I think you're, with a large acquisition, immediately accretive, but with any big acquisition, slightly lower margin to start with, whilst you integrate that business and then getting to margins, as you say, around the 20% level sounds pretty good to me.

Okay. And then just, I guess, if you could maybe just share once we get past the Sage or the OTC acquisition, any kind of updated thoughts on capital allocation priorities? And are there any potential businesses within Fenics that you could possibly look to divest? Just updated thoughts there would be great.

You're correct that we've focused on acquisitions that enhance our capital allocation. We've analyzed the optimal use of our capital, and it's evident that these acquisitions will provide superior shareholder value, which is why we pursued them. They are priced well and represent excellent opportunities for us to grow and increase profitability and earnings per share. As a result, we anticipate a decrease in our share repurchase activities while we allocate funds for these acquisitions. However, our calculations indicate that this will be beneficial to our shareholders. Additionally, we have several technology and electronic assets that are performing very well, and we believe some of them could attract offers significantly higher than our current trading multiples. We are certainly open to this possibility, and we have received interest from potential buyers. Over time, we expect to divest some smaller businesses which will underscore the greater value of our electronic assets, potentially exceeding our market capitalization at these multiples. Therefore, we anticipate closing such deals in the coming year.

Thank you. We have a follow-up from the line of Patrick Moley with Piper Sandler. Please proceed with your questions.

It's just us today, Patrick. I'm good with that.

Yeah. I think I was on mute and got thrown back in the queue. So, I wanted to go back to the organic growth outlook. Howard, I know in the past you've said that you expect that you can generate around 10% revenue growth going forward. Is that still achievable in your mind? And in the fourth quarter, it looks like you might dip below that from an organic standpoint. Is that just you have a tough comp, so you're maybe temporarily dipping below that? How should we think about that in the fourth quarter?

I believe we initially indicated that we expected revenue growth to exceed 10% for the year, and we are now guiding for 11% growth. As demonstrated this quarter, the company achieved 16%, showing our focus on maximizing performance. We do not anticipate any setbacks, but I am uncertain about the election outcome and its aftermath, as well as how December will compare to last year's exceptional results. We aim to be realistic with our expectations, yet we remain confident in achieving organic growth of 10%, and nothing has altered that outlook.

Okay. And then, just last one for me. Any update on quarter-to-date trends? And once we get on the other side of the election, how do you expect maybe volumes and just overall activity levels in your business to kind of trend into the end of the year?

All right. So, by guiding revs up more than slightly more than 10%, we sort of tell you that our expectation is things are going to remain lovely at BGC.

All right. Thanks a lot, Howard. That's it.

Okay. Bye, everybody.

Mr. Lutnick, I'd like to turn the floor back to you for closing comments.

Thank you. So, we continue to deliver strong top- and bottom-line growth. Our FMX Futures Exchange, which opened a month ago, we're actively onboarding clients and we feel really good about it. We expect our growth trajectory and market share in SOFR futures to far exceed what we experienced with our FMX U.S. treasury business and you know where that is now. So, we expect very positive things of our SOFR futures business. And we're happy to welcome Sage Energy Partners to BGC, and we look forward to welcoming OTC in the New Year. Things, as I said, are feeling very, very good for BGC, and we look forward to seeing you next quarter. Thanks, everybody. I appreciate you joining us this morning.

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