Greetings, and welcome to the BGC Group Second Quarter 2023 Earnings Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jason Chryssicas, Head of Investor Relations. Thank you, Jason. You may begin.

Thank you, and good morning, everyone. We issued BGC's second quarter 2023 financial results press release and the presentation summarizing these results this morning prior to the market open. You can find these at ir.bgcg.com. We will provide additional details on our quarterly results in today's press release and investor presentation. Unless otherwise stated, any historical results provided on today's call compare only the second quarter of 2023 with the prior year period. Certain revenue figures are provided for the current period as indicated. We will be referring to our results on this call only on an adjusted earnings basis, unless otherwise stated. You may also refer to adjusted EBITDA. You may refer to our liquidity, which we define as cash and cash equivalents plus marketable securities that have not been financed, reverse repurchase agreements and financial instruments owned at fair value, less securities loans and repurchase agreements. We define total capital as redeemable partnership interest, total stockholders' equity and noncontrolling interest in subsidiaries. Please see today's press release for results under generally accepted accounting principles or GAAP. Please also see the relevant sections in the back of today's press release 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 such terms. Additional information with respect to our GAAP and non-GAAP results mentioned on today's call is available on our website, ir.bgcg.com and in our investor presentation. We refer to the company's technology-driven businesses as Fenics. Fenics' offerings include Fenics Markets and Fenics growth platforms. I also remind you that information regarding our business on today's call that are not historical are forward-looking statements. These include statements about the company's business results, financial position, liquidity and outlook. Any forward-looking statements involve risks and uncertainties, except as required by law, BGC undertakes no obligation to update any forward-looking statements. Any outlook and targets discussed on this call assume no material acquisitions, buybacks, extraordinary transactions or meaningful changes to the company's stock price. For a discussion of additional risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see BGC's SEC filings, including, but not limited to the risk factors and special note on forward-looking information set forth in these filings. And any updates of such risk factors, especially not on forward-looking information contained in subsequent reports on Form 10-K, Form 10-Q or Form 8-K. I am now happy to turn the call over to Howard Lutnick, Chairman of the Board and CEO of BGC Group.

Thank you, Jason. Good morning, and welcome to our second quarter 2023 conference call and our first call after our corporate conversion as the BGC Group. With me today are our Chief Operating Officer, Sean Windeatt; and our Chief Financial Officer, Jason Hauf. We generated strong revenue growth of over 13% in the second quarter as our business continued to improve following the end of manufactured 0 interest rates. BGC outperformance reflects the breadth and scale of our global platform. We are and expect to remain a growth company. At the beginning of the third quarter, we completed our corporate conversion and reduced our fully diluted weighted average share count to approximately 484 million shares, which is a $21 million share reduction, which lowers our share count by approximately 4%. With respect to FMX, we are awaiting CFTC approval. We expect to announce our strategic investors and the transaction details in the fourth quarter. FMX's U.S. treasury platform continues to outperform the industry and captures market share from the CME. In U.S. interest rate futures, we will execute the same playbook. But now with the added support of these strategic partners, who are the largest users of these products. FMX represents the unique opportunity to reshape the U.S. interest rate cash and futures markets. With that, I'd like to turn the call over to Sean.

Thanks, and good day, everyone. Our revenue grew by 13.2% to $493.1 million in the second quarter of 2023, with revenues increasing across all geographies. This growth was primarily driven by the Americas, which improved 21.9% as we continue to execute our growth strategy to increase market share in the region. Our revenue growth was led by a 48% improvement in our Energy & Commodities business, driven by our leading environmental broking business, along with strong double-digit growth across our energy complex and ship broking businesses. Energy & Commodities now represents our second largest asset class behind rates. Our Rates, Credit and Foreign Exchange businesses generated solid year-over-year growth driven by strength in inflation products as well as European and emerging market fixed income and foreign exchange products. We expect continued improvement across fixed income and foreign exchange markets going forward. We generated double-digit growth across all adjusted earnings metrics during the quarter. Pretax adjusted earnings grew by 17.1% to $105.5 million and post-tax adjusted earnings increased by 18% to $100 million or $0.20 per share, reflecting a 17.6% improvement. Adjusted EBITDA improved by 18.5% to $135.1 million for the second quarter. Turning to Fenics. Fenics grew at an industry-leading pace of 14.2%, generating revenue of $125.1 million which represented 25.4% of BGC's total revenue during the quarter. This strong growth was led by Fenics Rates, Fenics Credit and our data network and post-trade businesses. Beginning this quarter, we've renamed the line item from data software and post-trade to data network and post-trade to better reflect the nature of these businesses. Our Fenics Markets revenues increased 10.1%, and Fenics growth platform generated record revenue of $18.1 million, a 46.1% improvement versus last year. Fenics U.S. Treasury revenue increased by over 40% and captured significant market share during the quarter. Our…

Thank you, Sean, and hello, everyone. BGC generated total revenue of $493.1 million, an increase of 13.2% as compared to last year. By asset class, energy and commodities increased by 48%. Excluding our Trident acquisition, organic growth in Energy & Commodities was 35.2%. Credit increased by 7.4%, rates increased by 5.2%, FX increased by 4.3% and equity decreased by 1.6%. By geography, Americas revenue increased by 21.9%. Excluding Trident, organic growth in the Americas was 16.2%. Europe, Middle East and Africa revenues increased by 9.5% and Asia Pacific revenue increased by 5.4%. Turning to expenses. Our compensation and employee benefits under GAAP and adjusted earnings increased by 14.9% and 13.9%, respectively. This increase was led by greater hiring to enhance our growth across both our Fenics and voice hybrid businesses. Our noncompensation expenses under GAAP and adjusted earnings increased by 3.2% and 10.6%, respectively. Moving on to our adjusted earnings. Our pretax income was $105.5 million, a 17.1% improvement, with a 72 basis point margin expansion to 21.4%. We recorded post-tax adjusted earnings of $100 million, an 18% increase from last year and an 84 basis point margin expansion. Our adjusted EBITDA was $135.1 million, an 18.5% improvement. Turning to share count. Our spot share count as of June 30, decreased by 0.3% sequentially to 503.5 million shares. Our fully diluted weighted average share count increased 0.9% sequentially, but decreased 0.3% year-over-year to 505.5 million shares. However, as Howard mentioned, at the beginning of the third quarter, our corporate conversion resulted in an approximate $21 million share reduction of our fully diluted weighted average share count to approximately 484 million shares which lowered our share count by 4%. As of June 30, our liquidity was $766.8 million compared with $524.3 million as of the year-end 2022. This change primarily reflects…

Thanks, Jason. BGC's strong competitive advantage lies in our global breadth and scale, which sets us apart from the other execution platform and market intermediaries. We offer a truly global and comprehensive product suite across the financial, energy and commodity markets. Our strategic position alongside a steadily improving macro trading landscape to provide significant opportunities for BGC's continued growth. We look forward to updating you on FMX, and we are pleased to have completed our corporate conversion. We are happy to be reporting here today for the first time as the BGC Group. And as Jason said, with a new simple ticker BGC. Operator, we'd now like to open the call for questions. Operator?

I will now be conducting a question-and-answer session. [Operator Instructions]. Our first question is from Patrick Moley with Piper Sandler.

So congratulations on the strong quarter. It seems like revenues really accelerated in May and June, which is consistent with what some of your peers have said, but you significantly outperformed the industry. So I guess my question is, what do you think drove this outperformance, if you could dive into that a little bit more? And wondering, Howard, if you could just update us on how you see the back half of 2023 playing out the 13% growth of revenues in the third quarter seems a little -- seems pretty strong. So I'm just wondering if that's maybe what we should expect going forward or if you would maybe expect that to come down after the third quarter.

It's Sean. So why don't I start first? So I think in terms of the quarter just gone, we -- as I said in my prepared remarks, it was driven by big growth in America, 21.4% in America, which we've always said we were undersized in America, and that's where we had tremendous opportunity to grow, and we're executing on that. And I think that's one of the reasons for our outperformance compared to the industry. In terms of asset class, we always said that our Energy & Commodity business was undersized. Hence, the fact you've seen the growth of 48% this quarter because now we're gaining market share in that huge asset class. And we also wanted to point out that even excluding the small acquisition that we made, our Energy & Commodity business grew by 35 percentage points. And then in terms of rates, credit and FX, all which saw nice double -- nice single-digit increases. Again, I think that's exactly as described as the marketplace gets better, we gain further market share. You saw our European business grow by just under 10% as well. So it's executing on the strategy that we've had in place for the last 12 months.

And as we look forward, the macro market structure is healing, right? It was beaten upon by this manufactured zero interest rate scenario that we all lived through for 14 years and 14 years of that oddity produces people who think that is reality. Instead of realizing with a 14-year oddity. So as [Indiscernible] said yesterday, this morning that the Fed is planning to now issue more coupons and less treasury bills, that's a healing process. What that's going to do? That's going to raise longer-term rates simply by supply coming into the market that would just create more volatility, more volume of trading, not only in U.S. treasuries, but across the credit and foreign exchange markets. We now talk about foreign exchange, right? Bouncing all around based on interest rates. For 14 years, all we talked about is foreign exchange based on the macro economy of Europe versus the U.S. That's kind of a slow-moving boat. Now you have interest rates moving kind of every month and so what you're going to see, and you're going to feel is a healing macro environment of which BGC has a broad, deep, set of businesses that are going to benefit from. We have a giant sale. And for 14 years, it wasn't windy. Now the wind is picking up and you're starting to see this boat move. You have seen nothing yet. I think there are great opportunities ahead of us coming. I don't feel this quarter is impressive. I don't feel it's coming down. I feel this is who we are. This is who we feel, and I think we have a really, really good business beneath our feet. And we feel really good about this quarter. And I'm not going to project the fourth quarter because I don't know what that world will bring. But certainly, we just finished the quarter at 13.2%. Midpoint of our guidance was 13.4%. Obviously, this company feels pretty darn comfortable with the way the world is rocking going forward. It's coming our way. Finally, 14 years, and now it's coming our way, and it's going to stay our way for a long, long time.

That's very helpful color. So my next question was going to be on FMX. And Howard, maybe if you could give any color on your thoughts on the recent announcement from CME in their expanded cross-margining opportunities with the DTCC. And just given the delays that you've seen in getting the CFTC approval, is there any -- do you think these delays have given CME anytime to counter and so far as any possible advantages that FMX is planning to offer their customers?

Well, so let's take that a part. So the CME has a long-standing relationship with the DTCC. And those are 2 pots, meaning the DTCC holds the treasuries, the CME hold the futures. And they kind of want to work together to try to give the market some gross margin benefit, but the fact is when you have 2 different people holding the money, we have a certain healthy skepticism of the other one [Indiscernible]. So they hope to get to 70% benefit, meaning, if you're long the treasury and you're short the treasury future, they expect to get to a 70% margin offset then. Our view with the LCH is a one-pot model where LCH will hold both pieces, and when you're holding both pieces, you actually only care about the actual risk, and that should be sort of 95% to 97% reduction in margin. So if you have an interest rate swap with the LCH and they have the gigantic marginal percentage of all swaps. And you have Eurodollars or treasuries against it, you would get 95% to 97% margin offset. So I think the CME, which is an excellent company and extraordinary monopoly in America. They are smart, capable competitor. But having never had an actual competitor, I think this will sort of shock them into thinking, gee, 70% sounds good. But when the other guy is 95% to 97%, I think we are going to be a really, really thoughtful, capable, clever competitor. And that -- so that's sort of the baseline. So 70% is good. We think 95% to 97% is better. That's number one. We are waiting CFTC approval. We do not think it's an if, we just think it's a win. It's a process. We are working through the process. We are thoughtfully,…

Great. Great color there as well. And then I guess, lastly, my last question would just be around capital return. Howard, I think you've said on the last quarter call that -- or maybe hinted that there could be accelerated share repurchases in the second half. So just wondering maybe if you could give us an update there and what we should expect in the second half.

Sure. So because of the seasonality of the business, our best 2 quarters, it starts at the beginning of the year and sort of slightly declines each quarter thereafter. But we collect the money, let's assume it's between 90 and 120 days later. So we earn our money in the first 2 quarters and we collect the cash in the second 2 quarters. And in the first quarter, we paid bonuses and we paid taxes. So we have lots of uses in the beginning, right? And generate -- so we generate more cash in the second half of the year, so we tend to be bigger spenders of our cash in the second half of the year, right? So a, we're going into the second half of the year, so I think it feels good right now, right? Because we're in the good part of the year. Capital return with the company growing, there's 2 ways to return capital, there's buyback shares and there's to increase your dividend, right now in stock trading where it is with us being a growth company, and doing much better; obviously, we're interested in buying back shares. If you looked at us for the last 2 years, we had a 560 million fully diluted share count, and now we have 484 million fully diluted share count. So we've cut our share count 80 million shares, which I don't know, most people would consider a lot. And we like that model of relentlessly using our cash to reduce our shares. So the corporate conversion had the result of allowing us to issue net shares, send the cash to the government, which is an effective buyback, right? It has the same effect of a buyback, meaning reducing the fully diluted weighted average share count. So I would think in the near term, share repurchases seem to be the top of the list. But over time, I could see our Board revisiting the dividend and considering increasing the dividend going forward. But short term, I would think share repurchases are on the top of the list, but we are not taking the dividend off the table, but I don't think that would be for a while.

Thanks, Patrick. There are no further questions at this time. I'd like to hand the floor back over to Howard Lutnick, Chairman and Chief Executive Officer for any closing comments.

Thank you all for joining us today. It is a pleasure to come to you as BGC Group, and we look forward to many, many quarters of growth together. Thanks, everybody.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.