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MarketScreener Homepage  >  Equities  >  Nasdaq  >  BGC Partners, Inc.    BGCP

BGC PARTNERS, INC.

(BGCP)
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BGC Partners : 3Q 2020 Earnings Call

10/28/2020 | 08:35am EST

BGC PARTNERS, INC.

NASDAQ: BGCP

E A R N I N G S P R E S E N TAT I O N 3 Q 2 0 2 0

© 2020 BGC Partners, Inc. All rights reserved.

DISCLAIMER

2

DISCUSSION OF FORWARD-LOOKING STATEMENTS ABOUT BGC

Statements in this document regarding BGC that are not historical facts are "forward-looking statements" that involve risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements. These include statements about the effects of the COVID-19 pandemic on the Company's business, results, financial position, liquidity and outlook, which may constitute forward-looking statements and are subject to the risk that the actual impact may differ, possibly materially, from what is currently expected. Except as required by law, BGC undertakes no obligation to update any forward-looking statements. For a discussion of additional risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see BGC's Securities and Exchange Commission filings, including, but not limited to, the risk factors and Special Note on Forward-Looking Information set forth in these filings and any updates to such risk factors and Special Note on Forward-Looking Information contained in subsequent reports on Form 10-K, Form 10-Q or Form 8-K.

NOTE REGARDING FINANCIAL TABLES AND METRICS

Excel versions of certain tables in this document are available for download online. The Excel tables may include other useful information that may not be contained herein, including certain of BGC's financial results and metrics from the current period to as far back as the first quarter of 2018. These excel tables are accessible in the various financial results press releases at the "Investor Relations" section of http://www.bgcpartners.com. They are also available directly at http://ir.bgcpartners.com/news- releases/news-releases.

OTHER ITEMS OF NOTE

Unless otherwise stated, all results provided in this document compare the third quarter of 2020 with the year-earlier period. Certain reclassifications may have been made to previously reported amounts to conform to the current presentation and to show results on a consistent basis across periods. With the exception of reporting Newmark as a discontinued operation and the previously announced non-GAAP presentation, any such reclassifications would have had no impact on consolidated revenues or earnings under GAAP and would leave consolidated pre- and post-tax Adjusted Earnings for the prior periods essentially unchanged all else being equal. Certain numbers and percentage changes listed throughout this document may not sum due to rounding.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This standard requires lessees to recognize a right-of-use ("ROU") asset and lease liability for all leases with terms of more than 12 months. Recognition, measurement and presentation of expenses will depend on classification as a finance or operating lease. The amendments also require certain quantitative and qualitative disclosures. These impacts were approximately $157.8 million and $179.7 million in Total Assets and Total Liabilities, respectively, as of September 30, 2020. These impacts were approximately $169.1 million and $187.4 million in Total Assets and Total Liabilities, respectively, as of December 31, 2019. For additional information regarding the adoption of ASC 842, please see the section titled "New Accounting Pronouncements" in BGC's Annual Reports on Form 10-K as filed with the Securities and Exchange Commission.

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.

NEWMARK SPIN-OFF

The Spin-Off included the shares of Newmark Class A and Class B common stock owned by BGC, as well as the shares of Newmark common stock into which the limited partnership units of Newmark Holdings, L.P. and Newmark Partners, L.P. owned by BGC were exchanged prior to and in connection with the Spin-Off. For more information, see the press release titled "BGC Partners Announces Completion of Spin-Off of Newmark" dated November 30, 2018, and the related filing on Form 8-K filed before market open on December 6, 2018. Unless otherwise stated, all the tables and financial results in this document through the Outlook section reflect continuing operations of BGC. The financial results from continuing operations of BGC do not present a distinct corporate segment and are generally comparable to the stand-alone results for BGC Partners excluding Newmark Group, referred to as "post-spin BGC" in previous documents. Post-spin BGC represented what BGC financial results would have been had the Spin-Off of Newmark occurred prior to the Distribution date of November 30, 2018. Post-spin BGC can also be defined as the results for BGC's Financial Services segment plus its pro-rata portion of corporate items.

NON-GAAP FINANCIAL MEASURES

This presentation should be read in conjunction with BGC's most recent financial results press releases and filings or reports on Form 10-K, Form 10-Q or Form 8-K. Throughout this presentation, BGC refers to certain non-GAAP financial measures,

including Adjusted Earnings, Adjusted EBITDA and Liquidity. All non-GAAP results discussed herein are comparable to and reconciled with the most directly comparable GAAP figures. For an updated complete description of Adjusted Earnings, Adjusted EBITDA and Liquidity, and how, when, and why management uses these and other non-GAAP measures, as well as reconciliations of these measures to the comparable GAAP measures, and more information regarding GAAP and non-GAAP results, see the "Appendix" section of this presentation. Below under "Highlights of Consolidated Results" is a summary of certain GAAP and non-GAAP results for BGC. Results on a GAAP and non-GAAP basis are included towards the end of this presentation, with appropriate reconciliations provided in the "Appendix" section noted above and in our most recent financial results press release and/or are available at http://ir.bgcpartners.com.

2

2

HIGHLIGHTS OF CONSOLIDATED RESULTS: Q3' 20

3

Highlights of Consolidated Results

(USD millions, except per share data)

Revenues

GAAP income (loss) from operations before income taxes

GAAP net income (loss) for fully diluted shares

Adjusted Earnings before noncontrolling interest in subsidiaries and taxes

Post-tax Adjusted Earnings

Adjusted EBITDA

GAAP fully diluted earnings (loss) per share

Post-tax Adjusted Earnings per share

3Q 2020

3Q 2019

Change

$455.0

$521.1

(12.7)%

28.7

8.7

228.2%

29.6

(3.5)

938.1%

69.2

87.7

(21.1)%

61.9

77.3

(19.9)%

101.2

84.2

20.2%

$0.05

($0.01)

600.0%

$0.11

$0.15

(26.7)%

3

BGC PARTNERS, INC.

GENERAL OVERVIEW

BUSINESS OVERVIEW: 3Q'20

5

B U S I N E S S O V E R V I E W

REVENUE:

$455.0M

Electronic

Voice/Hybrid

Brokerage

13%

Brokerage

Data, Software

69%

& Post-Trade

5%

Insurance

Brokerage

10%

Other

4% 1

PRE-TAX ADJ. EARNINGS:

$69.2M

(PRE-TAX ADJ. EARNINGS MARGIN: 15.2%)

R E V E N U E B Y A S S E T C L A S S & G E O G R P A H Y

Americas

EMEA

28%

56%

Data, software &

post-trade, and

other1

Equity derivatives 8%

and cash equities

Rates

11%

26%

Insurance

10%

Energy &

Foreign

Exchange

Commodities

16%

14%

Credit

15%

APAC

17%

F E N I C S

NET REVENUE:

(EXCLUDING INTER-COMPANY)

$79.5M

NET REVENUE GROWTH:

(Yr/Yr)

+19%

B U S I N E S S H I G H L I G H T S ( 3 Q 2 0 2 0 )

19% Fenics growth despite a challenging

Insurance brokerage continues strong growth

Fenics and Insurance revenues represent over

macro environment and subdued

trajectory driven by investment in new hires

a quarter of company-wide revenues providing

secondary trading volumes

and business lines

diversification to BGC's combined business

BGC expects a $65M improvement in pre-tax Adj. Earnings from Fenics and insurance brokerage in 2021

1.

Fees from related parties, interest and dividend income, and other revenues

5

BUSINESS OVERVIEW: FENICS

6

F E N I C S O V E R V I E W : 3 Q ' 2 0

S E L E C T P L A T F O R M H I G H L I G H T S

NET REVENUE1,2:

$79.5M

Equities and

Data, software &

Energy &

post trade

Commodities

27%

Rates

1%

34%

FX

19%Credit

18%

+19% yr/yr

+86% VOLUME GROWTH

YTD SEP 20 vs. YTD SEP 19

DOUBLED MARKET

SHARE TO 12%3

AMONGST UST CLOBs 3Q 20 YR/YR

#2 LARGEST

UST CLOB PLATFORM

AS OF SEP 2020

~$115 MILLION3

ESTIMATED CLIENT SAVINGS SINCE JAN 19 DRIVEN BY TIGHTER FENICS UST PRICING

  • 200% GROWTH

EURO STOXX 50 OPTION VOLUMES

3Q'20 VS. 1Q'20 (launched 3Q'19)

  • 6% MARKET SHARE4

ESTIMATED FOR EURO STOXX 50 FRONT-MONTH OPTIONS, SEP 20

  • 150% GROWTH

NIKKEI 225 OPTION VOLUMES

3Q'20 VS. 2Q'20 (launched Q1'20)

  • 13% MARKET SHARE4

ESTIMATED FOR NIKKEI 225 FRONT MONTH OPTIONS, SEP 20

ELECTRONIC BROKERAGE

QUARTERLY OVERVIEW

DATA, SOFTWARE AND POST-TRADE5

$58

+20%

Electronic brokerage growth of 20% driven by Rates, FX and Fenics

$22

+17%

Integrated

MILLION

GROWTH

Over 17% growth in Data, Software and Post-trade powered by

MILLION

GROWTH

REVENUE

YR/YR

REVENUE

YR/YR

Lucera Connect, Algomi, and strong client demand for Capitalab's

Initial Margin Optimization and NDF Match businesses

1. Inter-company revenues are eliminated in consolidation. 2. Net revenue includes Fenics Integrated revenue starting in 2Q'20. Desks are categorized as "Fenics Integrated" if they utilize sufficient levels of technology such that significant amounts of their transactions can be or are executed

without broker intervention and have expected pre-tax Adjusted Earnings margins of at least 25%. 3. Central limit order book ("CLOB") market share is based on data from Greenwich Associates and BGC's internal estimates. Including these CLOB platforms as well as those using other

fully electronic US Treasury trading protocols, Fenics UST increased its overall market share from 4.3 percent to 5.8 percent year-on-year in September 2020, per Greenwich Associates. BGC internal estimates based on savings per tick (1/16 of 1/32 = $19.53125) adjusted for tenor

multiplied by the quantity of the trade (single counted). 4. GO's market share is based on estimated Euro Stoxx 50 and Nikkei 225 IDB block-sized transactions for "front-month" option volume, which refers to the nearest expiration date for an options contract (within 32 days of

6

expiration). 5. Total revenue as of Q3 2020 and excludes $14.1 million of inter-company data, software and post-trade.

FENICS UST HIGHLIGHTS

7

UST NOTIONAL TRADING VOLUMES

FENICS UST CLOB MARKET SHARE1

UST CLOB MARKET SHARE1

YTD SEP 20 (Yr/Yr)

SEP 20

CME

Nasdaq Fixed

13%

Nasdaq

8%

12%

12%

BrokerTec

Income

SIFMA

Dealerweb

10%

10%

10%

86%

10%

10%

11%

9%

9%

9%

8%

8%

13%

4%

CME

BrokerTec

69%

-22%

Sep-19

Nov-19

Jan-20Mar-20

May-20Jul-20

Sep-20

-48%

PERFORMANCE HIGHLIGHTS

MARKET LEADING TECHNOLOGY

COST SAVINGS FOR CLIENTS

Doubled market share to 12%

Tightest pricing and fastest

~$115 million in estimated client

in 3Q20201

matching cash US Treasury

savings from January 1, 2019 to

Volumes up 86% YTD 2020

marketplace

September, 20202

CLOB and Direct Streaming

1.

Central limit order book ("CLOB") market share is based on data from Greenwich Associates and BGC's internal estimates. Including these CLOB platforms as well as those using other fully electronic US Treasury trading protocols, Fenics UST increased its overall market

share from 4.3 percent to 5.8 percent year-on-year in September 2020, per Greenwich Associates. Primary dealer volumes are based on data from the Securities Industry and Financial Markets Association ("SIFMA").

2.

BGC internal estimates based on savings per tick (1/16 of 1/32 = $19.53125) adjusted for tenor multiplied by the quantity of the trade (single counted).

7

FENICS GO HIGHLIGHTS

8

EURO STOXX 50 (EUREX)1

NIKKEI 225 (OSE)1

FENICS GO EST. MARKET SHARE

FENICS GO EST. MARKET SHARE

(IDB Block Size Trades)

(IDB Block Size Trades)

6.3%

13.6%

4.4%

4.1%

10.0%

3.7%

8.7%

4.7%

0.5%

0.3%

0.2%

0.1%

Mar 20

Jun 20

Sept 20

Mar 20

Jun 20

Sept 20

Front Month

Short-dated

Front Month

Short-dated

DEEPEST OFF-EXCHANGE LIQUIDITY SUPPORTED BY LEADING GLOBAL LIQUIDITY PARTNERS

MARKET LEADING TECHNOLOGYPRODUCT PIPELINE

Web-based with API connectivity

Additional European equity index options

Request for Stream,Volume Clearing and Order Book

Additional Asian equity index options

Aggregated product access from multiple exchanges

Delta One products

Multiple asset classes available on single interface

1. Fenics GO launched on the Euro Stoxx 50 in Q3' 19 and on the NIKKEI 225 Options market in Q1' 20. BGC's estimate of Fenics GO's market share is based on estimated Euro Stoxx 50 and Nikkei 225 IDB block-sized transactions for "front-month" option volume, which refers to the

nearest expiration date for an options contract (within 32 days of expiration) and "short-dated" options, which refers to options expiry dates within three-months (up to 91 days).

8

FENICS MARKET DATA OPPORTUNITY

9

FENICS MARKET DATA OVERVIEW

Estimated Global Market Data Wallet:

1

AT AN ESTIMATED $32 BILLION PER ANNUM, THE GLOBAL

CONSUMPTION OF MARKET DATA CONTINUES TO REACH

RECORD LEVELS;

$32B

ANNUALLY

BGC CONTINUES TO EXPECT DOUBLE-DIGIT GROWTH ACROSS DATA, SOFTWARE, AND POST-TRADE DRIVEN BY PIPELINE OF NEW AND INNOVATIVE PRODUCTS INCLUDING LIBOR TRANSITION SOLUTIONS AND NEW RATES AND FX DATA SETS THAT LEVERAGE BGC'S MARKET LEADING RATES AND FX FRANCHISES

DATA, SOFTWARE AND POST-TRADE REVENUE

(excluding inter-company revenue)

$73

$79

$61

$53

TTM 3Q2017

TTM 3Q2018

TTM 3Q2019

TTM 3Q2020

Supported by over 2,300 brokers

Significant opportunity to monetize

Multiple distribution channels

and salespeople and Fenics stand-

vast amounts of capital markets

provides opportunities to expand

alone platforms

transactions that BGC executes

existing client base

Note: Chart not shown to scale.

9

1. Burton-Taylor Market Data research

BUSINESS OVERVIEW: INSURANCE BROKERAGE

10

I N S U R A N C E B R O K E R A G E O V E R V I E W

INSURANCE BROKERAGE REVENUE:

($ in millions)

3Q'20:

> $50.0

$43.3

$39.7

+9%

YR/YR

$19.2

+125%

VS. 3Q'18

3Q'18

3Q'19

3Q'20

4Q'20E

Expected 4Q'20 revenue growth of around 20% in 4Q'20 as previous front

office hires and newly launched business lines increase productivity

Revenues are typically more predictable while insurance brokerage has historically been non-cyclical and resilient in recessionary environments

I N T E G R A T E D G L O B A L P L A T F O R M

BGC Insurance's global platform attracts top talent and competes for market share across all major geographies

BGC Insurance's client base and insurance carrier network are highly diversified and global

BU S I N E S S H I G H L I G H T S ( 3 Q 2 0 2 0 )

FRONT-OFFICE HEADCOUNT1

POSITIVE MARKET TAILWINDS

SELECT BGC INSURANCE BROKERAGE PRODUCTS

464 +22%

BROKERS GROWTH

YR/YR

1. Period end headcount as of September 30, 2020.

  • Global insurance rates increasing across all insurance business classes
  • Market hardening expected to result in increased premiums and higher brokerage commissions

Accident &

Aerospace

Cargo &

Cyber

Construction

Energy

health

Marine

Fine art,

Financial &

Risk

Professional &

Property &

jewelry and

political risk

solutions

executive risk

Reinsurance

casualty

specie

10

INSURANCE BROKERAGE OPPORTUNITY

Insurance brokerage provides a significant global opportunity with high levels of fragmentation despite recent industry consolidation

11

GLOBAL PROPERTY & CASULATY

GROSS WRITTEN PREMIUMS1:

$1.6T

GWPINSURANCE

Insurance brokerage represents a massive global opportunity with a long runway for continued growth

BGC Insurance generated $177M of TTM 3Q'20 brokerage revenue but represents less than one percent of estimated global P&C GWP

  1. Chart not shown to scale. Source: "State of Property & Casualty Insurance 2020", McKinsey & Company.
  2. Pro forma for the announced AON / Willis Towers Watson merger in April 2020 and Marsh & McLennan's acquisition of JLT completed in April 2019.

COMMERCIAL PROPERTY &

CASUALTY MARKET SHARE1,2

14%

26%

29%

11%

12%

16%

AON + Willis

Marsh + JLT

75%

All Other

62%

55%

United States

Europe

APAC (Developed)

Recent consolidation provides significant opportunity:

  • Risk placement concentration concerns by insurance carriers
  • Overlap causing brokers to seek global independent alternatives

11

CORPORATE CONSIDERATIONS

12

INVESTMENT GRADE CREDIT RATING

POSSIBLE CORPORATION CONVERSION

UPDATED CAPITAL RETURN POLICY TIMING

  • Investment Grade Credit Rated:
    • Fitch: BBB- (Outlook: Stable)
    • S&P: BBB- (Outlook: Stable)
    • Kroll Bond Rating Agency: BBB (Outlook: Stable)
    • Japanese Credit Rating Agency (JCR): BBB+ (Outlook: Stable)
  • Strong balance sheet and liquidity provides financial flexibility
  • Liquidity of $549.1 M1 at September 30, 2020
  • BGC continues to manage its business with a focus on the Company's Investment Grade ratings
  • 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
  • The Company continues to work with regulators, lenders, and rating agencies regarding any possible conversion
  • BGC's Board committees will review potential transaction arrangements
  • BGC expects to announce its updated capital return policy in 1Q 2021
  • Historically, BGC's capital return strategy was highly dividend focused
  • Going forward, BGC plans to consider both share repurchases and dividends as part of its overall capital return policy

1. Includes Cash and Cash Equivalents of $492.3 million, Securities Owned of $58.5 million, Repurchase Agreements of $(2.1) million, and Marketable Securities of $0.3 million as of September 30, 2020.

12

OUTLOOK: 4Q'20

13

13

Metric

(USD millions)

Revenues

Pre-tax Adjusted Earnings

Adjusted Earnings Tax Rate (%)

Guidance

4Q 2020

$440-490

$65-85

FY 2020

10-12%

Actual

4Q 2019

$487.2

$73.2

FY 2019

11.4%

  • BGC's revenues decreased by approximately 4.4 percent year-on-year for the first 17 trading days of the fourth quarter of 2020
  • Additionally, in the first 17 trading days of the fourth quarter of 2020, Asia Pacific revenues have increased around 5 percent and continental Europe is up over 10 percent
  • Beginning at the end of December, BGC will be modifying the way it updates guidance. Going forward the Company plans to either reaffirm its quarterly guidance range or provide an update if it expects its results to be above or below the previously guided range
  • BGC expects to update its quarterly outlook towards the end of December 2020

13

BGC PARTNERS, INC.

GAAP FINANCIAL RESULTS

BGC PARTNERS, INC. CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) (UNDER GAAP)

September 30,

December 31,

2020

2019

Assets

Cash and cash equivalents

$

492,303

$

415,379

Cash segregated under regulatory requirements

244,230

220,735

Securities owned

58,547

57,525

Marketable securities

303

14,228

Receivables from broker-dealers, clearing organizations, customers and related broker-dealers

1,140,121

551,445

Accrued commissions and other receivables, net

689,045

778,415

Loans, forgivable loans and other receivables from employees and partners, net

401,633

315,590

Fixed assets, net

218,654

204,841

Investments

40,169

40,349

Goodwill

553,688

553,745

Other intangible assets, net

291,339

303,224

Receivables from related parties

14,246

14,273

Other assets

450,007

446,371

Total assets

$

4,594,285

$

3,916,120

Liabilities, Redeemable Partnership Interest, and Equity

Short-term borrowings

$

3,546

$

4,962

Repurchase agreements

2,089

-

Securities loaned

-

13,902

Accrued compensation

212,561

215,085

Payables to broker-dealers, clearing organizations, customers and related broker-dealers

988,329

416,566

Payables to related parties

45,750

72,497

Accounts payable, accrued and other liabilities

1,197,615

1,283,046

Notes payable and other borrowings

1,318,490

1,142,687

Total liabilities

3,768,380

3,148,745

Redeemable partnership interest

23,280

23,638

Equity

Stockholders' equity:

Class A common stock, par value $0.01 per share; 750,000 shares authorized;

365,842 and 358,440 shares issued at September 30, 2020 and December 31,

2019, respectively; and 315,315 and 307,915 shares outstanding at

September 30, 2020 and December 31, 2019, respectively

3,658

3,584

Class B common stock, par value $0.01 per share; 150,000 shares authorized;

45,884 shares issued and outstanding at each of September 30, 2020 and

December 31, 2019, convertible into Class A common stock

459

459

Additional paid-in capital

2,317,706

2,271,947

Treasury stock, at cost: 50,527 and 50,525 shares of Class A common stock at

(315,313)

(315,308)

September 30, 2020 and December 31, 2019, respectively

Retained deficit

(1,237,657)

(1,241,754)

Accumulated other comprehensive income (loss)

(39,405)

(33,102)

Total stockholders' equity

729,448

685,826

Noncontrolling interest in subsidiaries

73,177

57,911

Total equity

802,625

743,737

Total liabilities, redeemable partnership interest and equity

$

4,594,285

$

3,916,120

15

15

BGC PARTNERS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) (UNDER GAAP)

Three Months Ended September 30,

Nine Months Ended September 30,

Revenues:

2020

2019

2020

2019

Commissions

$

352,027

$

409,765

$

1,190,522

1,262,921

Principal transactions

65,182

75,536

277,946

250,198

Total brokerage revenues

417,209

485,301

1,468,468

1,513,119

Fees from related parties

8,814

8,208

20,897

21,224

Data, software and post-trade

21,523

18,364

61,060

55,015

Interest and dividend income

2,418

3,976

13,115

15,454

Other revenues

5,075

5,288

13,754

12,263

Total revenues

455,039

521,137

1,577,294

1,617,075

Expenses:

Compensation and employee benefits

244,240

278,544

872,426

856,615

Equity-based compensation and allocations of net income

to limited partnership units and FPUs

33,007

40,330

103,030

96,223

Total compensation and employee benefits

277,247

318,874

975,456

952,838

Occupancy and equipment

45,224

44,709

143,545

135,820

Fees to related parties

7,610

7,123

18,239

16,507

Professional and consulting fees

15,637

21,262

55,398

64,614

Communications

30,088

29,882

91,133

90,267

Selling and promotion

5,943

20,320

31,276

60,213

Commissions and floor brokerage

12,933

15,831

45,730

47,240

Interest expense

19,488

15,258

54,279

43,441

Other expenses

18,458

42,757

59,145

88,537

Total non-compensation expenses

155,381

197,142

498,745

546,639

Total expenses

432,628

516,016

1,474,201

1,499,477

Other income (losses), net:

Gains (losses) on divestitures and sale of investments

(9)

-

(9)

18,435

Gains (losses) on equity method investments

1,527

1,530

3,669

3,051

Other income (loss)

4,779

2,095

(107)

23,491

Total other income (losses), net

6,297

3,625

3,553

44,977

Income (loss) from operations before income taxes

28,708

8,746

106,646

162,575

Provision (benefit) for income taxes

3,778

6,186

21,125

51,076

Consolidated net income (loss)

$

24,930

$

2,560

$

85,521

$

111,499

Less: Net income (loss) attributable to noncontrolling interest

5,549

6,089

23,727

39,549

in subsidiaries

Net income (loss) available to common stockholders

$

19,381

$

(3,529)

$

61,794

$

71,950

16

16

BGC PARTNERS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS -

CONTINUED

17

(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) (UNDER GAAP)

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

Per share data:

Basic earnings (lo ss) per share

Net income (loss) available to common stockholders

$

19,381

$

(3,529)

$

61,794

$

71,950

Basic earnings (loss) per share

$

0.05

$

(0.01)

$

0.17

$

0.21

Basic weighted-average shares of common stock outstanding

363,244

346,060

360,629

341,940

Fully diluted earnings (lo ss) per share

Net income (loss) for fully diluted shares

$

29,575

$

(3,529)

$

90,270

$

108,378

Fully diluted earnings (loss) per share

$

0.05

$

(0.01)

$

0.17

$

0.21

Fully diluted weighted-average shares of common stock outstanding

549,244

346,060

544,475

523,218

17

BGC PARTNERS, INC.

APPENDIX

FRONT OFFICE HEADCOUNT & PRODUCTIVITY

19

FRONT OFFICE HEADCOUNT AND PRODUCTIVITY (Productivity in USD 000s)

(Excludes Insurance Brokerage)

2,600

$748

$744

$747

$736

$753

$749

$735

2,550

2,500

2,450

2,400

2,350

2,300

2,250

2,200

2,150

2,100

2,050

2,000

1,950

1,900

1,850

1,800

2,574

2,548

2,559

2,573

2,491

1,750

2,388

1,700

2,351

1,650

1,600

1,550

1,500

1,450

1,400

1,350

1,300

1,250

1,200

1,150

1,100

1,050

1,000

1Q2019

2Q2019

3Q2019

4Q2019

1Q2020

2Q2020

3Q2020

$800

$750

FENICS IS EXPECTED TO

DRIVE INCREASED

$700

PRODUCTIVITY AND

$650

HIGHER PROFITABILITY

WITH SCALE

$600

$550 Period-end Front Office Headcount

TTM Front Office Productivity

  • BGC continues to focus on optimizing its front office headcount and reducing expense in less profitable businesses
  • Expanded use of technology and automated processes is expected to drive increased front office productivity
  • Fenics Integrated, which was launched in Q2' 20, will further incentivize the Company's brokers and clients to automate execution, which we expect to increase productivity

Note: The figures in the above table include total brokerage revenue (excluding insurance brokerage revenue) and revenue from data, software and post-trade. The average revenue for all producers are approximate and based on the relevant revenues divided by the average number

19

of producers for the period.

BGC'S FULLY DILUTED SHARE COUNT SUMMARY AS OF SEPTEMBER 30, 2020

20

(share count in millions)

20

BGC Partners, Inc. Fully Diluted Share Count Summary

Fully-diluted

Ownership (%)

(as of September 30, 2020)

Shares

Class A owned by Public

298.1

54%

Class A owned by executives, board members and employees(1)

17.2

3%

Partnership units owned by employees(2)

129.9

24%

Other owned by employees(3)

4.7

1%

Class A owned by Cantor

0.0

0%

Class B owned by Cantor

45.9

8%

Partnership units owned by Cantor(4)

52.3

10%

-1%

Total

548.1

100%

BGC Partners, Inc. Fully Diluted Share Count Summary

Fully-diluted

Ownership (%)

(as of September 30, 2020)

Shares

Public

298.1

54%

Employees

151.8

28%

Cantor

98.2

18%

  1. Class A shares owned by board members or executives and restricted shares owned by other employees of BGC and Newmark. Any Class A share owned by an employee without restriction is included in the "Class A owned by Public".
  2. Partnership units owned by employees include founding/working partner units and limited partnership units. In conjunction with the proposed spin-off of Newmark, the Partnership units are owned by employees of both Newmark and BGC. Over time, virtually all of the partners of Newmark are expected to only own units and/or shares of Newmark and virtually all of the partners of BGC are expected to only own units and/or shares of BGC. Going forward, partners of BGC will be compensated with BGC partnership units and partners of Newmark will be compensated with Newmark partnership units.
  3. These primarily represent contingent shares and/or units held by employees of BGC and Newmark for which all necessary conditions have been satisfied except for the passage of time.

4.

Includes 15.8 million Cantor distribution rights.

20

STRONGLY CAPITALIZED; INVESTMENT GRADE CREDIT PROFILE

BGC Partners, Inc. (USD $000s)

As of 9/30/2020

21

Cash and Cash Equivalents

$492,303

Repurchase Agreements

(2,089)

Securities Owned

58,547

Marketable Securities

303

Total Liquidity

$549,064

Maturity

5.125% Senior Notes

05/27/2021

255,308

Collateralized Borrowings

5/31/2021, 4/8/2023, and 4/19/2023

23,351

5.375% Senior Notes

07/24/2023

446,244

3.750% Senior Notes

10/01/2024

296,701

4.375% Senior Notes

12/15/2025

296,886

Total notes payable and other borrowings

$1,318,490

Total notes payable and other borrowings (after adjusting for Liquidity)

$769,426

Total Capital

$825,905

Credit Ratios (Adj. EBITDA / Adj. EBITDA for Credit Agreement Financial Covenants as of TTM 3Q2020)

Adjusted EBITDA / Adjusted EBITDA for Credit Agreement Financial Covenants 1

$416,817 / $513,066

Leverage Ratio: Total Notes payable and other borrowings / Adjusted EBITDA

3.2x / 2.6x

Net Leverage Ratio: Net Notes payable and other borrowings / Adjusted EBITDA

1.8x / NM

Interest Coverage Ratio: Adjusted EBITDA / Interest Expense

6.0x / 7.4x

Total notes payable and other borrowings / Total Capital2

1.6x

BGC's Adjusted EBITDA is higher under its credit agreement financial covenants

  1. BGC's credit agreement is subject to financial covenants that do not permit the Company to have: (a) a gross leverage ratio of greater than 3.25x; or (b) an interest coverage ratio of less than 4.0x. BGC's credit agreement financial covenant metrics are based on a preliminary TTM Adjusted EBITDA of $513 million as calculated under BGC's credit agreement. Interest expense under this agreement excludes interest on securities financing transactions. As of September 30, 2020, there was $350 million of available undrawn capacity under BGC's revolving credit facility.
  2. Total Capital includes total equity and redeemable partnership interest and therefore is representative of what debt to equity would be on a fully diluted basis, all else equal.

21

21

CORRELATION BETWEEN BGC'S BROKERAGE REVENUES AND CERTAIN

INDUSTRY METRICS

22

Asset Class

Rates

FX

Equities1

Credit

Industry Metric

BGC Rates Revenues vs. Fed UST Primary Dealer Volume BGC Rates Revenues vs. EUREX Interest Rate Derivatives BGC Rates Revenues vs. BrokerTec (NEX/CME) Volume

BGC FX Revenues vs. CME FX Futures Volume

BGC FX Revenues vs. EBS (NEX/CME) Volume

BGC Equities and Other Asset Classes Revenues vs. OCC Total Industry Equity Option Volume

BGC Credit Revenues vs. Fed Primary Dealer Corporate Bond Inventory

Correlation 22

60.4%

62.8%

47.4%

57.8%

30.8%

71.0%

41.3%

  • BGC's revenues generally correlated with industry notional volumes but tend to have low correlation in the short and medium-term with global bank and broker-dealer sales and trading revenues1
  • 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 driven mainly by secondary trading volumes in the markets in which it transacts1
  • Overall industry volumes have historically been seasonally strongest in the 1st calendar quarter of the year and slowest in the 4th calendar quarter

Sources: Bloomberg, Eurex, CME, OCC and Federal Reserve

Note: Correlation periods measured are quarterly from 1Q2007 through 4Q2019 except for CME FX Futures (1Q2008 through 4Q2019) and Fed Primary Dealer Positions for Corporate Securities (1Q2009 through 4Q2019). Correlation between rates and FX revenues of

BGC and NEX/CME are measured based on quarterly revenues from 2015-2019 and 2016-2019, respectively.

1. Equities excludes insurance brokerage revenues

22

BGC FINANCIAL ASSET CLASS BREAKDOWN

23

Revenue by Asset Class & Comparison to Secondary Trading Volumes: 3Q'20

Rates

Credit

FX

Energy &

Equity Derivatives

Commodities

and Cash Equities

3Q'20 BGC Financial Revenues

$119 million

$68 million

$73 million

$66 million

$47 million

Revenue:

(24)%

(6)%

(15)%

(10)%

(17)%

% Change (Yr/Yr):

Industry Volumes % Change (Yr/Yr)

(23)%

17%

(6)%

N/A

(8)%

Cash1:

European

(14)%

(5)%

(13)%

(25)%

Equities

Derivatives2:

(33)%

  1. Cash volumes include a simple average of various intermediaries and exchanges. For Equities, this includes Euro Equities volumes (Source: Raymond James). For Rates, this includes MarketAxess U.S. government bonds, Nasdaq U.S. fixed income, LSE/MTS Cash, CME/NEX US
    Treasuries, and Tradeweb U.S. government bonds. For FX, this includes CBOE Hotspot, Refinitiv Spot FX, CME/NEX Spot FX (EBS), Euronext FX (Fastmatch), and CLS Spot. For Credit, this includes Primary Dealer US Corporate Bonds (source: Bloomberg), MarketAxess total credit, and Tradeweb total cash credit.
  2. Derivatives volumes include a simple average of various intermediaries and exchanges. For Equities, this includes Eurex Index and Equity traded contracts. For Rates, this includes ICE short-term Interest Rates and medium & long-term Interest Rates, Eurex European Interest Rate

derivatives, CME Interest Rate futures and options, Tradeweb total Rates derivatives, ISDA Interest Rate derivatives, and SEF - FIA Interest Rate derivatives, excluding forward rate agreements. For FX, this includes SEF - FIA FX non-deliverable forwards and options based on

currencies, and excludes products based on gold, silver, and other precious metals, Refinitiv Other FX volume, CME FX futures and options volume, Deutsche Boerse 360T, and CLS swap and forward volume. For Credit, this includes ISDA credit derivatives, Tradeweb total credit

23

derivatives, and SEF - FIA credit volume, which is limited to credit default swaps and options based on indices. For Energy and Commodities, this includes CME energy and metals futures and options, and ICE total energy and other agriculture and metals.

INDUSTRY VOLUMES

24

3Q'20 CHANGE IN TRADING VOLUMES1,2

4 Q ' 2 0 T D C H A N G E I N T R A D I N G V O L U M E S 2 , 3

24

-51%

Interest Rate Futures (CME)

-41%

Interest Rate Futures (CME)

-28%

U.S. Treasuries (Primary Dealer)

-24%

CDS Notional Turnover (ISDA)

-27%

Interest Rate Futures (ICE)

-19%

FX Futures (CME)

-25%

Eurex Equity Derivatives

-19%

U.S. Treasuries (Primary Dealer)

-23%

CDS Notional Turnover (ISDA)

-12%

European Equities

-18%

Energy and Metals (CME)

-14%

Equity Indices (ICE)

2%

Energy (ICE)

-8%

Energy (ICE)

14%

U.S. Corp. Bonds

-3%

FX Futures (CME)

17%

U.S. Agency (Primary Dealer)

-2%

Refinitiv (Thomson Reuters) FX Spot

18%

U.S. High-Grade Credit

5%

Energy & Commodities Options (FIA)

32%

U.S Equities

8%

U.S. Corp. Bonds (Primary Dealer)

Industry volumes were mostly lower yr/yr across asset

Industry volumes are mixed yr/yr in 4QTD 2020

classes in 3Q2020

Sources: Bloomberg, CME, Eurex, FIA, ICE, ISDA, and Refinitiv for 3Q2020 and Raymond James (BATS, CBOE, CME, ICE, EuroNext, IEX, NYSE, Nasdaq, and Trace), Bloomberg, and ISDA for 2020 4QTD.

1.

Global futures volumes reported to FIA for agriculture, energy, non-precious metals, and precious metals.

2.

Futures volumes are generally based on contracts traded throughout the month/quarter.

24

3.. U.S. Corp. Bond, U.S. Agency, and U.S. Treasury data from 10/1/2020 - 10/16/2020 (Bloomberg). All others from 10/1/2020 - 10/23/2020.

FENICS ECOSYSTEM POWERING THE CAPITAL MARKETS

CONNECTIVITY

  • Co-locatedInfrastructure and Connectivity
  • Smart Order Routing
  • Liquidity & Price Aggregation
    Revenue Streams:
    SaaS

MARKET DATA & ANALYTICS

  • Enriched Market Data & Independent Pricing
  • Pricing Engines & Analytics
  • Broker/Trader Whiteboards

Revenue Streams:

  • Direct Feeds (FIX, API)
  • Vendor Feeds (Bloomberg, Refinitiv, ICE, etc.)
  • Exchange Consumption & Other

PRE-TRADE

EXECUTION

EXECUTION

TTM NET REVENUE:

$296M1

PRE-TRADE

POST-TRADE

EXECUTION

TRADE EXECUTION

Stand-alone Fully Electronic Platforms:

Fenics Integrated:

  • Rates: USTs, EGBs, Gilts, EM, IRDs
  • Credit: Corporate Bonds, EM
  • FX: Spot, Options, NDFs, Forwards
  • Equities: Derivatives

Revenue Streams:

  • Commissions
  • Matched Principal

POST-TRADE

  • Portfolio Compression & Risk Management
  • Multilateral Optimization of Bilateral Margin
  • TCA (Lucera)

Revenue Streams:

  • Commissions
  • Fixed-TermContracts

1.TTM total revenue as of Q3 2020 and excludes $83.1 million of inter-company data, software and post-trade.

25

FENICS STAND-ALONE ELECTRONIC PLATFORMS

Fully Lit Central Limit Order Book ("CLOB") plus bespoke Directed Stream ("DCLOB") trading platform for US Treasuries

Highlights

  • +86% notional volume growth YTD September 20 vs.YTD September 19
  • Doubled market share to 12% in 3Q20201
  • #2 largest UST CLOB platform as of September 20201
  • ~$115 million in estimated client savings from January 1, 2019 to August 31, 20202

26

MidFX, Spot, FX Options, and Non-

Fully electronic end-to-end platform

Web-delivered FX Options platform

Deliverable Forwards ("NDF") and

for the arrangement of block trades

providing aggregated multi-dealer

FX Forwards

in listed derivative products

liquidity and trade execution through

one single interface

Highlights

Highlights

Highlights

Spot FX focuses on ultra-low latency

> 200% growth in Euro Stoxx 50

Name disclosed pre-trade pricing and

execution

option volumes - 3Q'20 VS. Q1'20

bi-lateral execution to promote best

(launched Q3'19)

possible FX Option pricing relative to

Currently offers 55 Spot pairs &

anonymous order book methodology

continuous marketplace (24/6)

> 6% market share estimated for Euro

Stoxx 50 front-month options3

Superior FX option liquidity instantly

Supporting all forms of fully electronic

connectivity including binary, FIX, GUI,

>150% growth in NIKKEI 225 option

Web-deployed for ease of

and STP

volumes - 3Q'20 VS. 2Q'20 (launched

implementation

Q1'20)

MIDFX serves bank liquidity

originators seeking to reduce existing

> 13% market share estimated for

positional risk in a fully electronic,

NIKKEI 225 front-month options3

name disclosed, dark environment

  1. Central limit order book ("CLOB") market share is based on data from Greenwich Associates and BGC's internal estimates. Including these CLOB platforms as well as those using other fully electronic US Treasury trading protocols, Fenics UST increased its overall market share from 4.3 percent to 5.8 percent year-on-year in September 2020, per Greenwich Associates. Primary dealer volumes are based on data from the Securities Industry and Financial Markets Association ("SIFMA").
  2. BGC internal estimates based on savings per tick (1/16 of 1/32 = $19.53125) adjusted for tenor multiplied by the quantity of the trade.
  3. BGC's estimate of Fenics GO's market share is based on estimated Euro Stoxx 50 and Nikkei 225 IDB block-sized transactions for "front-month" option volume, which refers to the nearest expiration date for an options contract (within 32 days of expiration).26

FENICS DATA, SOFTWARE AND POST-TRADE OFFERINGS

Comprehensive market data

Independent software vendor

solution providing unique &

providing gateway access, analytics,

valuable data sets sourced from

pricing, deal capture, trade lifecycle

inputs generated across our global

management, and distribution

brokerage operations

solutions

Highlights

Highlights

Coverage across multiple global

Updated version of its award-winning

asset classes

platform, kACE Pro

Enhanced FX data package

Provides pricing, data aggregation,

US dollar data service, FENICSMD

trading front ends, deal capture, and

risk management in Spot FX and FX

20/20, combining Fenics UST

Options

pricing with real-time interest rate

swaps data from BGC and US

Treasuries implied spreads to

SOFR1

  • Lucera is BGC's software defined network enabling the trading community to directly connect to each other
  • Algomi provides technology aggregating buy-side clients' access to venues, trading counterparties and exchanges

Highlights

  • BGC is integrating Algomi with its Lucera SaaS connectivity subscription service to provide direct data and execution capabilities between the buy side and the sell side

27

  • Derivatives optimization service providing portfolio compression, margin optimization, and NDF reset risk mitigation services

Highlights

  • Compressed over $10.5 trillion of notional Interest Rate Options; $60+ billion in margin reductions
  • Interest Rate, FX and Equity Options risk compression offered via multilateral cycles
  • Bilateral Initial Margin cash/collateral shrunk multilaterally across counterparties and CCPs

Note: Algomi was acquired by Fenics in March of 2020. 1. Secured overnight financing rate (SOFR)

27

BGC PARTNERS, INC.

NON-GAAP DEFINITIONS AND RECONCILIATION TABLES

RECONCILIATION OF GAAP INCOME (LOSS) FROM OPERATIONS BEFORE INCOME TAXES TO ADJUSTED EARNINGS AND GAAP FULLY DILUTED EPS TO POST-TAX ADJUSTED EPS

(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)

Q3 2020

Q3 2019

GAAP income (loss) from operations before income taxes

29

$

28,708

$

8,746

Pre-tax adjustments:

Compensation adjustments:

Equity-based compensation and allocations of net income

to limited partnership units and FPUs (1)

33,007

40,330

Other Compensation charges (2)

2,871

1,531

Total Compensation adjustments

35,878

41,861

Non-Compensation adjustments:

Amortization of intangibles (3)

7,204

7,572

Acquisition related costs

(26)

197

Certain rent charges (4)

-

1,875

Impairment charges

84

354

Other (5)

1,188

28,000

Total Non-Compensation adjustments

8,450

37,998

Other income (losses), net adjustments:

Losses (gains) on divestitures

9

-

Fair value adjustment of investments

990

25

Other net (gains) losses (6)

(4,845)

(970)

Total other income (losses), net adjustments

(3,846)

(945)

Total pre-tax adjustments

40,482

78,914

Adjusted Earnings before noncontrolling interest

in subsidiaries and taxes

$

69,190

$

87,660

GAAP net income (loss) available to common stockholders

$

19,381

$

(3,529)

Allocation of net income (loss) to noncontrolling interest in subsidiaries (7)

6,228

5,839

Total pre-tax adjustments (from above)

40,482

78,912

Income tax adjustment to reflect adjusted earnings taxes (8)

(4,179)

(3,895)

Post-tax adjusted earnings

$

61,912

$

77,327

Per Share Data

GAAP fully diluted earnings (loss) per share

$

0.05

$

(0.01)

Less: Allocations of net income (loss) to limited partnership units,

FPUs, and noncontrolling interest in subsidiaries, net of tax

-

0.02

Total pre-tax adjustments (from above)

0.07

0.15

Income tax adjustment to reflect adjusted earnings taxes

(0.01)

(0.01)

Post-tax adjusted earnings per share

0.11

0.15

Fully diluted weighted-average shares of common stock outstanding

549,244

528,396

Please see footnotes to

Dividends declared per share of common stock

$

0.01

$

0.14

this table on the next page.

Dividends declared and paid per share of common stock

$

0.01

$

0.14

29

29

RECONCILIATION OF GAAP INCOME (LOSS) FROM OPERATIONS BEFORE INCOME TAXES

TO ADJUSTED EARNINGS AND GAAP FULLY DILUTED EPS TO POST-TAX ADJUSTED EPS

30

(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)

(1) The components of equity-based compensation and allocations of net income to limited partnership units and FPUs are as follows (in thousands):

30

Q3 2020

Q3 2019

Issuance of common stock and grants of exchangeability

$

3,554

$

24,245

Allocations of net income

8,213

10,273

LPU amortization

18,455

4,213

RSU amortization

2,785

1,599

Equity-based compensation and allocations of net income to limited partnership units and FPUs

$

33,007

$

40,330

  1. GAAP expenses in the third quarter of 2020 included certain one-off costs associated with the cost reduction program of $1.6 million in addition to certain loan impairments related to the cost reduction program of $0.9 million. GAAP expenses in the third quarter of 2020 and 2019 included certain acquisition-related compensation expenses of $0.5 million and $1.4 million, respectively.
  2. Includes non-cash GAAP charges related to the amortization of intangibles with respect to acquisitions.
  3. Includes certain rent charges incurred by the Company during the build-out phase of the Company's new UK based headquarters.
  4. Includes various other GAAP items. Adjusted Earnings for the third quarter of 2019 exclude the impact of certain GAAP charges recorded as part of "Other expenses", primarily related to litigation matters such as the Company's settlement with the Commodity Futures Trading Commission and the New York Attorney General's Office. This is consistent with BGC's normal practice of excluding certain GAAP gains and charges from Adjusted Earnings that management believes do not best reflect the ordinary results of the Company, including with respect to acquisitions, dispositions, and/or resolutions of litigation.
  5. For the third quarters of both 2020 and 2019, includes non-cash gains of ($1.5) million related to BGC's investments accounted for under the equity method. The third quarter of 2020 also includes a net gain of ($3.3) million related to various other GAAP items, while the third quarter of 2019 also included net losses of $0.5 million for various other GAAP items.
  6. Primarily represents Cantor's pro-rata portion of net income.
  7. BGC's GAAP provision for income taxes is calculated based on an annualized methodology. The Company's GAAP provision for income taxes was $3.8 million and $6.2 million for the third quarters of 2020 and 2019, respectively. The Company includes additional tax-deductible items when calculating the provision for taxes with respect to Adjusted Earnings using an annualized methodology. These include tax-deductions related to equity-based compensation with respect to limited partnership unit exchange, employee loan amortization, and certain net-operating loss carryforwards. The non-GAAP provision for income taxes was adjusted $4.2 million and $3.9 million for the third quarters of 2020 and 2019, respectively. As a result, the provision for income taxes with respect to Adjusted Earnings was $8.0 million and $10.1 million for the third quarters of 2020 and 2019, respectively. The calculation of taxes for Adjusted Earnings excluded the effect of the 2017 U.S. Tax Cuts and Jobs Act.

Note: Certain numbers may not add due to rounding.

30

RECONCILIATION OF GAAP NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS TO ADJUSTED EBITDA

(IN THOUSANDS) (UNAUDITED)

Q3 2020

Q3 2019

31

GAAP net income (loss) available to common stockholders

$

19,381

$

(3,529)

Add back:

Provision (benefit) for income taxes

3,778

6,186

Net income (loss) attributable to noncontrolling interest in subsidiaries (1)

5,549

6,089

Interest expense

19,488

15,258

Fixed asset depreciation and intangible asset amortization

21,233

20,176

Impairment of long-lived assets

84

354

Equity-based compensation and allocations of net income to limited partnership units and

33,007

40,330

(Gains) losses on equity method investments (3)

(1,302)

(1,530)

Other non-cash GAAP items (4)

-

909

Adjusted EBITDA

$

101,218

$

84,243

  1. Primarily represents Cantor's pro-rata portion of net income.
  2. Represents BGC employees' pro-rata portion of net income and non-cash and non-dilutive charges relating to equity-based
    compensation. See Footnote 1 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" for more information.
  3. For the third quarters of both 2020 and 2019, includes non-cash gains of ($1.5) million related to BGC's investments accounted for under the equity method. The third quarter of 2020 also includes a net loss of $0.2 million related to an investment impairment.
  4. Non-cashcharges of amortized rents incurred by the Company during the build-out phase of the Company's new UK based headquarters

Note: BGC's Adjusted EBITDA for Financial Covenants is defined under the amended Revolving Credit Agreement, which the Company entered into on February 26, 2020. For TTM 3Q2020, Adjusted EBITDA for Financial Covenants was $513 million.

31

31

FULLY DILUTED WEIGHTED-AVERAGE SHARE COUNT UNDER GAAP AND FOR ADJUSTED

EARNINGS & LIQUIDITY ANALYSIS

32

(IN THOUSANDS) (UNAUDITED)

32

FULLY DILUTED WEIGHTED AVERAGE SHARE COUNT

Q3 2020

Q3 2019

Common stock outstanding

363,244

346,060

Limited partnership units

119,975

-

Cantor units

52,363

-

Founding partner units

12,304

-

RSUs

219

-

Other

1,139

-

Fully diluted weighted-average share count under GAAP

549,244

346,060

Non-GAAP Adjustments:

Limited partnership units

-

115,730

Cantor units

-

52,363

Founding partner units

-

12,420

RSUs

-

502

Other

-

1,321

Fully diluted weighted-average share count for Adjusted Earnings

549,244

528,396

LIQUIDITY ANALYSIS

September 30, 2020

December 31, 2019

Cash and cash equivalents

$

492,303

$

415,379

Repurchase agreements

(2,089)

-

Securities owned

58,547

57,525

Marketable securities (1)

303

326

Total Liquidity

$

549,064

$

473,230

  1. As of December 31, 2019, $13.9 million of Marketable securities on our balance sheet had been lent in a Securities loaned transaction and, therefore, are not included in this Liquidity Analysis.

Note: BGC's fully diluted weighted-average share count under GAAP may differ from the fully diluted weighted-average share count for

Adjusted Earnings in order to avoid anti-dilution in certain periods.

32

DIFFERENCES BETWEEN NON-GAAP AND GAAP CONSOLIDATED RESULTS

33

NON-GAAP FINANCIAL MEASURES33

This document contains non-GAAP financial measures that differ from the most directly comparable measures calculated and presented in accordance with Generally Accepted Accounting Principles in the United States ("GAAP"). Non-GAAP financial measures used by the Company include "Adjusted Earnings before noncontrolling interests and taxes", which is used interchangeably with "pre-tax Adjusted Earnings"; "Post-tax Adjusted Earnings to fully diluted shareholders", which is used interchangeably with "post-tax Adjusted Earnings"; "Adjusted EBITDA"; and "Liquidity". The definitions of these terms are below.

ADJUSTED EARNINGS DEFINED

BGC uses non-GAAP financial measures, including "Adjusted Earnings before noncontrolling interests and taxes" and "Post-tax Adjusted Earnings to fully diluted shareholders", which are supplemental measures of operating results used by management to evaluate the financial performance of the Company and its consolidated subsidiaries. BGC believes that Adjusted Earnings best reflect the operating earnings generated by the Company on a consolidated basis and are the earnings which management considers when managing its business.

As compared with "Income (loss) from operations before income taxes" and "Net income (loss) for fully diluted shares", both prepared in accordance with GAAP, Adjusted Earnings calculations primarily exclude certain non-cash items and other expenses that generally do not involve the receipt or outlay of cash by the Company and/or which do not dilute existing stockholders. In addition, Adjusted Earnings calculations exclude certain gains and charges that management believes do not best reflect the ordinary results of BGC. Adjusted Earnings is calculated by taking the most comparable GAAP measures and adjusting for certain items with respect to compensation expenses, non-compensation expenses, and other income, as discussed below.

CALCULATIONS OF COMPENSATION ADJUSTMENTS FOR ADJUSTED EARNINGS AND ADJUSTED EBITDA

Treatment of Equity-Based Compensation Line Item for Adjusted Earnings and Adjusted EBITDA

The Company's Adjusted Earnings and Adjusted EBITDA measures exclude all GAAP charges included in the line item "Equity-based compensation and allocations of net income to limited partnership units and FPUs" (or "equity-based compensation" for purposes of defining the Company's non-GAAP results) as recorded on the Company's GAAP Consolidated Statements of Operations and GAAP Consolidated Statements of Cash Flows. These GAAP equity-based compensation charges reflect the following items:

  • Charges with respect to grants of exchangeability, which reflect the right of holders of limited partnership units with no capital accounts, such as LPUs and PSUs, to exchange these units into shares of common stock, or into partnership units with capital accounts, such as HDUs, as well as cash paid with respect to taxes withheld or expected to be owed by the unit holder upon such exchange. The withholding taxes related to the exchange of certain non-exchangeable units without a capital account into either common shares or units with a capital account may be funded by the redemption of preferred units such as PPSUs.
  • Charges with respect to preferred units. Any preferred units would not be included in the Company's fully diluted share count because they cannot be made exchangeable into shares of common stock and are entitled only to a fixed distribution. Preferred units are granted in connection with the grant of certain limited partnership units that may be granted exchangeability or redeemed in connection with the grant of shares of common stock at ratios designed to cover any withholding taxes expected to be paid. This is an alternative to the common practice among public companies of issuing the gross amount of shares to employees, subject to cashless withholding of shares, to pay applicable withholding taxes.
  • GAAP equity-based compensation charges with respect to the grant of an offsetting amount of common stock or partnership units with capital accounts in connection with the redemption of non-exchangeable units, including PSUs and LPUs.
  • Charges related to amortization of RSUs and limited partnership units.
  • Charges related to grants of equity awards, including common stock or partnership units with capital accounts.
  • Allocations of net income to limited partnership units and FPUs. Such allocations represent the pro-rata portion of post-tax GAAP earnings available to such unit holders.
    The amounts of certain quarterly equity-based compensation charges are based upon the Company's estimate of such expected charges during the annual period, as described further below under "Methodology for Calculating Adjusted Earnings Taxes."
    Virtually all of BGC's key executives and producers have equity or partnership stakes in the Company and its subsidiaries and generally receive deferred equity or limited partnership units as part of their compensation. A significant percentage of BGC's fully diluted shares are owned by its executives, partners and employees. The Company issues limited partnership units as well as other forms of equity-based compensation, including grants of exchangeability into shares of common stock, to provide liquidity to its employees, to align the interests of its employees and management with those of common stockholders, to help motivate and retain key employees, and to encourage a collaborative culture that drives cross-selling and revenue growth.

33

DIFFERENCES BETWEEN NON-GAAP AND GAAP CONSOLIDATED RESULTS

34

(CONTINUED)

All share equivalents that are part of the Company's equity-based compensation program, including REUs, PSUs, LPUs, HDUs, and other units that may be made exchangeable into common stock, as well as RSUs (which are recorded using the treasury stock method), are included in the fully diluted share count when issued or at the beginning of the subsequent quarter after the date of grant. Generally, limited partnership units other than preferred units34are expected to be paid a pro-rata distribution based on BGC's calculation of Adjusted Earnings per fully diluted share. However, out of an abundance of caution and in order to strengthen the Company's balance sheet due the uncertain macroeconomic conditions with respect to the COVID-19 pandemic, BGC Holdings, L.P. has reduced its distributions of income from the operations of BGC's businesses to its partners.

Compensation charges are also adjusted for certain other cash and non-cash items, including those related to the amortization of GFI employee forgivable loans granted prior to the closing of the January 11, 2016 back-end merger with GFI.

CERTAIN OTHER COMPENSATION-RELATED ADJUSTMENTS FOR ADJUSTED EARNINGS

BGC also excludes various other GAAP items that management views as not reflective of the Company's underlying performance in a given period from its calculation of Adjusted Earnings. These may include compensation-related items with

respect to cost-saving initiatives, such as severance charges incurred in connection with headcount reductions as part of broad restructuring and/or cost savings plans.

CALCULATION OF NON-COMPENSATION ADJUSTMENTS FOR ADJUSTED EARNINGS

Adjusted Earnings calculations may also exclude items such as:

  • Non-cashGAAP charges related to the amortization of intangibles with respect to acquisitions;
  • Acquisition related costs;
  • Certain rent charges;
  • Non-cashGAAP asset impairment charges; and
  • Various other GAAP items that management views as not reflective of the Company's underlying performance in a given period, including non-compensation-related charges incurred as part of broad restructuring and/or cost savings plans. Such GAAP items may include charges for exiting leases and/or other long-term contracts as part of cost-saving initiatives, as well as non-cash impairment charges related to assets, goodwill and/or intangibles created from acquisitions.

CALCULATION OF ADJUSTMENTS FOR OTHER (INCOME) LOSSES FOR ADJUSTED EARNINGS

Adjusted Earnings calculations also exclude certain other non-cash,non-dilutive, and/or non-economic items, which may, in some periods, include:

  • Gains or losses on divestitures;
  • Fair value adjustment of investments;
  • Certain other GAAP items, including gains or losses related to BGC's investments accounted for under the equity method; and
  • Any unusual, one-time,non-ordinary, or non-recurring gains or losses.

METHODOLOGY FOR CALCULATING ADJUSTED EARNINGS TAXES

Although Adjusted Earnings are calculated on a pre-tax basis, BGC also reports post-tax Adjusted Earnings to fully diluted shareholders. The Company defines post-tax Adjusted Earnings to fully diluted shareholders as pre-tax Adjusted Earnings reduced by the non-GAAP tax provision described below and net income (loss) attributable to noncontrolling interest for Adjusted Earnings.

The Company calculates its tax provision for post-tax Adjusted Earnings using an annual estimate similar to how it accounts for its income tax provision under GAAP. To calculate the quarterly tax provision under GAAP, BGC estimates its full fiscal year GAAP income (loss) from operations before income taxes and noncontrolling interests in subsidiaries and the expected inclusions and deductions for income tax purposes, including expected equity-based compensation during the annual period. The resulting annualized tax rate is applied to BGC's quarterly GAAP income (loss) from operations before income taxes and noncontrolling interests in subsidiaries. At the end of the annual period, the Company updates its estimate to reflect the actual tax amounts owed for the period.

To determine the non-GAAP tax provision, BGC first adjusts pre-tax Adjusted Earnings by recognizing any, and only, amounts for which a tax deduction applies under applicable law. The amounts include charges with respect to equity-based compensation; certain charges related to employee loan forgiveness; certain net operating loss carryforwards when taken for statutory purposes; and certain charges related to tax goodwill amortization. These adjustments may also reflect timing and measurement differences, including treatment of employee loans; changes in the value of units between the dates of grants of exchangeability and the date of actual unit exchange; variations in the value of certain deferred tax assets; and liabilities and the different timing of permitted deductions for tax under GAAP and statutory tax requirements.

34

DIFFERENCES BETWEEN NON-GAAP AND GAAP CONSOLIDATED RESULTS

35

(CONTINUED)

After application of these adjustments, the result is the Company's taxable income for its pre-tax Adjusted Earnings, to which BGC then applies the statutory tax rates to determine its non-GAAP tax provision. BGC views the effective tax rate on pre-

tax Adjusted Earnings as equal to the amount of its non-GAAP tax provision divided by the amount of pre-tax Adjusted Earnings.

35

Generally, the most significant factor affecting this non-GAAP tax provision is the amount of charges relating to equity-based compensation. Because the charges relating to equity-based compensation are deductible in accordance with applicable tax laws, increases in such charges have the effect of lowering the Company's non-GAAP effective tax rate and thereby increasing its post-tax Adjusted Earnings.

BGC incurs income tax expenses based on the location, legal structure and jurisdictional taxing authorities of each of its subsidiaries. Certain of the Company's entities are taxed as U.S. partnerships and are subject to the Unincorporated Business Tax ("UBT") in New York City. Any U.S. federal and state income tax liability or benefit related to the partnership income or loss, with the exception of UBT, rests with the unit holders rather than with the partnership entity. The Company's consolidated financial statements include U.S. federal, state, and local income taxes on the Company's allocable share of the U.S. results of operations. Outside of the U.S., BGC is expected to operate principally through subsidiary corporations subject to local income taxes. For these reasons, taxes for Adjusted Earnings are expected to be presented to show the tax provision the consolidated Company would expect to pay if 100 percent of earnings were taxed at global corporate rates.

CALCULATIONS OF PRE- AND POST-TAX ADJUSTED EARNINGS PER SHARE

BGC's pre- and post-tax Adjusted Earnings per share calculations assume either that:

  • The fully diluted share count includes the shares related to any dilutive instruments, but excludes the associated expense, net of tax, when the impact would be dilutive; or
  • The fully diluted share count excludes the shares related to these instruments, but includes the associated expense, net of tax.

The share count for Adjusted Earnings excludes certain shares and share equivalents expected to be issued in future periods but not yet eligible to receive dividends and/or distributions. Each quarter, the dividend payable to BGC's stockholders, if any, is expected to be determined by the Company's Board of Directors with reference to a number of factors, including post-tax Adjusted Earnings per share. BGC may also pay a pro-rata distribution of net income to limited partnership units, as well as to Cantor for its noncontrolling interest. The amount of this net income, and therefore of these payments per unit, would be determined using the above definition of Adjusted Earnings per share on a pre-tax basis.

The declaration, payment, timing, and amount of any future dividends payable by the Company will be at the discretion of its Board of Directors using the fully diluted share count. For more information on any share count adjustments, see the table titled "Fully Diluted Weighted-Average Share Count under GAAP and for Adjusted Earnings".

MANAGEMENT RATIONALE FOR USING ADJUSTED EARNINGS

BGC's calculation of Adjusted Earnings excludes the items discussed above because they are either non-cash in nature, because the anticipated benefits from the expenditures are not expected to be fully realized until future periods, or because the Company views results excluding these items as a better reflection of the underlying performance of BGC's ongoing operations. Management uses Adjusted Earnings in part to help it evaluate, among other things, the overall performance of the Company's business, to make decisions with respect to the Company's operations, and to determine the amount of dividends payable to common stockholders and distributions payable to holders of limited partnership units. Dividends payable to common stockholders and distributions payable to holders of limited partnership units are included within "Dividends to stockholders" and "Earnings distributions to limited partnership interests and noncontrolling interests," respectively, in our unaudited, condensed, consolidated statements of cash flows.

The term "Adjusted Earnings" should not be considered in isolation or as an alternative to GAAP net income (loss). The Company views Adjusted Earnings as a metric that is not indicative of liquidity, or the cash available to fund its operations, but rather as a performance measure. Pre- and post-tax Adjusted Earnings, as well as related measures, are not intended to replace the Company's presentation of its GAAP financial results. However, management believes that these measures help provide investors with a clearer understanding of BGC's financial performance and offer useful information to both management and investors regarding certain financial and business trends related to the Company's financial condition and results of operations. Management believes that the GAAP and Adjusted Earnings measures of financial performance should be considered together.

For more information regarding Adjusted Earnings, see the sections of this document and/or the Company's most recent financial results press release titled "Reconciliation of GAAP Income (Loss) from Operations before Income Taxes to Adjusted Earnings and GAAP Fully Diluted EPS to Post-Tax Adjusted EPS", including the related footnotes, for details about how BGC's non-GAAP results are reconciled to those under GAAP.

35

DIFFERENCES BETWEEN NON-GAAP AND GAAP CONSOLIDATED RESULTS

(CONTINUED)

ADJUSTED EBITDA DEFINED

36

BGC also provides an additional non-GAAP financial performance measure, "Adjusted EBITDA", which it defines as GAAP "Net income (loss) available to common stockholders", adjusted to add back the following items:36

  • Provision (benefit) for income taxes;
  • Net income (loss) attributable to noncontrolling interest in subsidiaries;
  • Interest expense;
  • Fixed asset depreciation and intangible asset amortization;
  • Equity-basedcompensation and allocations of net income to limited partnership units and FPUs;
  • Impairment of long-lived assets;
  • (Gains) losses on equity method investments; and
  • Certain other non-cash GAAP items, such as non-cash charges of amortized rents incurred by the Company for its new UK based headquarters.

The Company's management believes that its Adjusted EBITDA measure is useful in evaluating BGC's operating performance, because the calculation of this measure generally eliminates the effects of financing and income taxes and the accounting effects of capital spending and acquisitions, which would include impairment charges of goodwill and intangibles created from acquisitions. Such items may vary for different companies for reasons unrelated to overall operating performance. As a result, the Company's management uses this measure to evaluate operating performance and for other discretionary purposes. BGC believes that Adjusted EBITDA is useful to investors to assist them in getting a more complete picture of the Company's financial results and operations.

Since BGC's Adjusted EBITDA is not a recognized measurement under GAAP, investors should use this measure in addition to GAAP measures of net income when analyzing BGC's operating performance. Because not all companies use identical EBITDA calculations, the Company's presentation of Adjusted EBITDA may not be comparable to similarly titled measures of other companies. Furthermore, Adjusted EBITDA is not intended to be a measure of free cash flow or GAAP cash flow from operations because the Company's Adjusted EBITDA does not consider certain cash requirements, such as tax and debt service payments.

For more information regarding Adjusted EBITDA, see the section of this document and/or the Company's most recent financial results press release titled "Reconciliation of GAAP Net Income (Loss) Available to Common Stockholders to Adjusted EBITDA", including the footnotes to the same, for details about how BGC's non-GAAP results are reconciled to those under GAAP.

TIMING OF OUTLOOK FOR CERTAIN GAAP AND NON-GAAP ITEMS

BGC anticipates providing forward-looking guidance for GAAP revenues and for certain non-GAAP measures from time to time. However, the Company does not anticipate providing an outlook for other GAAP results. This is because certain GAAP items, which are excluded from Adjusted Earnings and/or Adjusted EBITDA, are difficult to forecast with precision before the end of each period. The Company therefore believes that it is not possible for it to have the required information necessary to forecast GAAP results or to quantitatively reconcile GAAP forecasts to non-GAAP forecasts with sufficient precision without unreasonable efforts. For the same reasons, the Company is unable to address the probable significance of the unavailable information. The relevant items that are difficult to predict on a quarterly and/or annual basis with precision and may materially impact the Company's GAAP results include, but are not limited, to the following:

  • Certain equity-based compensation charges that may be determined at the discretion of management throughout and up to the period-end;
  • Unusual, one-time,non-ordinary, or non-recurring items;
  • The impact of gains or losses on certain marketable securities, as well as any gains or losses related to associated mark-to- market movements and/or hedging. These items are calculated using period-end closing prices;
  • Non-cashasset impairment charges, which are calculated and analyzed based on the period-end values of the underlying assets. These amounts may not be known until after period-end;
  • Acquisitions, dispositions and/or resolutions of litigation, which are fluid and unpredictable in nature.

LIQUIDITY DEFINED

BGC may also use a non-GAAP measure called "liquidity". 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). 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.

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.

36

Media Contact:

Karen Laureano-Rikardsen +1 212-829-4975

Investor Contact:

Jason Chryssicas

+1 212-610-2426

ir.bgcpartners.com

twitter.com/bgcpartners linkedin.com/company/bgc-partners

Disclaimer

BGC Partners Inc. published this content on 28 October 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 October 2020 13:34:03 UTC


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Financials (USD)
Sales 2020 2 038 M - -
Net income 2020 103 M - -
Net Debt 2020 - - -
P/E ratio 2020 27,7x
Yield 2020 -
Capitalization 1 508 M 1 508 M -
Capi. / Sales 2020 0,74x
Capi. / Sales 2021 0,69x
Nbr of Employees 5 200
Free-Float 70,7%
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Howard William Lutnick Chairman & Chief Executive Officer
Sean Anthony Windeatt Chief Operating Officer
Steven Bisgay Chief Financial Officer & Executive MD
Steven Sadoff Chief Information Officer
Stephen T. Curwood Independent Director
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