BGC Partners, Inc. Q1 2010 Earnings Call Transcript

BGC Partners, Inc. Q1 2010 Earnings Call Transcript
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BGC Partners, Inc. (BGCP)

Q1 2010 Earnings Call

May 6, 2010 8:30 AM ET


Jason McGruder – Head, Investor Relations

Howard Lutnick – Chairman and CEO

Shaun Lynn – President

Sean Windeatt – Chief Operating officer

Graham Sadler – Chief Financial Officer


Niamh Alexander – KBW

Rich Repetto - Sandler O’Neill

Daniel Harris - Goldman Sachs



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Good day, ladies and gentlemen. And welcome to the First Quarter 2010 BGC Partners Incorporated Earnings Conference Call. My name is Sally, and I’ll be your operator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions)

As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Jason McGruder, Head of Investor Relations. Please proceed.

Jason McGruder

Good morning. Before we begin, I want to make sure that you know that our first quarter 2010 financial results press release was issued yesterday. It can be found either at the News Center or Investor Relations section of our website at

During today's call, we will also be referring to a PowerPoint presentation that summarizes our results and which includes other useful information. This can also be found in the Investor Relations section of our website.

Throughout today's call, we will be referring to our results only on a distributable earnings basis. Please see the sections of yesterday's financial release entitled Distributable Earnings and Reconciliation of GAAP Income to Distributable Earnings for a definition of this term and how, why and when management uses it.

Unless otherwise stated, we refer to financial statement items such as revenues, expenses, pre-tax earnings or post-tax earnings we are doing so on a distributable earnings basis, although the balance sheet is GAAP.

I also refer you to the statement titled Discussion of Forward-Looking Statements, contained in our press release. I remind you that the information on the release and on this 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 and Exchange Act of 1934, as amended.

Such forward-looking statements include statements about the outlook and prospects for BGC Partners and its industry as well as statements about our future financial operating performance. Such statements are based upon current expectations and involve risks and uncertainties.

Actual results, performance or achievements could differ materially from those contemplated, expressed or implied because of the number of risks and uncertainties that include but not limited to the risks and uncertainties identified in the earnings release and BGC Partners filing with the U.S. Securities and Exchange Commission.

We believe that all such forward-looking statements are based upon reasonable assumptions when made. However, we caution that it is impossible to predict actual results or outcomes or the affects of risks, uncertainties or other factors on anticipated results or outcomes and that accordingly you should not place undue reliance upon 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 set forth in yesterday's earnings release and the risk factors set forth in our public filings, all which are incorporated by reference.

I am very happy now to turn the call over to our host, Howard Lutnick, Chairman and CEO of BGC Partners Inc.

Howard Lutnick

Good morning. And thank you for joining us today for our first quarter conference call. With me today our BGC's President, Shaun Lynn; our Chief Operating officer, Sean Windeatt; and our Chief Financial Officer, Graham Sadler.

BGC's revenues were up 22% to $348.9 million in the first quarter of 2010. Pre-tax distributable earnings were up 49.1% to $44.8 million. Our pre-tax distributable earnings were $0.20 per fully diluted share and out post-tax distributable earnings were up by 68.7% to $38.1 million, or $0.17 per fully diluted share.

We had strong results across most of our products during the quarter. We generated double-digit revenue increases in rates, foreign exchange and equities and other asset classes. I'm also pleased to report that our quarterly revenues related to fully electronic trading were up over 57%, compared to last year.

During the quarter, we completed our global compensation restructuring related to the modification of pre-merger employee contractual arrangements. Graham, will discuss the details with you later in the call.

We also began our partnership enhancement program to strengthen our employment arrangements by leveraging BGC’s unique partnership structure. These new employment agreements will among other things, extend our employment contracts with our broker partners and increase the percentage of competition these partners receive in form of restricted partnership unit.

The overall performance of the company continues to improve as we increase revenue generated from fully electronic trading extend our employment agreement. Increase the percentage of competition partners receive in the form of restricted partnership unit and lower our effective tax rate for distributable earnings. As a results we expect to increase the amount of cash available for dividends and share repurchases.

Taken together, these developments enhance shareholder value and further improve BGC’s competitive position in the marketplace. The improve employee retention and gradually lower our competition ratio for distributable earnings. This aligning of shareholder and partner interest creates a powerful dynamic for growth, profit and dividend.

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