BGC Partners, Inc. (BGCP)

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BGC Partners (BGCP)

Q4 2008 Earnings Call

February 27, 2009, 08:30 am ET


Howard Lutnick - Chairman & Chief Executive Officer

Shaun Lynn - President

Bob West - Chief Financial Officer

Jason McGruder - Investor Relations


Rich Repetto - Sandler O’Neill

Rob Rutschow - Deutsche Bank



Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2008 BGC Partners Inc. Earnings Conference Call. My name is Josh and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answering session towards the end of this conference. (Operator Instructions) I would now like to turn the presentation over to our host for today’s call, Head of Investor Relations, Jason McGruder. You may proceed, sir.

Jason McGruder

Good morning. Before we begin, I want to make sure that you know that our fourth-quarter full year 2008 financial results press release was issued last night. It can be found at either the News Center or Investor Relations section of our website at We also have a PowerPoint summarizing results in the Investor Relations section. I also refer you to the section of our press release titled ‘Discussion of Forward-Looking Statements’ contained in our financial results press release.

I remind you that the information released on this call contains forward-looking statements within the meaning of Sections 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 for its industry, as well as statements about our future financial and 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 the number of risks and uncertainties that include, but are not limited to the risks and uncertainties identified in the earnings release and BGC Partner’s filings with the U.S. 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 effects of risks, uncertainties or other factors on anticipated results or outcomes and that accordingly you should not place undue reliance on these statements.

Forward-looking statements speak only 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 our forward-looking statements set forth in yesterday’s earnings release and the risk factors set forth in our public filings, which we incorporate by reference.

I’d now like 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 on our fourth-quarter 2008 conference call. With me today is Shaun Lynn, our President and Bob West, our Chief Financial Officer. Our pre-tax distributable earnings increased by 46% to $11.3 million or $0.06 per fully diluted share, while our post-tax distributable earnings increased to $8 million or $0.04 per fully diluted share compared with $1 million in the fourth quarter of last year.

As Bob will discuss in more detail, our equity-based compensation was $15 million less than what was reflected in our previous accounts. This lowered our pre-tax distributable earnings for the quarter. We believe that paying relatively more cash to employees and relatively less equity had the same effect as repurchasing $15 million worth of stock, but in a more tax efficient fashion.

We have declared a dividend equal to our post-tax distributable earnings of $0.04 per share for the fourth quarter, which is payable on March 20, to shareholders of record as of March 6. Revenues in October were up 18% year-over-year to $118 million driven by strong growth in credit and other assets. November revenues were down approximately 10% to $89 million as we had expected and December revenues were up approximately 9% to $81 million. Overall, our fourth-quarter revenues were up 5.5% compared to last year.

In January 2009, revenues were down 9% to approximately $100 million compared to January of last year 2008. Our monthly revenues for January 2007, through January 2009 can be found in the appendix of the fourth-quarter 2008 earnings presentation on our Investor Relations website as Jason so eloquently described.

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

Shaun Lynn

Thanks Howard and good morning, everybody. There has been a lot written lately about the current state of the OTC market, inter-dealer brokers in particular and the relationship of OTC revenues of central accounts party clearing. I thought it would be useful to comment from our perspective, as I mentioned on our last call BGC strongly favors open non-exclusionary central clearing and we already broke a number of OTC and exchanges product in this manner.

Our businesses thrived along with a dramatic growth in the percentage of our brokerage revenues coming from centrally cleared products. On our GAAP income statement, we break out our brokerage revenues into commissions and principal transactions.

Commission revenues involve name give up transactions that are bilaterally cleared by our clients. Principal transactions are primarily those in which our counterparty is the central clearing organization. Principal transactions accounted for 31% of BGC’s brokerage revenue in the fourth quarter of 2008 compared to less than 10% in the fourth quarter of 2007.

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