Welcome to the BGC Partners Inc. Fourth Quarter and Full Year 2017 Financial Results Conference Call. My name is Candice and I will be your operator for today’s call. [Operator Instructions] Please note that this conference is being recorded. I’d now like to turn the conference over to Jason McGruder, Head of Investor Relations. Mr. McGruder, you may begin.

Good morning. BGC’s fourth quarter and full year 2017 financial results press release and a presentation summarizing these results were both issued this morning. These can be found at ir.bgcpartners.com. Details about Newmark Group, Inc.’s separate conference call scheduled for today right after BGC’s as well as Newmark financial results press release and presentation can be found at ir.ngkf.com. Unless otherwise stated, the results provided on today’s call compare only the fourth quarter of 2017 with the year earlier period. We will be referring to our consolidated results on this call only on adjusted earnings basis unless otherwise stated. We may also refer to adjusted EBITDA. Please see today’s press release for full year financial results and for results under generally accepted accounting principles or GAAP. Please also see the section of today’s press release for the complete definitions of any such non-GAAP terms; reconciliation of these items to the corresponding GAAP results and how, when and why management uses them. For the purposes of today's call, all the company’s fully electronic businesses are referred to as FENICS. These offerings include the Financial Services segments, fully electronic brokerage products as well as the offerings in market data, software solutions and post-trade services. Also on today’s call, Newmark is synonymous with our Real State Services segment, unless specifically referred to as Newmark standalone, in which case we referred to results of Newmark Group Inc. BGC’s financial results have been recast to include the results of Berkeley Point for all periods discussed on today’s call because these transactions involve entities under common control. Investors and analysts should also note at the beginning of the first quarter of 2018, BGC will recognize receipt of NASDAQ earn-out payments when earned in the third quarter for adjusted earnings instead of prorating over the following four…

Thank you, Jason. Good morning, everyone and thanks for joining us for our fourth quarter and full year 2017 conference call. With me today are BGC’s President, Shaun Lynn; our Chief Operating Officer, Shaun Windeatt; and Steve McMurray, our Chief Financial Officer. As Jason mentioned, our subsidiary, Newmark Group, Inc., issued its standalone financial results press release this morning and it will hold a separate conference call following this call. BGC’s consolidated revenues grew by over 18% to $894 million in the fourth quarter, while our post-tax earnings were up by 27% to $162 million. BGC generated strong revenue growth from both Newmark and Financial Services. Financial Services was up by more than 17% and Newmark’s revenues grew by more than 18%. Newmark’s brokerage revenues were up by 19% for the full year 2017 and more than 27% in the fourth quarter. Newmark’s strong performance was led by its average revenue per front office employee improving by 14% for the full year 2017. This productivity growth explains why more than 80% of Newmark’s revenue growth for the year was organic. Please join us for Newmark’s call beginning at 8:45 for more details in its performance. I am also pleased to report that our Board declared an $0.18 qualified dividend for the fourth quarter, which is up 12.5% compared to last year. At yesterday’s closing stock price, this translates into a 5.4% annualized yield. With that, I will now turn the call over to Shaun.

Thanks, Howard and good morning everyone. Our overall revenues for Financial Services increased by approximately 17% to $422 million for the quarter. Financial Services revenues were up by 12% to $1.712 billion for the full year. Brokerage revenues increased across all asset classes, led by 14% improvement in overall foreign exchange revenues as well as 28% growth from FENICS fully electronic sales [ph]. The strong performance generated by FENICS rates was a result of our continued investment in technology and the ongoing conversion of that business to more profitable fully electronic trade. As we continued to invest in that business, we expect our revenues and earnings to outperform those of our peers. Brokerage revenues from equities, insurance and other asset classes more than doubled primarily due to the additions of Sunrise and Besso. Financial Services pretax earnings for the full quarter were up by 9% to $77 million excluding the NASDAQ payment from the prior year period. Full year pretax earnings including the NASDAQ payment were up by 22% to $356 million. The key driver of that profitability is average productivity per broker or sales person. Front office revenue per producer in our Financial Services business improved by 12% to $168,000 and by 7% to $676,000 respectively for the quarter and year ended December 31, 2017. Our financial services revenue per producer improved year-on-year in each of the four quarters of the year. With respect to the first quarter of 2018, Financial Services revenues were off to an excellent start, showing double digit sales growth for the 25 trading days of the year compared with last year. Market volatility is a friend of the company. And the current macro trends bode well for the performance of that business. With respect to our results for Real Estate Services revenues from Newmark as a standalone company increased by 90% year-on-year in the quarter to $461 million, while pretax adjusted earnings increased by 23% to $85 million. The standalone Newmark results would have been higher and presented consistently with BGC segment reporting methodology. Please see BGC’s and Newmark’s press releases for more details. With that I am happy to turn the call over to Steve.

Thank you, Shaun and hello everyone. BGC generated consolidated quarterly revenues of $894 million, up 18.3%. Our revenues from the Americas were up by approximately 20.6%. Revenues from Europe, Middle East and Africa were up by 13%, while Asia Pacific revenues increased by 17.3%. With respect to expenses, compensation increased by 21.2%, our compensation ratio increased by 130 basis points to 57.3% due to the mix of revenues by product. For the full year the ratio declined by around 120 basis points. Our non-compensation expenses were $217.7 million compared to $169.1 million a year ago. As a percentage of revenue, our non-compensation expenses were 24.3% versus 22.4% in the year ago period which largely reflects the impact of increased interest expense associated with the acquisition the Berkeley Point acquisition. For the full year our non-compensation expense ratio remained unchanged at 23.6%. Our overall expenses were $730.2 million in the fourth quarter of 2017 compared to $592.2 million. Our fourth quarter pretax earnings before non-controlling interest in subsidiaries and taxes were up by 10.7% to $165.1 million. For the full year pretax earnings were up by 26.5% to $613.7 million. Our full year adjusted earnings tax rate was 10.6% which is below our previous full year estimate. As part of our ongoing efforts to retain key partners across both Financial Services and Real Estate Services, we extended many contracts in both segments. Accordingly our fourth quarter GAAP compensation expenses increased non-cash, non-dilutive charges for grants of exchangeability. These non-cash exchangeability charges are tax deductible. BGC’s post-tax earnings were up by 26.7% to $162.2 million. Our post-tax earnings per share were up by 17%, $0.35. BGC’s fully diluted weighted average share count was 462.9 million for adjusted earnings. The GAAP weighted average share count was lower in the fourth quarter of 2017.…

Thank you, Steve. Our outlook for the first quarter of 2018 compared with last year is as follows. We expect to generate revenues of between $870 million and $920 million, that’s up between 11% and 17% compared with $783 million last year. We anticipate pre-tax earnings to be in the range of $140 million and $160 million, up 18% to 34% as compared with $119 million, which excludes the NASDAQ earn-out. We anticipate our consolidated adjusted earnings tax rate to be in the range of approximately 10% to 11%. Newmark’s standalone tax rate is expected to be approximately 12% to 14%. We expect to update our consolidated first quarter company guidance toward the end of March as we have said Newmark’s call begins at 8:45. As such we would appreciate it, if you would hold your detailed questions regarding our Real Estate Services results until then, since Newmark’s executives will be on that call. With that operator, we are happy to turn the call over to questions.

Thank you. [Operator Instructions] And our first question comes from Rich Repetto of Sandler O’Neill. Your line is now open.

Yes, good morning. And if this question pertains to real estate too much and you can certainly put me off I guess. But I guess the question is overall, Howard, on just revenue guidance, you came out with the range initially, then you came out that it was at the high-end or towards the high end and then it was going to be well above. And I guess I am just trying to see maybe you mentioned this on the call, I would have to jump on, but just trying to understand what changed in the quarter, what was the driver of the positive sort of news here on the top line?

Both businesses performed better through the rest of the quarter. I mean, they just – just the numbers work that better all the way through and it was across both businesses.

Well, on the Financial Services side, could you highlight like what areas that I see it did well, I believe it was an equities and I can see the segments, but could you say what uplifted and is that going to continue or is that continuing in the first quarter?

Hi, Rich, it’s Shaun. The volatility we saw towards the end of last year and it just continued throughout this year was maybe in rates and equities, we have seen that’s been the big driver of the financial revenue for us. And…

And of course in the real estate business, seasonality is always strong in fourth quarter and that was directed towards the end of the year that kicked in, in a very positive way.

Got it, okay. And then I guess this will be my last question, when you look at FENICS, we appreciate the detail on sort of the transaction detail, but margins have stayed above your overall margins, but not back up to 50% and sort of like flat year-over-year. And just trying to understand will we see more margin expansion, because that was sort of one of the, I guess promises of the acquisition over time that you would get higher margins in the electronic business? And then from the transaction sort of summary you put in the earnings release, it looks like I think if interest rates are, but looks like the others are flat to slightly down as far as activity, so could you comment on I guess some insight into FENICS?

Sure. So, to start with, we are investing broadly in FENICS. I think we have discussed the fact that we have our foreign exchange and rates products coming out and we are investing in that. So that is holding the margin down as than it otherwise would be because we are building those businesses and making those investments but as we expect both of those businesses to be out and about during the year 2018 and so I think things will just improve, but then again I am sure we will find other investments to make. And Shaun?

And Rich, also you have probably seen recently, we have made a few announcements around our compression services around Capitalab and Swaptioniser, where we have continued to come out with new product is now gaining traction that’s going to take some time once again, but if the incubation of these products takes a lot of time. We have worked on this for many, many months in the formation of these new products, which is now going to marketing. So, as Howard said, we continued to invest in FENICS in a dramatic way across many different execution aspects as well as compression.

Okay. And then my very last one and I don’t know whether you can help me with this, but if you look at the stock price and it incorporates by our math somewhere of 45% to 50% of the market cap comes from the ownership of the new market shares that BGCP shareholders own, it will be locked released for whatever another 5 months or so. So, I guess the question is with Newmark flat year-to-date, Howard, but in BGCP stock down, I am just trying to understand and other comps in a deal – or the other comp say flat year-to-date as well. So I am trying to understand given the positive fundamental what do you think is happening with the stock here?

I mean that yesterday was exciting, I don’t know what else to say that when you are executives of a company, our objective is keep our head down and earn more money and if you earn more money and you build your business, eventually your investors and the stock market follows. BGC’s had excellent performance over many years by doing exactly that. Improving its performance in this quarter is as good an example as you could have. The company is firing well in the fourth quarter on all cylinders and so far obviously in the New Year as Shaun mentioned with the volatility where it is today, I mean, this bodes really, really well for the company. It’s volatility is back. This is wonderful for financial services. So, look, the company is doing superbly, revenues up 17% and 18% in both its segments. We are just going to keep our heads down. We are just going to keep earning more money to this company. And within a reasonable period of time, I think people will compare Newmark to its peers and realized we are growing faster than our peers and give us a reasonable multiple against that, but that just comes with time proving our point and for BGC Financial. We are just going to keep making more money growing our business and we would expect our shareholders to applaud and eventually the market will give us credit for it.

Understood. Thanks for the response, Howard. Thanks.

Thank you. [Operator Instructions] And our next question comes from Patrick O'Shaughnessy of Raymond James. Your line is now open.

Hey, good morning, guys.

Good morning.

Question about your M&A aspirations going forward for the financial services business, obviously, you are kind of gifted or however you want to term it, the eSpeed earn out to the Newmark subsidiary. So in terms of growing the financial services business through acquisition going forward, what are your thoughts in terms of financing that growth?

Well, we saw with the GFI acquisition the opportunity to take out expense in our space was our executives did an excellent job to that effect. So, I think there are plenty of opportunities out there for us to buy. We generate substantial cash flow to company and I think we are in good shape to acquire the companies that we have in our vision and finance it’s appropriately within the financials of the company. So, we don’t feel constrained at the company at all.

Got it. Thank you. And then maybe a related question, you bought Besso, it was a while going now any update on your plans in the insurance brokerage space?

Patrick, it’s Shaun. Yes, we – I think closed the deal in February and we have continued to organically grow the business. Of course, we are going to look at opportunities that are going to come our way, but once again it was in line with we have always said is an accretive acquisition. Insurance is a reasonably hot space at the moment, but there are opportunities potentially on the horizon as with any – as with any M&A you have got to make sure that you did just well and you make sure that it’s the right fit to the company and it’s about the way we do our transactions, good earn-out, profitability and good strategic fit.

That’s performed very well and our ability to help them grow their business by hiring and acquiring will continue to propel them forward so excellent numbers in the first year, really superb above all of our expectations and I think that has put us in yet another vertical where our view of the brokerage business will be understanding how to integrate companies and how to hire super producers and how to manage those kind of businesses. We became experts in it in financial services. We proved our bonafides with Newmark. And as we grow and build in the insurance business, because we feel very, very good with our first year under our belt, we feel very good about our view and our ability to execute on the insurance business first year and very good.

Got it. Appreciate that. And then turning to the legacy interdealer brokerage business, obviously, nice start to volatility to 2018, but can you maybe just take a step back and give your thoughts on what the competitive landscape looks like at this point?

Sure. There are two big players and the two big players have the capacity to provide just more data – just more technology – just more information, broader service, better capacity than the regional and smaller competitors. So, the two big players are going to be sitting down with big clients and being able to just provide the more service and just do a better job to that. And so I think the competitive landscape is just one that we can invest more in our business and deliver more value to our clients and I think that puts us in a good position. And there are lots of little players, lots and lots of little players in the world is very big and so there is great opportunity for us to grow and build across all these small regional flares around the world.

Got it. Question about the Newmark plan spin-off, is any update to your thoughts in terms of the timing and process for that to be concluded?

Nothing new to report, we have agreed within the IPO process that we would not visit this for at least 6 months that sort of ordinary and standards and the board will make its decision when I think it’s best for itself, but I have nothing that new to say today.

Got it. And then maybe one last one, any initial preliminary thoughts on what BGC’s dividend policy is going to look like post that Newmark spin and obviously, the implications are probably that the absolute amount of the dividend is probably going to have to be reduced, is that a fair assumption?

I think when the time comes BGC will examine its policy and based on its earnings. Right now BGC is growing really nicely. And I would want to constrain or limit whatever the Board chooses to do at that time. But at that time, we will take a look but BGC continues to grow and produce substantial amounts of cash and is growing. So we feel really good about it. And we surely feel really good beginning of this year. And you can only discuss the volatility as a friend of the company when there is no volatility for so long. When people start to get they forgot volatility is like. And now all of the sudden, the last week or so people are sort of shocked into remembering what volatility is like and you start having volumes, which are in the top 10 of ever and this is just good. Okay. It’s just good.

Maybe another question along that point, do you think that a lot of these shortfall strategies that have really coming to be in the last several years that kind of artificially suppressed volatility and maybe some unwind those shortfall strategies is going to leave to more sustainably higher volatility going forward?

That’s a big question for our earnings call at the movement. But I would say that quantitative easing was a primary and proximate cause of volatility decline in my view. The fact that the government was a gigantic and the governments around the world were gigantic acquirers of assets without the ordinary hedging that would come with it, that would add to the volatility that spread across and philosophy spread across the markets. But there are strategies and how they rise and fall and press and move a particular market. I don’t have the answer for you, but I would simply say that if you take quantitative easing out of the mix, then last I checked you have the same world we have before that. And I would expect that volatility would return, albeit at bigger world with more assets under management with higher markets and higher movements and therefore ordinary volatility. So I think if you look back in history, before quantitative easing would be a better guide to where we are going and that bodes very, very well for our business.

Got it, I appreciate it.

Thank you. And our final question comes from the line of Keith Rosenbloom of Cruiser Capital. Your line is now open.

Thanks so much. Howard, actually, I think you addressed these – the questions I had, I think you alluded it – alluded to it both in your response to Rich and to Patrick, but I think top 10 volumes ever is a great quote Howard, we are going to put that up on the board here, but actually maybe you could take this time, I think they are probably new investors on the line, because the Newmark has been, would you mind detailing a little bit as to why volatility helps you so much and what you are seeing in the fixed income markets right now, what you are seeing trading in U.S. bonds and global bonds?

Sure. For those – for those who have been with us – those who have been with us for long time our analogy is to say that we have the largest as I said, but we have the largest sales in the fixed income world and it’s just not particularly windy. Volatility is the breeze, is the wind and I used to always say just give us a little breeze and you are going to be able to see what this company is about. This company did before the quantitative easing and before the volatility change. The revenues of this company were more than 20% higher, I think they were near 30%, I think 30% higher not I think anything to do with other then volatility. So if there is no volatility that means people just aren’t trading, there just is nothing that forces them to make a choice whereas the markets yesterday proved, if you own equities, you weren’t just going to sit around, you had to think about what do I want to do if they go down, am I supposed to buy, am I supposed to sell. But as that enters your mind what’s happening is it enters your mind that there is a transaction to do maybe I should hedge myself maybe I should do this or that. That increase in volatility literally means it increases volumes. And when you are in the marketplace business where we make no money when the markets go up and we lose no money when they go down, we only participate and help our clients buy and sell, the more they buy and sell, the more money we earn. And so yesterday and the day before and the day before are excellent for the company, because it is just so busy and that’s when we make our money, we just don’t like Fridays in August when it’s boring, but we surely like yesterday.

Thanks, Howard.

Thank you. And that concludes our question-and-answer session. I would like to turn the conference back over to Howard Lutnick for any closing remarks.

Thanks very much for joining us. It seems that it’s going to be a busy day again today, so got to get back to work and we look forward to speaking to you next quarter. Thanks everyone.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program and you may all disconnect. Everyone have a great day.