BGC Group, Inc. (BGC) Earnings Call Transcript & Summary

Good afternoon, everyone, and welcome to the 23rd Annual Credit Suisse Financial Services Forum. This is Gautam Sawant from Credit Suisse, and it is my pleasure to introduce Howard Lutnick, Chairman and CEO of BGC Partners. BGC facilitates trading in fixed income, derivatives, FX and equities through its electronic platforms and interdealer broker. Howard, it's good to have you here in person with us.

Really great to see you.

Why don't we start with an update on your health?

Okay. So for those of you who don't know, I was diagnosed in September with non-Hodgkin's lymphoma. So this is not a fashion choice, but this is a growing back hair. So I'm done with chemo. I finished January 31. I have my final scan on -- in the first week of March. I was 95% resolved in December. So my doctors are confident, more than confident. They are certain that I'll be cancer free. That's why you're all wearing masks. Thank you. I really appreciate it. My immune system is coming back. It should be perfect by May 1, and I'll be a free man. But I expect to be cancer-free next week. If you wanted an update, I'd put out videos to my employees so there shouldn't be rumors and stuff like that. So as soon as I get my scan back, I'll tell my employees and put it on YouTube and Rumble, and there you go.

Good to hear you're doing better. Let's start off with an overview of BGC, and please touch upon the evolution from inter-dealer broker to hybrid and fully electronic solutions provider.

So an interdealer broker is a giant wholesaler to all the banks and market makers of the world. And you all know that everybody wants to trade wholesale, right? Everybody wants to do business wholesale. Every buy side wants to do business wholesale, and so all the buy-side firms in the world, they're all -- the biggest ones are friends of ours. They come visit me and they talk to me. They tell me I look good and all that sort of stuff. And you know it's just because they want access to the wholesale markets. It's not my charming personality that's driving them to me. So you've got all these systems, electronic, voice, voice for the things that are complex and nuanced and electronic for the things that are homogenous. And then you take those systems and you expand them everywhere in the world, and then you think how can we extend them, how can we scale them out. And so we do foreign exchange across the world. So if you said, "Well, when are you going to do crypto?" I'd say, about the end of the year. So how hard is that going to be? I said, "Well, I don't know, I already do every currency." So what's the difference. We did every kind of cryptocurrency. So the leverage of the assets are so extraordinary. And I think there -- and that's part of what's my pleasure of being here is to talk about those assets and how we're going to extend them and scale them. And all the banks and all the trading firms of the world, all of them, they're all connected to it, and they all love our system, and they wanted to do more things.

That's a great point. So let's talk about data and technology, which is at the heart of your new initiatives. Walk us through the Fenics platforms and the asset complexes they cover.

Sure. So we started by being a voice broker, right? We pay our brokers 60%, and then think of the Chicago Mercantile Exchange with -- take off the colored coats and give them chairs. And that was sort of like -- that was like BGC 20 years ago, right? And then you're starting infusing technology and technology and technology. And what happens is you have less and less people necessary to do the same job on each product category. And that's called Fenics markets. Fenics markets means when I've gotten enough technology in that the margin has crossed 25% margin, which means basically, my compensation ratio has gone from 60% to 45%. And now I'll keep going down to about 35%, and we'll end up with about a 35% margin in that business. And that business is growing faster than the Chicago Mercantile Exchange, faster than Tradeweb, faster than MarketAxess because I'm automating the stuff that we've already got and driving our margins higher, right? And so that's step 1. And so we do that across the board. And then that creates beautiful market data, right? Because you're capturing all this and you can sell the market data much like the CME and much like these other guys. So our market data line, you're going to see that really pop because what happens is when I sell market data to you for $1 million for 4 years, that's $250 million a year for 4 years, right? And then you do it another one and another one and another one. So what happens is as that compounds every year, the growth rate just takes off. So you can mathematically see how we're going to have a 50% growth rate, but just not today. So it's 25% today, 35% next year, 45% the year after. It just sort of compounds like that, as you just add more deals to the ones you've already done. So -- and then lastly, you take those systems and you -- we rebuilt our Treasury business. So we had a dominant market share in U.S. treasuries. We sold it to NASDAQ. If you have extra time one day, I'll tell you how the mistake that Bob Greifeld made in the pricing, which took their market share down and they've sold it. We've rebuilt that Treasury business to 21 points of market share, 14 points a year ago, 21 points today, and we took the market share off of the monopolist, Chicago Mercantile Exchange. And then we take that same system and we announced that we're going to go after the interest rate complex, U.S. Treasury Futures, interest rate futures of Eurodollars and interest rate futures in SOFR. And you put that all together, invite all the banks and the high-frequency trading firms who are all our clients are ready to be partners with us, and off we go to compete with the $80 billion Chicago Mercantile Exchange. So I just think this is maybe the most exciting time that I've had running the company because the opportunity in crypto and futures, automating our business, those -- all those things coming together at the same time, had us what? Had every metric was a record and best metric in growth this quarter. Every one, margin -- and you name the topic. We're doing better on every metric, and that's the only way you can do it, is if your core fundamental issues are good, and I didn't even talk about the fact that rates are going to go crazy. We've been in a low interest rate environment for so long, how much boring could it be to have a giant rates platform with interest rates at 0. It's boring. If you go back and look at our revenue numbers 10 years ago when there were interest rates, '07, look at '07, '06 before the crisis drove interest rates down, you'd see a company twice the size. We have -- what I described is we have the biggest ship with the biggest sails and it just hasn't been windy. We're going to have a gale-force wind in rates coming as these guys just drive up rates, and you've never seen a boat go faster than what's going to happen when rate volatility comes and all these volumes explode. It's really going to be the most -- I haven't had this much fun in quite a long time.

So I want to take a step back and let's talk about Fenics UST. I want to dig in on Fenics UST monetization. Can you walk us through the revenue model and how it differs from the incumbents' offerings?

Sure. So when we launched in the middle of 2018, we gave everybody basically a 3-year fee holiday, right? How do you convince someone? The competitor, the Chicago Mercantile Exchange has a fixed price deal with almost every player and when they bought the company, what they started doing is they started adding fees, adding prices, adding fees. One of their fees is my favorite one, they added a fast connect fee. Imagine trading and being on the slow connect fee, like how do you -- oh, you got to upgrade to the fast connect or you're in the slow. I mean come on, that's just raising prices, right? So they started raising, raising, raising prices. So we said, look, 3-year fee holiday, and then you start to pay. Obviously, if you start with 3% market share, if you end at 3% market share, no one's ever going to pay. And that's what a Dealerweb has, right? They can't grow. They pay people to use their service. And that's why they bought eSpeed to try to bump themselves up. We now went from 3% market share to 20% for the quarter and 21% for December. So now everybody wants to pay because they need to pay. And so what happened last quarter is 6x revenue growth. All that happened is people started to pay. And that will all run off over the first 2 quarters of this year. So each time the calendar pulls, a company like yours says okay, the fee holiday is over, what's the deal going forward? They have the rate card. It's not a secret and they start paying. Now what's exciting is they come and say, look, you've got futures coming at the end of the year, let's negotiate. And one of the things we say is if you pay full right now and just pay full treasuries right now, we'll start your fee holiday on futures and it will last a little longer. But we're going to do that anyway, but they get a little extra and they're going to have volume incentives or they don't have their fee holiday. So the fee holiday in futures will come with volume incentives that unless they drive our market share higher, they're going to have to pay. And that's sort of the model. So our treasuries, we proved we could do it, 21 points of market share in December, 20 average for the quarter, so you see we're still rising. Everybody is going to be paying over the first 6 months of this year.

And can you talk about the flywheel of data on the platform? Like how is your platform being leveraged to monetize and create analytics that can be sold to some of the participants in the market?

So before we sold our Treasury business to NASDAQ, we were charging and earning about $50 million a year on treasury data because we had the best treasury data in the world, right? So our current platform of treasuries has the tightest spread in the world because the CME has a wide spread. And obviously, we were able to come in as the new comer and a little tighter spread. So a little tighter spread, of course, is better data. We've just started monetizing that. So we think that's one of the drivers of why you'll see our market data business sort of drive up to 50% -- 50% growth rate, not -- as I said, not this year because you make long-term deals, but I would say starting, let's say, the middle of 2023, you're going to start to see our market data business. Really, its growth rate will start to turbocharge. So that's an example of how you can monetize these assets now that you have 21% market share in the tightest spread. Now people want to buy that data because that data is incredibly valuable. Currently on our books, zero.

And how much of the business mix would you categorize as data and technology today?

Technology -- well, technology drives our business. So if my data business is teeny, and it should be 3 or 4x larger. I think it's 25% of the size that it should reasonably be were we to have back our Treasury business and the things that we're building. So I would think it's got a 3x or 4x in it. And then technology, we have 2 businesses that are really cool. So we have got this huge network connecting all the banks and all the trading firms in the world. So we started going to the banks, and we spent a bunch of money probably 5 years ago, separating our system from like our business. So now we had our system. We said, okay, here's an idea. We called it, we named it Lucera. And what we say is you can use our system to connect to each other and trade with each other. Don't pay a variable fee, just a SaaS model, right? You just turn it on, you guys use it. Credit Suisse uses it. Biggest banks in the world use it for foreign exchange. We connect to each other, trade with each other, trade with 400 users. That technology is fundamental for crypto. If you think about that, right, you've got a connection to everybody. Why can't they trade crypto with each other? So that's going to be model. I know we're going to get into that later, but that's Lucera technology. That's just the connection to everybody. And then we go to something called LumeMarkets. So if you take all this, you have all these exchanges and all these market makers. How do you look at them? So we built this software that basically integrates everything and we sell software. Who do we sell it to? I know a couple of biggest banks in the world, it's pretty good. We sell it to big traders. Now it's going to be more and more out there. So that's a software they pay, just to say, look, bring it all together for me and show my traders, right, so we can have those analytics that feed right into our trading systems, right into our networks, feed it, make it all integrated the way you do that stuff. So that's Lucera, LumeMarkets and then, of course, the core technology that drives our electronic trading system. And like our U.S. Treasury system will have 55% to 60% margins like any electronic marketplace. It's not any different.

And subscription model revenues, that's something new that you're trying to launch across the board. Do you have a target for total firm revenues that come from subscription sources?

I think we have to do some work to -- and I'm going to bring that out. So I thought -- I think that was an excellent point you raised to me, and we're going to go work on that, and we'll bring that out. I just haven't done the work to say exactly where we are today and where we're going to. But obviously, that's a core point of our business is subscription-based models and how that compounds and grows. Like I said, with market data, we'll do that with futures, we do that with treasuries. So I'm going to put those all together and show it as a ratio and a growing ratio of the company. And I think that's an excellent question. We live it, but we haven't really made that public yet, and we're going to go do that. And I think it's driven by your excellent questions and your advice to go do that.

And let's switch gears and talk about credit markets. What factors are affecting volumes today? And how do you expect them to change? And how are your Fenics credit platforms being used today?

Okay. So we all saw that the credit markets this last quarter, right? MarketAxess was down. Volumes are down because when rates are rising, people get a little hesitant to trade, right? As you said, the Fed was going to raise next month and the month after and the month after. I mean you just sort of wait. So credit markets have seen a pause on issuance and on trading. MarketAxess saw it. We saw it as well. It's sort of industry-wide. But I think the issue of the end of quantitative easing creates just an explosion of volume across all platforms. So I think credit has to take on the burden of interest rates rising over the next year. And then you're going to see credit volumes ramp up in a big way. It will be great for MarketAxess and great for us. So we have the biggest marketplace in credit, right? Primarily in the wholesale market, but extending beyond that, right? And so we will rise with the tide with MarketAxess in that business. So you're seeing us. We've lost a little volume, the same as they have. It's industry-wide. But I'd say in a year, that's an on-ramp that's really going to be attractive for them and us.

Can you please walk us through the FMX Futures Exchange and Fenics UST. How do these 2 key platforms come together as an interest rate derivative and spot trading offering?

Okay. So we have a Treasury futures electronic marketplace where we ended the year at 21 points of market share. That system, of course, can do futures as well. So the rates complex of the Chicago Mercantile Exchange would be Eurodollars, and that was converting to SOFR and U.S. Treasuries. Now the problem everybody has had is to build a competing futures exchange, you need 2 things. You must have a rocking electronic system connected to all players. And you need cross-margining benefits. So if you do a trade on the Chicago Mercantile Exchange and you go long a contract and then we have a better price and you sell it on ours, you need to have -- you can't have initial margin here and initial margin here. And that's why all competitors have died in the past. They either had cross-margining, like the LCH tried to do it itself with all the banks of the world with CurveGlobal, but they didn't have the system. Or you have the system and you don't have the margin. This is the first time that we have both things. The LCH which is the largest holder of interest rate collateral in the world, they hold everybody's interest rate swap collateral. They agreed to do all cross-margining and they are clear in one pot. And that is the fundamental 1 of the 2 keys. You need 2 keys to get in. 21 points market share in U.S. Treasuries in Rates, that's key 1. Key 2 is the LCH as our partner. Without the LCH as our partner, it doesn't work. Without the 21 points market share, it doesn't work. Bringing the 2 together. So you need both of those pieces. No one has ever had both of those pieces to bring a competitor to market. The banks are going to -- we announced, we planned to have a strategic partner. It will be the big banks and big trading firms, and they'll all want to play. And it's sort of obvious. If you have a monopolist, wouldn't you like to have a competitor? It's not really -- because it's not really a hard sell necessarily. They don't like a competitor. And you saw the Chicago Mercantile Exchange raised all of its rates 2 weeks ago. It's going to be a monopolist. You just like announce on Tuesday, you're going to raise your rates and everybody gets mad and pays you, for fun. I wish I had that. I don't have that. I'm used to competing. At the end of this year, we will roll out the entire complex. The LCH will clear it in one pot and it will be incredibly exciting.

And just on the time line, like what factors have kind of contributed to pushing 2Q '22 to 4Q '22 for the launch? Is it around technology? Is it bringing the strategic partners? Is it the products coming in? Just can you kind of help us understand what's driven the time line?

Sure. So we originally said we were going to -- we were going to open with Eurodollar futures contracts, which is the #1 product in the Chicago Mercantile Exchange, and we were going to cross-margin it with the LCH. We're going to do that in the second quarter. All of our clients said, why don't we bring the whole complex, right? SOFR contracts are coming and you got to have both. So please do SOFR contracts, and we'd like you to do U.S. Treasuries, so you have all 3. And the LCH has never cross-margined against U.S. Treasury futures. And the fact that they committed to do it, we originally planned in our sort of backroom discussions, that would be sort of third or fourth quarter 2023 for Treasury futures. Now that's going to be fourth quarter of this year. So we brought sort of lots of things forward and extended that, but we need really to be in perfect harmony with our clearer, LCH, perfect harmony with our clients connected to everybody in all 3 product categories. And so it was sort of a joint understanding with our key strategic partners, clients, LCH to do it this way. So we are -- we're just coming much, much bigger at the end of the year. And yes, is it a little slower? Sure. But is it much bigger? For sure.

I just want to stay on this topic a little bit longer. Can you talk about the commercial model for FMX beyond competing price and the margining aspect. Are there any other CME futures market-related pain points that FMX is solving for?

Well, it's -- their spreads are wide. So we're going to provide a narrower price spread. We can bring sort of the new initiatives, things that the other electronic markets of the world are using that the Chicago Mercantile Exchange, because it's a monopoly, it hasn't had to change. And so we'll bring sort of the innovations that have been going on in electronic markets. Everything doesn't have to have FIFO. You could have -- you can do things in all sorts of interesting ways that the market participants want to do in new markets. Pricing, of course, we can have all-you-can-eat deals, right, something the Chicago Mercantile Exchange will never do. Drive the subscription model up, right? And have those models go up where market share goes up. And market data. And then, of course, lastly, BGC owns one of the 3 approved crypto clearing corporations. So the Chicago Mercantile Exchange is crypto ETFs, right? They do futures, right? Crypto.com bought Nadex for $237 million. And I don't think Nadex didn't lose money every day. [ Well, I don't know ]. I think they lost money sort of always and they paid $237 million. And there's only 3 of them, and the third one is owned by BGC, and it will be part of our futures platform. It will be part of the things we will roll out going forward. So that's another sort of interesting model that doesn't get much talk. But the problem is when you have so many assets, I don't know which ones people want to talk about. But they're fun. And they're all sort of the same, but they're really -- they're interesting and there is enormous opportunity.

That's a great segue. Earlier this week, you spoke about many of your existing crypto offerings, including Lucera and kACE as well as your plans to launch a comprehensive crypto platform by the end of the year. Can you provide any more specificity on these crypto initiatives? And what's BGC's comprehensive crypto platform? What will that look like?

Okay. So if you think of all those cryptocurrencies, right? There is Bitcoin and Ethereum and Solana and Polkadot, you can go Avalanche, you can go on and on and on. They're basically -- as far as we think about them, they're like a currency. I don't know if the CFTC is going to call them a commodity, but it doesn't matter. It's that you trade it like a currency. So our systems and our people are used to trading options on them, swaps on them, all types of derivative structured products on them, spot, which would be like the treasury system, right? On all of them. So you'd say, "Wow, that's not really that hard for you to do everything" Like everyone else has to start an options exchange, like you mentioned kACE. What kACE is, this is our software. So the big banks have great options making software. But let's say you're a regional bank and you have clients who want to trade options. You don't want to just call -- like you're a German regional bank, you just don't want to call Deutsche Bank, right? That's not fun. You want to make your own prices. So we sell them kACE, which is software that lets them become a market maker so that they can make prices for their customers. So you can imagine how great that is as an asset when people want to trade options on crypto, right? All these traders of Bitcoin is $2.5 trillion. They don't know how to make prices. So you sell them the software, and now they can make prices on options. Optiver and the other great market makers in options are going to make options on crypto, and they're all used to doing it with us. And so this is sort of a natural extension for us to do it. It's not complex. It's not difficult. And here's the fun part. We have -- Lucera is going to connect to as many exchanges as we possibly can. Okay? We're going to have Lume sort of present a consolidated view of all derivatives, of all options, of all everything. And the day Credit Suisse decides, all right, we've got an approval, we're going into crypto all in, one button. All I do, my business would be, I do a huge business with BGC now. I'm now connected to every exchange, I can trade with every exchange. I can trade this. I can trade that, I can trade this, I can trade that. And all of a sudden, we'll get a tidal wave of clients led by Credit Suisse and your peers. And so we are built for it, but none of you are connected to FTX, BitFinance, Bitfinex. But you'll be connected to us, which you are now, and that means you'll be connected to them. Touch of a button, you'll pay just like you do foreign exchange, done. And that's going to come. You tell me when, you tell me when, but it's a monster winner.

At this point, we can open it up to -- if there is any questions in the audience, you can raise your hand and they'll bring you a mic. But while we get that set up, now that you've completed the sale of the insurance business, are there any other considerations preventing you from pursuing a C-corp conversion? And how do you perceive investors will react to the updated corporate structure?

So the -- our tax rate last year was very attractive because we were able to use our structure to create a low tax rate on sale of the business. Going forward, I would expect our Board to address the corporate structure and define that whether we are going to a C-corp simple structure or not in the second quarter. And if the answer is not, there will be a very specific reason why, like we've sold, X, Y, Z and it is going to save us a lot of taxes, meaning it's -- we're either going to go forward with it or there's going to be a very specific reason why not. We expect to announce that in the second quarter. And then we expect if they say yes, to execute by the end of the year. It'd be a much simpler structure. So that's our expectation. That's my expectation. I would expect us to go forward, but up to the Board, and they'll have their analysis. Last year, they saw that the insurance business said, let's wait a year. Let's see what they say this year.

Got it. And just looking at the revenues in this last quarter, can we talk about the international mix and how that potentially had an impact on this quarter relative to some of the peers that maybe investors who were comparing your numbers to?

Asia was weaker than I would have expected because of the strength of COVID-19 mandates and reactions. In Hong Kong, one of our best markets, if you got Omicron, you were not sent home, you were sent to a facility. You were sent to a facility for 2 weeks. It's like not home, elsewhere. So we had traders like away -- not only away from their desks, but like away as in they couldn't trade at all. And so we had to separate all of our people because we don't want people getting too sick. We didn't want to have 1/3 of our office going to some facility somewhere. So it really -- it hampered the nuanced trade. The electronic trading platforms and our electronic trading platforms did fine. But all the places where we do nuanced work where people really understand the business and extract -- all the places and the corners where there's business to do, that just took a hit in Asia, across -- Hong Kong was just an example, but Singapore was super tough. And it just doesn't feel like here. I mean here, we're all wearing masks because you're being kind to me. But otherwise, you wouldn't be wearing masks like this. But in Asia, it's just not feeling the same way. So that pulled things down for us in a way that -- I don't think it was obvious to people who are working in the U.S.

I just want to touch upon expenses. Having -- like post the sale of the insurance business, like how does that kind of change the operating model for the business? We should see margin expansion here, but how should we think about that going forward?

So we have our voice business, which is -- it's $1.4 billion and it's generally about a 15 point margin. Okay? And generally speaking, it's got enough scale and scope, it's about 15 point. As things go into Fenics markets as we automate them, they only go in when they get to 25%. And then so we have 25% to 35% margins, mature business is at 35%. The newer ones are 25% and not shockingly, what's our average, 30% and we will say, okay, it's sort of obvious because new ones, there's old ones, and there's ones in between. So every time when it goes, the margins go up. And then you have all these -- the fully electronic business, which we call Fenics growth, which have 55% to 60% margins, all fully electronic businesses. And those just drive the margins up. So as our Treasury, for example, right? As these guys roll in over the next 2 quarters and they start paying the fee, you'd say, really, what's your marginal expense? You'd say, really -- you're just growing revenues in a 55%, 60% business. So what's going to happen is you're going to see the margin of the whole company pulling up, but it's nothing but the 15% margin business is shrinking a little bit. We're trying to grow it with new other things, but basically it shrinks a little as the business goes electronic. As the business goes electronic, the margins expand, right? And then margins expand and then you've the 55% to 60% margin expanding and so you see the whole company and with the whole company, 21, right? You're going to start to see just the mix. You're just going to keep driving up the margin because it's really just the company automating itself and driving up the margin, as you would expect. So there's nothing in the way. We sold the insurance business, as you point out, in the fourth quarter, $535 million. We bought $480 million worth of stock. We paid up $260 million of our debt. We just paid it off because we made a bunch of cash last year, and we're buying stock as fast as we could. We bought like 26 million shares of public stock, fourth quarter. I expect us to buy stock next year. Wait, now we don't have the big insurance company sale to sort of spend huge amounts, but if you would expect us to spend 75% of our earnings in stock, yes, that -- obviously I like the stock and obviously -- so how do we know this guy's not just selling us? I'd say, I just bought 20 -- the company bought like 26 million shares in the fourth quarter. I don't -- I don't know how -- and 72 million shares last year. $475 million we spent on stock, so obviously you know we like the stock and I think it's just incredibly undervalued. The way I say it is we're currently trading at 6.4x earnings, and MarketAxess and Tradeweb are trading at 38x. I mean my Fenics business at $400 million of revenues, I don't know what model you put on it. This has happened before. In 2013, we had an asset called eSpeed and I would come to like a conference like this and I would say, "Come on, come on." And we sold it for the market cap of the company. I sold [indiscernible] for literally the market cap and of course, the stock since then went up 5x, okay? Now we're in that position again. Fenics, $400 million, right? These companies trade at 16x forward revenue. We grew 20% last year. The last quarter, 20%, Tradeweb grew 18%, MarketAxess fell 4%, and we trade at 6x now. And if you want to know, well, why don't you buy back stock as fast as we can? As fast as I can.

You recently provided an updated 1Q '22 revenue guidance of $490 million to $540 million and the adjusted pretax earnings of $105 million to $125 million. I think like what are markets missing? And what are you most excited about for 2022?

So 2022 will have automation driving margin. The rollout of crypto sort of all over the year, meaning it's not sort of like -- futures will just come at the end of the year. And that will just sort of a big, let's go. The crypto is going to come in all year, and it will be complete by the end of the year, which will be exciting. And just our ability to automate, our ability to become more efficient and our ability to scale will become more and more obvious to people. And what will happen is -- what's always happening to me is the exchanges of the world will want to buy our electronic assets. I've sold one asset to NASDAQ and sold another asset to the New York Stock Exchange. It's called Trayport. They all are coming to visit. Now it's by Zoom and I don't even get to have coffee with them anymore. Now we have virtual coffee. But they're all going to come to visit and they're all going to look at our assets and say, "Geez, how do we do a deal, Howard?" And the answer is, I'm the largest shareholder of this company. I care about how we do as a stock. I really care. And my job is to maximize shareholder value. And every once in a while, we just get great tools. We did in 2013, we did in 2015, we did in 2017. We spun off Newmark. If you look at -- if you add back all the assets of this company and how shareholders have actually done, it's an explosive return over the last decade. But I keep separating and selling and paying out and distributing. A Newmark is just a full spin-off of us. So I mean that's my job, and I think I've got the tools and the assets to really have -- to express that value. And I think the futures will be sensational. Crypto will be clear to everybody, the massive value that we can deliver over the year, and I will try to make that clearer and clearer over the course of the year. And I think people will sort of lay out, as you were doing, lay out the sum of the parts, really understand the valuation, which I really appreciate you doing because that's the right thinking and that's how I think about things, and just start to show, wow, this company is deeply undervalued. And it didn't seem like the CEO was lost. So I think he's going to do things to express the value, which I need to do.

Let's just touch upon the capital priorities for the next year and then kind of going out. In the past, you've spent a lot on organic growth. A lot of investors want to know more about equity compensation and if your share repurchase going forward will offset that. And then also M&A and how you consider that?

Okay. So we -- we've been reducing our equity-based compensation because we think it's too expensive because the stock's -- we think the stock is going to go much higher and it's too expensive. So I would think our equity issuance for compensation should be around 3%. Now our equity issuance for compensation is different than most. It -- while it invests in an ordinary case for accountants, the employees are not allowed to sell it, and if they ever, ever leave and compete, they forfeit it. So that means if they go to a competitor, all the equity they have received for all that period of time, they forfeit. And obviously, the new employer pays that back, but it becomes more and more and more expensive to hire our best people. And so that's why we issue equity compensation. It's not for any other reason. Okay? It's retentive and it makes it more and more expensive to hire our people, so we are the best retainer of quality staff in the world. 3% issuance. We will buy back more than that because say 3% on 500 million shares of a $5 stock, it's pretty easy to figure out that it's about $75 million, right? Normally, we like to do a capital return policy of 75%. So it's easy for us to buy more than $75 million, probably more than $150 million. So our share count next year will be lower, all other things equal will be lower than it is today. And last year, it was 560 million and now it's below 500 million. So I mean we've been driving it down.

Great. And with that, I think this is a great place to stop. Howard, thank you for joining us today.

It's really -- listen, it's fun to be out. I haven't been with other people in quite a while. I appreciate you all wearing masks for me today. It's really fun. Thank you for spending time and inviting me. It's been great. Thanks, everybody.