BGC Partners : 2Q 2020 Earnings Release

BGC Partners Reports Second Quarter 2020 Financial Results

Declares Quarterly Dividend of One Cent

Conference Call to Discuss Results Scheduled for 10:00 AM ET Today

NEW YORK, NY - July 30, 2020 - BGC Partners, Inc. (NASDAQ: BGCP) ("BGC Partners" or "BGC" or the "Company"), a leading global brokerage and financial technology company, today reported its financial results for the quarter ended June 30, 2020.

Select Results Compared to the Year-Earlier Period1

Highlights of Consolidated Results
(USD millions)	2Q20	2Q19	Change
Revenues	$519.1	$551.2	(5.8)%
GAAP income (loss) from operations before income taxes	48.2	36.8	31.1%
GAAP net income (loss) for fully diluted shares	40.4	21.0	92.5%
Adjusted Earnings before noncontrolling interest in subsidiaries and taxes	92.1	102.3	(10.0)%
Post-tax Adjusted Earnings	80.1	89.8	(10.8)%
Adjusted EBITDA	112.7	116.6	(3.4)%

	Per Share Results	2Q20	2Q19	Change
	GAAP fully diluted earnings (loss) per share	$0.07	$0.04	75.0%
	Post-tax Adjusted Earnings per share	$0.15	$0.17	(11.8)%

Management Comments

"We generated 23 percent growth in our credit business while we increased our insurance brokerage revenues by 11 percent. However, our results were adversely impacted by the continued dislocation faced by BGC and our clients due to COVID-19 and lower industry volumes in rates and foreign exchange, which reflected the massive quantitative easing undertaken by several major central banks and uniformly lower global interest rates", said Howard W. Lutnick, Chairman and Chief Executive Officer of BGC. "Our overall second quarter 2020 revenues would have been over $7 million higher, but for the relative strengthening of the U.S. dollar. Over time, we expect the significant increases in global debt issuance to overcome the effects of quantitative easing and to be a long-term tailwind for our rates and credit businesses".

Shaun D. Lynn, President of BGC, said: "Our stand-alone Fenics2 technology platforms maintained their strong momentum. Fenics UST generated substantial growth year-over-year, with notional volumes up more than 70 percent in the second quarter compared to a 10 percent increase in overall primary dealer treasury volumes. Fenics UST continued to gain considerable market share and expanded its position as the clear number two among central limit order book trading platforms.3 We are rolling out significant technological innovations to our system this quarter, which we expect to result in increased volumes and an expansion of our client base for Fenics UST. In addition, our Fenics GO fully electronic options trading platform doubled

1. U.S. Generally Accepted Accounting Principles is referred to as "GAAP". "GAAP income before income taxes and noncontrolling interests" and "Adjusted Earnings before noncontrolling interests and taxes" may be used interchangeably with "GAAP pre-tax income" and "pre-tax Adjusted Earnings", respectively. See the sections of this document including "Timing of Outlook for Certain GAAP and Non-GAAP Items", "Non-GAAP Financial Measures", "Adjusted Earnings Defined", "Reconciliation of GAAP Income (Loss) from Operations before Income Taxes to Adjusted Earnings and GAAP Fully Diluted EPS to Post-Tax
   Adjusted EPS", "Fully Diluted Weighted-Average Share Count under GAAP and for Adjusted Earnings", "Adjusted EBITDA Defined", "Reconciliation of GAAP Net Income (Loss) Available to Common Stockholders to Adjusted EBITDA", and "Liquidity Analysis", including any footnotes to these sections, for the complete and updated definitions of these non-GAAP terms and how, when and why management uses them, as well as for the differences between results under GAAP and non-GAAP for the periods discussed herein. See section titled "Newmark Spin-Off" later in this document for information regarding the Spin-Off and BGC's continuing operations.
2. For the purposes of this document, the Company's fully electronic businesses may be collectively referred to as "Fenics". Fenics includes revenues from fully electronic brokerage, as well as data, software, and post-trade services.
3. Primary dealer volumes are based on data from the Securities Industry and Financial Markets Association ("SIFMA"). Central limit order book ("CLOB") market share is based on BGC's estimates and data from Greenwich Associates with respect to US Treasury volumes for Fenics UST, CME's BrokerTec, Nasdaq Fixed Income, and Tradeweb's Dealerweb platform. Including these CLOB platforms as well as those using other fully electronic US Treasury trading protocols, Fenics UST increased its overall market share from 2.8 percent to 4.9 percent year-on-year in June 2020, per Greenwich Associates.

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its volumes in the second quarter of 2020. As a highlight, yesterday the system executed approximately 12 percent of the total volume of NIKKEI 225 options on the OSE, and 20 percent of all block trades in that product. Our data, software, and post-trade business grew by more than 7 percent driven by predictable and recurring revenue streams. We are focused on investing in these businesses and expect our data, software, and post-trade growth rate to double next year.4

"During the second quarter of 2020, we introduced Fenics Integrated,5 which seamlessly integrates hybrid liquidity with customer electronic orders either by GUI and/or API. We believe that Fenics Integrated will enhance profit margins by further incentivizing the Company's brokers and clients to automate execution.

We expect businesses that are part of Fenics Integrated to generate pre-tax Adjusted Earnings margins of at least 25 percent in the near-term, and 30 to 35 percent over time.

"We believe that Fenics Integrated will create superior real-time information, improving the robustness and value of Fenics Market Data, which will accelerate our growth rate. As more business lines are added to Fenics Integrated, and as our stand-alone fully electronic platforms6 such as Fenics UST, Fenics GO, Fenics FX, and Lucera gain further traction, the Company expects its revenues and profits to grow.

"While overall brokerage revenues declined this quarter, Fenics brokerage revenues increased by 10 percent and Fenics net revenues were up by 9 percent. We expect Fenics to continue to grow faster than the overall Company and to improve our profitability over time. Our investment of nearly $180 million per year in technology has put us in a position to drive increased electronic trading and higher margins.7 We believe it is only a matter of time before the marketplace realizes the value of our Fenics businesses".

Mr. Lynn concluded: "We continue to expect our Fenics stand-alone businesses to collectively break-even next year. We also expect our insurance brokerage business to be profitable next year. If we achieve these goals, BGC's pre-tax Adjusted Earnings and Adjusted EBITDA should improve by at least $50 million in 2021 from 2020 levels, all else equal".

Dividend Information

On July 29, 2020, BGC Partners' Board of Directors declared a quarterly qualified cash dividend of $0.01 per share payable on September 2, 2020 to Class A and Class B common stockholders of record as of August 19, 2020. The ex-dividend date will be August 18, 2020.

Possible Corporation Conversion8

The Company continues to explore a possible conversion into a simpler corporate structure. An important factor will be any significant change in taxation policy in any of the major jurisdictions in which the Company operates and its stakeholders reside, particularly the United States whose tax policies are likely to be affected by the outcome of the elections this November. This quarter, the Company will begin to work with regulators, lenders, and rating agencies regarding any possible conversion. BGC's board committees will review potential transaction arrangements.

Discussion of Financial Results

The combined impact of continued investment in certain stand-alone Fenics offerings and the insurance brokerage business lowered GAAP pre-tax income by approximately $17 million and $16 million, in the

1. Fenics Global Options ("Fenics GO"). See the press release titled "Fenics GO announces leading liquidity provider Citadel Sec urities joins its electronic trading platform for exchange listed futures and options" dated January 20, 2020. NIKKEI 225 figures refer only to T-session trades on the Osaka Securities Exchange on July 29, 2020.
2. Desks are categorized as "Fenics Integrated" if they utilize sufficient levels of technology such that significan t amounts of their transactions can be or are executed without broker intervention and have expected pre-tax Adjusted Earnings margins of at least 25 percent.
3. BGC may refer to "net investment costs", which are the pre-tax losses for certain Fenics stand-alone businesses, or their revenues less expenses and before taxes. These stand-alone businesses include Fenics UST, Lucera, Algomi, Fenics GO, Capitalab's SGX Nikkei 225 options compression service, and r ecently developed Fenics FX trading platforms.
4. The technology investment figure is based on BGC's annual total technology-related expenses and fixed asset purchases over the three years ended December 31, 2019, excluding Newmark.
5. BGC may refer to its current corporate structure as an "UP-C", which stands for Umbrella Partnership/C-Corporation.

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second quarters of 2020 and 2019, respectively. GAAP pre-tax income and Adjusted EBITDA also reflect the $6.8 million of GAAP charges related to cost savings initiatives recorded in the second quarter of 2020. These charges are in addition to the $22.7 million taken in the first quarter of 2020 for the same cost-savings program. BGC expects its 2020 GAAP expenses to be at least $35 million lower, all else equal, due to the steps it took to reduce costs.

Online Availability of Investor Presentation and Additional Financial Information

An investor presentation as well as Excel versions of the tables at the end of this document are available for download at http://ir.bgcpartners.com. The Excel tables and presentation contain the results discussed in this document as well as other useful information that may not be contained herein. Please see the sections titled "Impact of COVID-19 on Employees" and "Impact of COVID-19 on the Company's Results" in the Company's most recent report on Form 10-Q for the impact of the pandemic on the Company's employees, clients, and results.

Revenues

As a reminder, BGC's revenues are generally correlated with industry transaction volumes but tend to have low correlation in the short and medium-term with global bank and broker-dealer sales and trading revenues. This is because bank and broker-dealer sales and trading revenues reflect bid-ask spreads and mark-to- market movements, as well as industry volumes in both the primary and secondary markets. BGC's brokerage revenues are driven mainly by secondary trading volumes in the markets in which it operates.9 In addition, overall industry volumes have historically been seasonally strongest in the first calendar quarter of the year, sequentially slower in each of the next two quarters, and slowest in the fourth calendar quarter.

BGC reduced front office headcount in certain less profitable businesses, which lowered revenues but is expected to increase profitability over time. The Company's credit business produced strong organic revenue growth due to improved industry volumes. BGC's insurance brokerage business also generated organic growth as previously hired brokers and salespeople ramped up production and as it benefited from favorable pricing trends for insurance renewals.

In the quarter, certain of the Company's rates, FX, and credit businesses were adversely impacted by a global decline in activity across emerging market products, while historically low prices reduced demand for hedging and increased risk aversion across energy and commodities. In addition, global activity across rates and foreign exchange were broadly lower year-on-year during the quarter.10 BGC's equities business is mainly focused on European equity derivatives, where it outperformed in its core markets and gained share, despite a decline in certain relevant industry-wide European volumes.11

1. For more information, please see slides the slides titled "Correlation Between BGC's Brokerage Revenues and Certain Industry Metrics" and "BGC's Revenues Have Been Negatively Correlated with Those of the Large Banks" in the accompanying 2Q2020 financial results presentation.
2. Industry rates volumes include: CME interest rate futures and options, ICE short-term and medium & L-T interest rates, Deutsche Börse (Eurex) European interest rate derivatives, Nasdaq U.S. fixed income, LSE's MTS Cash, MarketAxess U.S. Government Bonds (which represents U.S. Treasury volumes on
   LiquidityEdge), NEX (CME) UST Treasuries, Tradeweb U.S. Government Bonds, ISDA interest rate derivatives, and FIA non -forward rate agreement IRS. Industry foreign exchange volumes include: CME FX futures and options, FIA FX, Refinitiv FX spot volume and other volume, CBOE Hotspot (spot) FX volumes, NEX (CME) EBS spot FX, Euronext FX (Fastmatch), Deutsche Börse FX (360T), and CLS forward, swap, and spot FX.
3. Eurex European equity derivatives volumes were 16% lower in the second quarter of 2020 compared to the year ago period, while Euron ext Equity Derivative Index volumes declined by 19%.

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Consolidated Revenues
(USD millions)	2Q20	2Q19	Change
Rates	$133.0	$153.0	(13.0)%
Foreign exchange	74.4	101.9	(27.0)%
Credit	95.8	78.2	22.5%
Energy and commodities	71.3	73.9	(3.5)%
Equities	61.8	65.1	(5.1)%
Insurance	45.8	41.4	10.5%
Total brokerage revenues	482.1	513.4	(6.1)%
Data, software, and post-trade	20.1	18.7	7.5%
Fees from related parties, interest and dividend income, and other
revenues	16.9	19.0	(11.5)%
Total revenues	519.1	551.2	(5.8)%

Revenues from Fenics are presented in the table below. Additional detail on overall Fenics revenues are available in the supplemental Excel financial tables that accompany this press release at http://ir.bgcpartners.com. "Brokerage revenues" include revenues from Fenics Integrated from the second quarter of 2020 onward. Inter-company revenues represent the amount that Fenics charges certain desks for the use of its technology and are eliminated upon consolidation.

Fenics Revenues
(USD millions)	2Q20	2Q19	Change
Brokerage revenues	$58.4	$53.0	10.1%
Data, software, and post-trade revenues	20.1	18.7	7.5%
Fenics net revenues	78.5	71.8	9.4%
Data, software, and post-trade revenues (inter-company)	21.7	21.2	2.3%
Total Fenics revenues	100.2	92.9	7.8%

BGC continues to expect the 2020 net investment cost associated with its newer standalone Fenics businesses to be less than $40 million and continues to expect these businesses to operate at breakeven for full year 2021.12

Consolidated Expenses13

Consolidated Expenses
(USD millions)	2Q20	2Q19	Change
Compensation and employee benefits under GAAP	$283.4	$290.1	(2.3)%
Equity-based compensation and allocations of net income to limited
partnership units and FPUs	27.8	43.8	(36.4)%
Non-compensation expenses under GAAP	161.9	179.9	(10.0)%
Total expenses under GAAP	473.1	513.7	(7.9)%
Compensation and employee benefits for Adjusted Earnings	276.4	288.9	(4.4)%
Non-compensation expenses for Adjusted Earnings	151.0	162.2	(6.9)%
Total expenses for Adjusted Earnings	427.4	451.2	(5.3)%

BGC's compensation expenses under GAAP and Adjusted Earnings declined in the second quarter of 2020 as it focused on reducing its cost base to improve margins as well as due to lower commissionable revenues. Compensation expenses under GAAP reflect $6.8 million in charges related to BGC's cost reduction program, which remains on track to reduce the Company's compensation expenses under GAAP by over $35 million in 2020. BGC's non-compensation expenses declined largely due to lower selling and promotion expenses and commissions and floor brokerage, which tend to move in line with commissionable

12 The net investment costs relating to these products and services was more than $55 million in full year 2019.

13For additional information on "Equity-based compensation and allocations of net income to limited partnership units and FPUs", please see the section of this document titled "Adjusted Earnings Defined" and the footnotes to the table titled "Reconciliation of GAAP Income (Loss) from Operations before Income Taxes to Adjusted Earnings and GAAP Fully Diluted EPS to Post-Tax Adjusted EPS".

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revenues. Selling and promotion expenses were much lower because of the impact of the pandemic. The decline in these expenses more than offset the increase in interest expense, which was driven by the $300 million 3.750% Senior Notes due 202414 and the Company's revolving credit facility. Over time, BGC expects its expenses to decline as a percentage of revenues as Fenics and the insurance brokerage business improve their top lines and the Company maintains its expense discipline.

Taxes and Noncontrolling Interest

Taxes and Noncontrolling Interest
(USD millions)	2Q20	2Q19	Change
GAAP provision for income taxes	$8.6	$15.0	(42.4)%
Provision for income taxes for Adjusted Earnings	10.6	11.9	(11.3)%
GAAP net income (loss) attributable to noncontrolling interest in
subsidiaries	11.5	8.2	40.5%
Net income (loss) attributable to noncontrolling interest in subsidiaries for	1.3	0.5	158.1%
Adjusted Earnings

Taxes and noncontrolling interest tend to move in line with the Company's earnings.

Consolidated Share Count15

Consolidated Share Count
(USD millions)	2Q20	2Q19	Change	1Q20
Fully diluted weighted-average share count under GAAP	546.1	523.0	4.4%	538.4
Fully diluted weighted-average share count for Adjusted Earnings	546.1	523.0	4.4%	538.4
Fully diluted spot share count under GAAP and Adjusted Earnings	546.2	523.2	4.4%	538.6

BGC's fully diluted spot share count increased by 1.4 percent sequentially. BGC's fully diluted weighted- average share count under GAAP may differ from the fully diluted weighted-average share count for Adjusted Earnings to avoid anti-dilution in certain periods. This also impacts GAAP net income (loss) for fully diluted shares for such periods. The Company expects to use relatively more cash with respect to compensation and acquisitions over time to minimize dilution. BGC continues to expect its 2020 year-end fully diluted share count to increase by approximately 4 percent year-on-year to 550 million.

Select Balance Sheet Data16

Select Balance Sheet Data
(USD millions except per share data)	June 30, 2020	December 31, 2019
Cash and cash equivalents	$463.6	$415.4
Liquidity	522.5	473.2
Notes payable and other borrowings	1,291.0	1,142.7
Book value per share	1.94	1.94
Total capital	786.0	767.4

The quarter-end balance sheet figures reflect the Company paying down $75 million of its revolving credit facility, ordinary movements in working capital, cash paid with respect to annual employee bonuses, taxes,

1. For more information, see the September 30, 2019 press release titled "BGC Completes Offering of $300 Million of 3.750% Senior Notes" and the corresponding Securities and Exchange Commission filing on Form 8-K made on the same date.
2. "Spot" is used interchangeably with the end-of-period share count.
3. The Company considers liquidity to be comprised of the sum of cash and cash equivalents, reverse repurchase agreements (if any), securities owned, and marketable securities, less securities lent out in securities loaned transactions and repurchase agreements (if any). "Cash s egregated under regulatory requirements" is not included in liquidity. For more information regarding Liquidity, see the section of this document and/or the Company's most recent financial results press release titled "Liquidity Analysis", including any footnotes to the same, for details about how BGC's non-GAAP results are reconciled to those under GAAP. The Company considers liquidity to be an important metric for determining the amount of cash that is available or that could be readily available to the Company on short notice. The Company defines net debt as notes payable and other borrowings less liquidity. Total capital is defined as redeemable partnership interest, total stockholders' equity and noncontrolling interest in subsidiaries.

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and the Company's continued investment in its stand-alone Fenics and insurance brokerage businesses. The Company continues to manage its business with a focus on its investment grade ratings.

BGC closed an offering of $300 million of 4.375 percent senior notes on July 10, 2020.17 With this financing, the Company has effectively pre-funded its 5.125% Senior Notes due 2021. BGC continues to expect to strengthen its balance sheet and reduce its overall debt by year-end.

Outlook

BGC's revenues declined by approximately 10 percent year-on-year for the first 18 trading days of the third quarter of 2020. However, Fenics revenues increased by over 10 percent for the same period.

Metric	Guidance	Actual
	3Q20	3Q19
Revenues (USD millions)	$440-490	$521.1
Pre-tax Adjusted Earnings (USD millions)	$63-83	$87.7
	FY 2020	FY 2019
Adjusted Earnings Tax Rate (%)	10-12%	11.4%

This guidance reflects lower global industry volumes thus far in the quarter across rates, FX, commodities, and credit derivatives as well as continued dislocation for BGC's brokers and their clients due to the pandemic. The Company's outlook also includes the impact of its recent insurance brokerage hires who are incurring costs but are not yet generating meaningful revenue, as well as the net investment cost of its stand- alone Fenics products.

BGC expects to update its quarterly outlook towards the end of September 2020. In addition, the Company expects to provide additional guidance on today's conference call, including with respect to its full year 2020 results.

BGC Conference Call and Investor Presentation

BGC will host a conference call on the date of this release at 10:00 a.m. ET to discuss these results. A webcast of the call, along with an investor presentation summarizing BGC's consolidated non-GAAP results, will be accessible via the following sites:

http://ir.bgcpartners.com(PDF version of the full press release, PDF of a quarterly results investor presentation, and supplemental Excel financial tables) http://ir.bgcpartners.com/news-releases(PDF version of the full press release, PDF of a quarterly results investor presentation, and supplemental Excel financial tables) http://bgcpartners.com/category/bgc-releases/(PDF only)

A listing of minimum system requirements can be found here: http://event.on24.com/view/help/index.html?text_language_id=en&fh=true&ngwebcast=true

Participants are encouraged to pre-register for the conference call to gain immediate access to the call and bypass the live operator. Pre-registration may be completed at any time by accessing the pre-registration link on BGC Partners' Investor Relations website, http://ir.bgcpartners.com, or by navigating to http://dpregister.com/10146577.

Participants who have not pre-registered may join the call using the following information. Please note that those who do not pre-register may experience greater than normal wait times before being able to join the live call.

17 For more information, see the July 13, 2020 press release titled "BGC Completes Offering Of $300 Million Of 4.375% Senior Notes" and the corresponding

Securities and Exchange Commission filing on Form 8-K made on July 14, 2020.

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