BGC Partners : 3Q 2020 Earnings Release

BGC Partners Reports Third Quarter 2020 Financial Results

Conference Call to Discuss Results Scheduled for 11:00 AM ET Today

NEW YORK, NY - October 28, 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 September 30, 2020.

Select Results Compared to the Year-Earlier Period1

Highlights of Consolidated Results
(USD millions)	3Q20	3Q19	Change
Revenues	$455.0	$521.1	(12.7)%
GAAP income (loss) from operations before income taxes	28.7	8.7	228.2%
GAAP net income (loss) for fully diluted shares	29.6	(3.5)	938.1%
Adjusted Earnings before noncontrolling interest in subsidiaries and taxes	69.2	87.7	(21.1)%
Post-tax Adjusted Earnings	61.9	77.3	(19.9)%
Adjusted EBITDA	101.2	84.2	20.2%

Per Share Results	3Q20	3Q19	Change
GAAP fully diluted earnings (loss) per share	$0.05	($0.01)	600.0%
Post-tax Adjusted Earnings per share	$0.11	$0.15	(26.7)%

Management Comments

"We've made excellent progress this quarter with respect to our investments in Fenics and insurance brokerage. Our Fenics brokerage revenues grew by double digits for the second consecutive quarter. Fenics UST and Fenics GO, two of our newer fully electronic offerings, reached record levels of market share, and our insurance brokerage group is positioned to turn profitable for the fourth quarter and for the full year 2021", said Howard W. Lutnick, Chairman and Chief Executive Officer of BGC.

"We believe the macro trends of accelerated adoption of electronic trading, record levels of global debt issuance, and a hardening insurance market will drive positive fundamentals for our businesses. In the third quarter, BGC generated strong revenue growth of 20 percent and 9 percent in its Fenics and insurance brokerage businesses, respectively.2

"As a result of these improvements, we expect to match last year's fourth quarter Adjusted Earnings, even in this tougher market environment. We view our stock as being demonstrably undervalued as our earnings return to 2019 levels in the fourth quarter, while our current stock price is over 50 percent below where it was last year".

Sean Windeatt, Chief Operating Officer of BGC, said: "Our Fenics business continued to demonstrate strength and resilience, outperforming a challenging macro trading backdrop in the third quarter. Fenics

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. Including interest and dividend income and other revenues, which are included in "Fees from related parties, interest and dividend income, and other revenues", total revenues associated with insurance brokerage increased 8 percent in the third quarter of 2020.

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UST and Fenics GO, two of our newer fully electronic offerings, reached record levels of market share in their respective markets. In the span of just two years, Fenics UST has rapidly grown its position to be the clear number two among central limit order book trading platforms with an estimated 13 percent market share in September. Fenics UST generated substantial growth year-over-year with notional volumes up by approximately 86 percent year-to-date compared to a 4 percent increase in overall primary dealer treasury volumes. Fenics UST is estimated to have saved our clients approximately $115 million since January 2019 by offering the tightest spreads in the market. As a result of our continued technological innovations and strong client support, we expect both volumes and market share to continue to outperform the overall market.3

"In addition, our Fenics GO fully electronic options trading platform more than tripled its volumes since the first quarter of 2020. Our Fenics GO platform went live in Euro Stoxx 50 options just over a year ago and live in Nikkei 225 options in the first quarter of this year. In this short time, we estimate Fenics GO now commands over 6 and 13 percent market share in Euro Stoxx 50 and Nikkei 225 front-monthblock-sized options, respectively.4

"Our data, software, and post-trade businesses, which are predominantly comprised of recurring revenue, grew by more than 17 percent. This strong performance was driven by Lucera's Connect platform winning new SaaS client contracts and the acquisition of Algomi. Furthermore, our Capitalab business grew over 20 percent, driven by adoption of its Initial Margin Optimization product, and NDF Match's continued market share growth. We have a strong pipeline of new and innovative products including LIBOR transition solutions and new rates and FX data sets, which leverage our market leading rates and FX franchises. We continue to expect double-digit growth across our data, software and post-trade businesses".

Steve Bisgay, Chief Financial Officer of BGC, said: "Our insurance brokerage group grew its revenues by 9 percent this quarter driven by new hires in aviation and reinsurance.5 We expect around 20 percent top-line growth next quarter to over $50 million as previous front office hires and newly launched business lines increase productivity. Furthermore, our insurance brokerage group has reached a size and scale where we expect it to be profitable for the fourth quarter and improve BGC's bottom line by over $25 million in 2021 compared to 2020.

Mr. Bisgay concluded: "As we expand our product offerings, optimize our commercial agreements, and add new clients across our electronic platforms, we continue to expect profitability in our newer Fenics stand- alone businesses, which includes Fenics UST, Fenics GO, and Lucera, to improve by $40 million and collectively break-even next year.6 This improvement, combined with the $25 million improvement in insurance brokerage profitability, will drive overall pre-tax Adjusted Earnings and Adjusted EBITDA at least $65 million higher in 2021, all else equal, which is $15 million more than we expected last quarter".

Dividend Information

On October 27, 2020, BGC Partners' Board of Directors declared a quarterly qualified cash dividend of $0.01 per share payable on December 1, 2020 to Class A and Class B common stockholders of record as of November 17, 2020. The ex-dividend date will be November 16, 2020.

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"). 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).
2. 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).
3. Including interest and dividend income and other revenues, which are included in "Fees from related parties, interest and dividend income, and other revenues", total revenues associated with insurance brokerage increased 8 percent in the third quarter of 2020.
4. 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 recently developed Fenics FX trading platforms.The net investment costs relating to these products and services was more than $55 million in full year 2019.

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Possible Corporation Conversion7

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 on November 3rd. This quarter, the Company will continue to work with regulators, lenders, and rating agencies regarding any possible conversion, and BGC's board committees will review potential transaction arrangements.

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.

Discussion of Financial Results

The combined impact of continued investment in BGC's stand-alone Fenics offerings and insurance brokerage business lowered GAAP pre-tax income by $18.4 million and $15.8 million, in the third quarters of 2020 and 2019, respectively. GAAP pre-tax income and Adjusted EBITDA also reflect $2.5 million of charges related to cost savings initiatives recorded in the third quarter of 2020.

Revenues

BGC's brokerage revenues are driven mainly by secondary trading volumes in the markets in which it transacts.8 BGC's brokerage revenues are generally not correlated with trading results at global investment banks, which capture bid/ask spreads and mark-to-market asset price movements.

Fenics net revenues increased 19 percent driven by double-digit growth in electronic brokerage and data, software, and post-trade. BGC's insurance brokerage business benefitted from favorable pricing trends and improved productivity from previously hired brokers and salespeople. BGC continued its focus on optimizing its front office headcount and reducing expenses in less profitable businesses, which lowered revenues in the short-term, but is expected to increase profitability going forward. In addition, the Company's rates, FX, credit, and equities businesses were adversely impacted by lower year-on-year secondary trading volumes in certain markets during the quarter, while historically low prices across energy and commodities reduced demand for underlying product hedges.9 As a reminder, BGC's equity business primarily consists of equity derivatives, so the Company has renamed the revenue line item Equity derivatives and cash equities.

1. BGC may refer to its current corporate structure as an "UP-C", which stands for Umbrella Partnership/C-Corporation.
2. For more information, please see slide "Correlation Between BGC's Brokerage Revenues and Certain Industry Metrics" in the accompanying 3Q2020 financial results presentation.
3. Industry rates volumes include CME interest rate futures and options, Deutsche Börse (Eurex) European interest rate derivatives, FIA SEF non-forward rate agreement IRS, ICE short-term and medium & L-T interest rates, ISDA interest rate derivatives, LSE's MTS Cash, MarketAxess U.S. government bonds (which represents U.S. Treasury volumes on LiquidityEdge), Nasdaq U.S. fixed income, NEX (CME) U.S. Treasuries, and Tradeweb U.S. government bonds. Industry foreign exchange volumes include CBOE Hotspot (spot) FX, CLS forward, swap, and spot FX, CME FX futures and options, Deutsche Börse FX (360T), Euronext FX (Fastmatch), FIA SEF FX products, NEX (CME) EBS spot FX, and Refinitiv FX spot volume and other volume. Industry credit derivatives volumes include FIA CDS and options, ISDA credit derivatives, and Tradeweb credit derivatives. Eurex European equity derivatives volumes were 25% lower in the third quarter of 2020 compared to the year ago period, while Euronext Equity Derivative Index volumes declined by 22%.

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Consolidated Revenues
(USD millions)	3Q20	3Q19	Change
Rates	$119.3	$156.8	(23.9)%
Foreign exchange	73.3	86.5	(15.3)%
Credit	68.1	72.4	(6.0)%
Energy and commodities	65.9	73.0	(9.8)%
Equity derivatives and cash equities	47.4	57.0	(16.8)%
Insurance	43.3	39.7	9.0%
Total brokerage revenues	417.2	485.3	(14.0)%
Data, software, and post-trade	21.5	18.4	17.2%
Fees from related parties, interest and dividend income, and other
revenues	16.3	17.5	(6.7)%
Total revenues	455.0	521.1	(12.7)%

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)	3Q20	3Q19	Change
Brokerage revenues	$58.0	$48.5	19.7%
Data, software, and post-trade revenues	21.5	18.4	17.2%
Fenics net revenues	79.5	66.8	19.0%
Data, software, and post-trade revenues (inter-company)	14.1	20.2	(30.5)%
Total Fenics revenues	93.6	87.1	7.5%
Consolidated Expenses10
Consolidated Expenses
(USD millions)	3Q20	3Q19	Change
Compensation and employee benefits under GAAP	$244.2	$278.5	(12.3)%
Equity-based compensation and allocations of net income to limited
partnership units and FPUs	33.0	40.3	(18.2)%
Non-compensation expenses under GAAP	155.4	197.1	(21.2)%
Total expenses under GAAP	432.6	516.0	(16.2)%
Compensation and employee benefits for Adjusted Earnings	241.4	277.0	(12.9)%
Non-compensation expenses for Adjusted Earnings	146.9	159.2	(7.7)%
Total expenses for Adjusted Earnings	388.3	436.2	(11.0)%

BGC remains focused on optimizing its cost base to improve margins. The Company's compensation expenses under GAAP and Adjusted Earnings decreased in the third quarter of 2020 as a result of lower commissionable revenues as well as the $35 million cost reduction program. Compensation expenses under GAAP reflect $2.5 million of charges related to this program. BGC's non-compensation expenses decreased primarily due to lower selling and promotion and previously disclosed settlements in the third quarter of 2019 recorded in GAAP other expenses. The decline in selling and promotion expenses was due to a continued focus on tighter cost management as well as the impact of the COVID-19 pandemic. The decrease in these expenses was partially offset by an increase in interest expense, driven by the $300 million 3.750%

10 For 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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Senior Notes due 2024 and the $300 million 4.375% Senior Notes due 2025, less lower interest expense on the Company's revolving credit facility, which was repaid in full during the third quarter.

Taxes and Noncontrolling Interest

Taxes and Noncontrolling Interest
(USD millions)	3Q20	3Q19	Change
GAAP provision for income taxes	$3.8	$6.2	(38.9)%
Provision for income taxes for Adjusted Earnings	8.0	10.1	(21.1)%
GAAP net income (loss) attributable to noncontrolling interest in
subsidiaries	5.5	6.1	(8.9)%
Net income (loss) attributable to noncontrolling interest in subsidiaries for	(0.7)	0.3	NMF
Adjusted Earnings

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

Consolidated Share Count11

Consolidated Share Count
(USD millions)	3Q20	3Q19	Change	2Q20
Fully diluted weighted-average share count under GAAP	549.2	346.1	58.7%	546.1
Fully diluted weighted-average share count for Adjusted Earnings	549.2	528.4	3.9%	546.1
Fully diluted spot share count under GAAP and Adjusted Earnings	548.1	528.4	3.7%	546.2

BGC's fully diluted spot share count increased by 0.3 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 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 around 550 million.

Select Balance Sheet Data12

Select Balance Sheet Data
(USD millions except per share data)	September 30, 2020	December 31, 2019
Cash and cash equivalents	$492.3	$415.4
Liquidity	549.1	473.2
Notes payable and other borrowings	1,318.5	1,142.7
Book value per share	2.02	1.94
Total capital	825.9	767.4

The quarter-end balance sheet figures reflect the issuance of $300 million of 4.375% Senior Notes due 2025,13 the Company paying down its revolving credit facility in full, $44 million of tendered 5.125% Senior Notes due 2021,14 and ordinary movements in working capital.

1. "Spot" is used interchangeably with the end-of-period share count.
2. 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 segregated 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.
3. 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.
4. For more information, see the August 12, 2020 press release titled "BGC Announces The Expiration Of The Tender Offer For Any And All Of Its $300 Million
   Outstanding 5.125% Senior Notes Due 2021" and the corresponding Securities and Exchange Commission filing on Form 8-K made on the same day.

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Outlook

BGC's revenues were 4.4 percent lower year-on-year for the first 17 trading days of the fourth quarter of 2020. The Company is beginning to see evidence of a return to growth. For example, in the first 17 trading days of the fourth quarter of 2020, Asia Pacific revenues increased approximately 5 percent, and continental Europe was up over 10 percent, representing BGC's first regional increases in revenues since the start of the pandemic.

Metric (USD millions)	Guidance	Actual
	4Q20	4Q19
Revenues	$440-490	$487.2
Pre-tax Adjusted Earnings	$65-85	$73.2
	FY 2020	FY 2019
Adjusted Earnings Tax Rate (%)	10-12%	11.4%

BGC expects to update its quarterly outlook towards the end of December 2020.

BGC Conference Call and Investor Presentation

BGC will host a conference call on the date of this release at 11:00 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)

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 https://dpregister.com/sreg/10148604/da5cfccb0c.

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.

LIVE CALL

Date - Start Time:	10/28/2020 at 11:00 a.m. ET
U.S. Dial In:	1-866-270-1533
International Dial In:	1-412-317-0797
Passcode:	1014-8604
REPLAY
Available From - To:	10/28/2020 2:00 p.m. ET - 11/4/2020 11:59 p.m. ET
U.S. Dial In:	1-877-344-7529
International Dial In:	1-412-317-0088
Passcode:	1014-8604

A webcast replay of the conference call is expected to be accessible at http://ir.bgcpartners.comwithin 24 hours of the live call and will be available for 365 days following the call. Additionally, call participants may dial in with the following information:

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