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BGC Partners, Inc. (BGCP)

Q2 2012 Earnings Conference Call

July 26, 2012 10:00 AM ET


Howard W. Lutnick - Chairman and CEO

Shaun D. Lynn - President

Anthony Graham Sadler - CFO

Sean A. Windeatt - COO

Jason McGruder - Head of Investor Relations


Patrick O'Shaughnessy - Raymond James

Jillian Miller - BMO Capital Markets Corp

Richard Repetto - Sandler O’Neill & Partners

Niamh Alexander - Keefe, Bruyette, & Woods, Inc., Research Division

Justin Hughes - Philadelphia Financial



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Good day ladies and gentlemen and welcome to the Second Quarter 2012 BGC Partners Incorporated Earnings Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions).

And now, I have the pleasure in turning the conference over to Mr. Howard Lutnick, Chairman and CEO. Please proceed.

Jason McGruder

Actually, first it’s Jason McGruder, Head of Investor Relations. Good morning. Our second quarter 2012 financial results press release was issued this morning. This can be found either at the News Center or Investors Relations section of our website at

During today’s call, we will also be referring to a presentation that summarizes our results and which includes other useful information. This too can be found at our IR website. Today’s call will be – on today’s call we will be referring to results only on a distributable earnings basis. Please see today’s press release for GAAP results. Please also see the section of today’s press release entitled Distributable Earnings, Distributable Earnings compared with GAAP results and reconciliation of GAAP Net Income to Distributable Earnings for a definition of these terms and how, when and why management uses them.

Unless otherwise stated, whenever we refer to income statement items such as revenues, expenses, pre-tax earnings or post-tax earnings, we are doing so only on a distributable earnings basis. Unless otherwise stated, all the financial comparisons we will be making today will contrast the second quarter of 2012 with the second quarter of 2011.

I also remind you that the information on today’s call contains forward-looking statements within the meaning of section 27A of the Securities Act of 1933 as amended and section 21E of the Securities Exchange Act of 1934 as amended. Such forward-looking statements include statements about the outlook and prospects for BGC and for its industry, as well as statements about our future financial operating performance.

Such statements are based upon current expectations that involve risks and uncertainties. Actual results performance or achievements could differ materially from those contemplated, expressed or implied because of a number of risks and uncertainties that include, but are limited to the risks and uncertainties identified in BGC’s filings with the US Securities and Exchange Commission.

We believe that all forward-looking statements are based upon reasonable assumptions when made. However, we caution that it’s impossible to predict actual results or outcomes or the effect of risks and uncertainties, or other factors on anticipated expected results or outcomes that accordingly you should not place undue reliance on these statements.

Forward-looking statements speak only as of the date when made and we undertake no obligation to update these statements in light of subsequent events or developments. Please refer to the complete disclaimer with respect to forward-looking statements and risk factors set forth in our most recent public filings on form 8-K, 10-K and 10-Q which were incorporated today by reference.

Now, I’m happy to turn the call over to our host, Howard Lutnick, Chairman and CEO of BGC Partners.

Howard W. Lutnick

Good morning and thank you for joining us on the second quarter conference call. With me today are BGC’s President, Shaun Lynn, our Chief Operating Officer, Sean Windeatt, and our Chief Financial Officer, Graham Sadler.

BGC’s second quarter revenues were up 27.5% year-over-year, driven by the success of our real estate business, which generated $144.1 million in revenues and $14 million in pre-tax earnings. Newmark Grubb Knight Frank has become both a powerful force in commercial real estate and a very valuable part of BGC.

We are very proud of Newmark’s CEO, Barry Gosin, BGC’s Global Head of Real Estate, Michael Lehrman, and our entire Newmark Grubb Knight Frank team. We have in front of us tremendous opportunities to grow and expand this asset class. Newmark has become a leader in many markets nationally, and continues to expand its market share and attract key professionals across the country. I am pleased to report that BGC’s dividend per common share will again be $0.17 for the second quarter.

I’d now like to turn the call over to Shaun.

Shaun D. Lynn

Thank you, Howard, and good morning everyone. Unless otherwise stated, the comparisons I will discuss are for the second quarter of 2012 versus a year earlier.

Our overall brokerage revenues increased by 18.6%, driven by the performance of our real estate asset class. Lower activity from our large bank customers, however has contributed to declines in market activity industry-wide across the financial services asset classes. Against this challenging market environment, BGC’s rates and foreign exchange businesses have held up well. Global volumes in rates have been muted due to quantitative easing undertaken by the U.S. Federal Reserve and other central banks.

BGC’s rates revenues decreased by 7.8%, which compares favorably to volume declines of between 9% and 23% for Federal Reserve U.S. Treasuries and for the fixed income and interest rate products of Eurex, the CME, BrokerTec and Euronext. When quantitative easing dissipates, we believe that rates volumes will dramatically rise as historically high levels of government debt issuance around the world will drive business across our voice and electronic platforms.

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