BGC Partners, Inc. (BGCP)

Q2 2010 Earnings Call Transcript

August 04, 2010 09:45 am

Executives

Jason McGruder - Head, IR

Howard Lutnick - Chairman & CEO

Shaun Lynn - President

Graham Sadler - CFO

Analysts

Daniel Harris - Goldman Sachs

Patrick O’Shaughnessy - Raymond James

Rich Repetto - Sandler O'Neill

Niamh Alexander - KBW

Michael Wong - Morningstar

Presentation

Operator

Good day, ladies and gentlemen and welcome to the Q2 2010 BGC Partners, Inc. Earnings Conference Call. My name is Steve and I will be your operator for today. At this time all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of today's conference. (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, Mr. Jason McGruder Head of Investor Relations.

Jason McGruder

Good morning. Before we begin I want to make sure that you know that our third quarter 2010 financial results press release was issued earlier today. It can be found at either the news center or investor relations section of our website at www.bgcpartners.com.

During this call, we will also be referring to a PowerPoint presentation that summarize our results and which includes other useful information. After the conclusion of this call we will also post a copy of the prepared remarks that we are about to give. These can all be found in the Investor Relations section of our site.

Throughout today's call we will be referring to our results only on a distributable earnings basis. Please see the section, financial results release entitled Distributable Earnings and reconciliation of GAAP 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, pretax earnings or posttax earnings, we are doing so only on a distributable earnings basis. I’ll also refer to the statement entitled discussion of forward-looking statements contained in the press release.

I remind you that the information in the release and on this call contain forward-looking statements within the meaning of section 27A of 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 Partners and industry as well as statements about our future financial operating performance.

That 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 a number of risks and uncertainties that are included, but limited to risks and uncertainties identified in the earnings release in BGC Partners’ filings with the US Securities and Exchange Commission.

We believe that our forward-looking statements are based upon reasonable assumptions when made. However, precaution it is impossible to take actual results or outcomes or the effect of risks and uncertainties of other factors on expected results or outcomes that accordingly you should not place undue reliance on these statements.

The forward-looking statements speak only as of the date when we make them and we undertake no obligation to update these statements in light of subsequent events or development. Please refer to the complete disclaimer with respect to forward-looking statements set forth in today’s earnings release and the risk factors set forth in our public filings which we incorporate by reference.

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

Howard Lutni ck

Well done, Jason. Good morning and good afternoon to those who are with me in London today. Thank you for joining us for our 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 Partners once again outpaced our peer group in terms of top- and bottom-line growth. Our revenues were up 14.4% to $336.3 million in the second quarter of 2010. Pretax distributable earnings were up 44.7% to $46.5 million or $0.20 per fully diluted share. Our post-tax distributable earnings were up by 63 % to $38.9 million or $0.17 per fully diluted share.

We had strong results across most of our products during the quarter. We again generated double-digit revenue increases in rates, foreign exchange and equities and other asset

classes.

I am also pleased to report that our quarterly revenues related to fully electronic trading were up by 40 % as compared to last year. The combination of our unique structure, ongoing partnership enhancement program, continued strong top line growth, and the increasing proportion of our revenues related to fully electronic trading contributed to our 345 basis point year-on-year profit margin expansion. Our pretax distributable earnings per share increased by 33.3 %, while our post-tax distributable earnings per share increased by 54.5 % when compared to the second quarter of 2009.

I am also pleased to announce that our quarterly dividend to common stockholders increased by 55.6 % year-over-year to $0.14 which remains consistent with our first quarter dividend. It is the Company’s intention to maintain this dividend for the remainder of the year.

With respect to the financial reform bill recently passed by Congress and as the exact rules have not yet been promulgated, it’s too early to speak about specific aspects of the

bill. However, we believe that the net impact of the legislation will be positive for BGC.

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