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

Greetings, and welcome to the BGC Group Second Quarter 2026 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Jason Chryssicas, Head of Investor Relations. Please go ahead.

Hello, everyone. This morning, we issued BGC's financial results, which can be found at ir.bgcg.com. Any historical results provided on today's call compare only the current period with the prior year period unless otherwise specified. All references on today's call to record or all-time high results are the BGC stand-alone financial results, excluding Newmark, prior to the spin-off in November 2018. We will be referring to our results on a non-GAAP basis, which include the terms, adjusted EBITDA and adjusted earnings. Please refer to today's investor materials on our website for additional details on our financial results, relevant economic and industry statistics and for the complete and updated definitions of any non-GAAP terms, reconciliations of these items to the corresponding GAAP results and how, when and why management uses them. The outlook discussed today assumes no material acquisitions or dispositions. Our expectations are subject to change based on various macroeconomic, social, political and/or other factors. Information on this call contains forward-looking statements, including, without limitation, statements about our economic outlook and business. These statements are subject to risks and uncertainties, which could cause our actual results to differ from expectations. Except as required by law, we undertake no obligation to update any forward-looking statements. For information on factors that could cause actual results to differ from forward-looking statements and a complete discussion of the risks and other factors that may impact these forward-looking statements, see our SEC filings, including, but not limited to, the risk factors and disclosures within these documents. With that, I am now happy to turn the call over to Sean Windeatt, Co-Chief Executive Officer of BGC Group.

Thank you, Jason. Good morning, and welcome to our second quarter 2026 conference call. With me today are my fellow Co-Chief Executive Officers, John Abularrage; and JP Aubin; along with our Chief Financial Officer, Jason Hauf. We produced revenues of $846 million, a second quarter record, up 8% versus last year. This growth was broad-based across every asset class, reflecting the durability, diversification and the strength of our global platform. Our revenues for the first half of 2026 were up more than 24% to $1.8 billion, the highest ever through the first 2 quarters of the year. Since 2022 and the return of interest rates, we have grown our revenues double digits every year since, and our half year revenues in 2026 were greater than our full year revenues of just 3 years ago. FMX once again saw market share gains across its cash, U.S. treasury and futures businesses. FMX UST market share grew to 42%, a new all-time high, and FMX SOFR and U.S. Treasury futures also reached new market share highs for the month of June. With that, I'd like to turn the call over to John to discuss our exciting new partnership with Fanatics and the quarterly results of the business in more detail.

Thank you, Sean. Earlier this week, we announced our partnership with Fanatics, a global sports platform, to build a prediction market ecosystem that serves both retail and institutional participants, combining BGC's extensive client network and Fanatics' database of over 100 million customers. Together, BGC and Fanatics will also deliver unique market data in this innovative and rapidly growing asset class. This partnership brings together BGC's established market data and analytics capabilities to enable the development of new data products. Prediction markets are a gauge of sentiment, which predict outcomes as opposed to our traditional data, which reflects past events. Merging these two together will allow us to offer new and exciting data sets to our clients. As part of this agreement, BGC will receive upfront consideration and a performance-based earnout as well as a license to the exchange's data. This is entirely separate from FMX's CFTC-registered DCM, which BGC continues to own and control. Similar to the sale of kACE and Capitalab, this transaction once again underscores the tremendous value of the assets that BGC owns, assets that we believe are worth significantly more than what is currently reflected in the market. Now turning to our second quarter results. We delivered record second quarter revenues of $845.5 million, a 7.8% increase versus last year. Our total brokerage revenues grew by 7.2% to $771.4 million, driven by growth across all asset classes. ECS revenues grew by 5.3% to $275.5 million, driven by strong growth across our shipping, environmental and commodities businesses, partially offset by lower oil and refined product volumes due to disruptions caused by the Strait of Hormuz closure. Additionally, we announced the launch of BGC Compute Infrastructure Markets during the second quarter, a logical extension of our existing power business. This is a new business focused on developing the secondary market for compute and memory capacity. Rates revenues increased by 10.6% to $221.9 million, reflecting higher volumes across all major Rates products during the quarter. Foreign exchange revenues were up 9.4% to $118.7 million, primarily due to strong volume growth in emerging markets and G10 products and precious metals. Credit revenues increased by 5.4% to $79.3 million, driven by PortfolioMatch along with higher European and emerging market credit volumes. Equities grew by 2.8% to $76 million, reflecting strong U.S. equity volumes, partially offset by lower European equity derivative activity. Data, network and post-trade revenues grew by 18.6% to $36.7 million, excluding kACE, which we sold in the fourth quarter of 2025. Now turning to Fenics. Fenics revenues increased by 14.3% to a second quarter record of $186.2 million. Fenics Markets generated revenues of $152.8 million, an increase of 16.5% excluding kACE. This growth was driven by higher electronic trading volumes across rates, credit, foreign exchange and increased Fenics Market Data revenues. Fenics Growth Platforms revenues grew to $33.4 million, a 22.9% increase, primarily driven by FMX, PortfolioMatch and Lucera. FMX UST generated record second quarter ADV of $79.4 billion, 17% higher compared to last year. FMX UST continued to grow its market share to 42% in the second quarter, up from 41% last quarter and 35% a year ago. FMX Futures Exchange delivered another quarter of significant growth with second quarter ADV of approximately 54,000 contracts, more than 16-fold higher than a year ago. SOFR ADV rebounded strongly in June following reduced Iran-driven volatility, achieving a monthly record of more than 59,000 contracts. U.S. Treasury futures continued to scale in the second quarter, averaging more than 15,000 contracts per day and total open interest ended at more than 140,000 contracts, up from approximately 22,000 contracts a year ago. As you know, we currently list only the 2- and 5-year U.S. Treasury future contracts, but we'll be listing the remaining tenors across the full curve on August 3, 2026, supporting further growth in trading volumes and open interest on the exchange. FMX FX average daily volumes increased by 16% to $18 billion, driven by continued growth across spot FX and NDF volumes, resulting in continued market share gains. PortfolioMatch ADV grew 82% to a new quarterly record of $431 million, significantly outpacing the broader credit market. Lucera, Fenics' network business, providing real-time trading infrastructure to the capital markets grew its revenues by 15%. And with that, I would now like to turn the call over to Jason.

Thank you, John, and hello, everyone. BGC generated revenues of $845.5 million during the second quarter. EMEA and Americas grew revenues by 11.2% and 6.1%, respectively, while Asia Pacific revenues decreased by 2.9%. Turning to expenses. Compensation and employee benefits for adjusted earnings increased by 7.7%. The increase was related to higher commissionable revenues during the period. Non-compensation expenses for adjusted earnings increased by 5.2%, primarily due to increased selling and promotion, along with commissions and floor brokerage expenses related to higher client activity. Moving on to our record second quarter adjusted earnings. Our pretax adjusted earnings grew by 11.1% to $192.9 million, representing a pretax incremental margin of 31.3%. Post-tax adjusted earnings increased by 11.2% to $171 million, resulting in a post-tax adjusted earnings per share of $0.35, 12.9% higher versus last year. Adjusted EBITDA increased by 7.2% to $228.7 million. Turning to share count. BGC's fully diluted weighted average share count for adjusted earnings was 495.4 million shares during the period, approximately flat compared to last quarter and a 1% decrease compared to last year. As of June 30, our liquidity was $861.4 million compared with $979.1 million as of year-end 2025. We recently received upgraded credit ratings from both Kroll and JCRA to BBB+ and A-, respectively, due to the continued strong performance of our business. With that, I'd like to turn the call back to Sean to go over our third quarter outlook.

Thank you, Jason. I'm pleased to provide the following guidance for the third quarter of 2026. We expect to generate revenues of between $775 million and $835 million compared to $736.8 million in the third quarter of 2025, which at the midpoint of our guidance, would represent just over 9% revenue growth for the third quarter and 19% revenue growth for the first 9 months of the year. We anticipate pretax adjusted earnings to be in the range of $172 million to $190 million versus $155.1 million last year, which at the midpoint of guidance would represent 17% earnings growth for the third quarter and 24% earnings growth for the first 9 months of the year. We expect our adjusted earnings tax rate to be between 11% and 14% for the full year 2026. Before we open the call for questions, I'm excited to announce that we will be hosting our first ever FMX Investor Day on October 13, with further details to follow. I'm also excited to share that our keynote speaker will be Geoffrey Hinton, the Godfather of AI, who won the 2024 Nobel Prize and the 2018 Turing Award for his work with artificial and deep neural networks. And with that, operator, we'd now like to open the call for questions.

[Operator Instructions] Our first question is from Patrick Moley with Piper Sandler.

I want to start off with a question on the BGC Compute Infrastructure Markets. You launched that in June. I know this is being positioned by yourselves and others in the industry as kind of a compute memory capacity being an emerging commodity market. So I was hoping you could maybe just like walk us through the growth opportunity there and the monetization model? Is this primarily a brokerage of OTC blocks between some of the participants in the AI ecosystem? Is there a market data or benchmarking opportunity? And then ultimately, I guess, how are you thinking about the maturity curve here? When should we expect revenues, I guess, from this business to maybe be reflected in the financials? And then I have a follow-up.

Patrick, it's John. That was a bunch of questions. So I'll do my best, but remind me if I skip one. I mean I -- the obvious point is CapEx is going to be close to $1 trillion globally. We obviously look at it and think there hasn't been an effective market that's formed to hedge risk. And so the focus so far has been on cleared futures. But I think for BGC, the real opportunity is going to be on the OTC market. So cash settled derivatives to hedge exposure and OTC delivered trades when counterparties want actual physical delivery. So we're #1 in ECS. I think it's a natural extension of our power markets. And where we're going with it is to drive standardization across what is a highly fragmented market needs a broker in it. And so when we see revenues, I would assume we'll start to trade relatively soon, but it's early and too nascent a market for us to give financial guidance at the moment. But I think we have a group of some of our best ECS brokers who are doing this. I think we have connectivity to the hyper-scalers, the NEOs and the traditional client base. So I think we're uniquely positioned to enter the market and help standardize things. And on the back of that, I think we'll -- we're very excited about the potential opportunity. So I hope that answers the question.

No, definitely. And then just a follow-up on the 3Q guidance and margins. I think pretty impressive revenue guide on the margin side. This quarter, I think it was up 100 basis points year-over-year pretax adjusted margin. I think that's going to accelerate this quarter based on the midpoint of the guidance of maybe 150 basis point step-up year-over-year. So could you maybe just talk about the longer term realistic multiyear margin destination, how you're thinking about that today? And what's really driving that incremental margin step-up year-over-year?

Yes. Certainly, Patrick, it's Sean here. I think you've actually -- you framed it quite correctly. We -- what you're seeing is the gearing that we've always spoken about. And that's why in the prepared notes, we didn't just point out the quarter, but pointed out the 9 months, assuming the midpoint. What you're seeing is, you're seeing that in that guidance for Q3, you're seeing the flow-through of just under 40 percentage points. And that's a mixture of, of course, the incremental business, the incremental growth and the cost savings that we have identified and executed on during the year. I think, as you quite rightly say, look, we're incredibly excited going forward because what we have is we have a model where the gearing is in place. You're seeing -- even on the sort of 22-ish percent margin, you're seeing that on incremental, it's well in excess of 30%. And of course, leading into 2027 and beyond, we still have our electronic platforms and our FMX business, which will, of course, once up to full speed, dwarf the margins of our existing business. And so I think our runway remains incredibly positive.

[Operator Instructions] Our next question is from Elias Abboud with Bank of America.

I wanted to ask if you were seeing any impacts downstream from the SLR reforms, which took place, or took effect with certain banks earlier this year? I appreciate that your Rates revenue is broadly strong here, up 19% in aggregate in the first half. But are you seeing any outsized contribution coming from the bank channel that's worth calling out?

Eli, JP here. Yes, it's early stage, but we did notice strong activity from the banks linked to the SLR. So yes, it's positive, definitely. Our strong market share with the top banks provide us the ability to notice on various underlyings, the positive aspect of the SLR.