Prepared remarks
Thank you for standing by. Today's presentation will begin momentarily. Greetings, and welcome to the BGC Group Second Quarter 26 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance, please press star 0 on your telephone keypad. 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 will 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 to BGC standalone 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, for the complete and updated definitions of any non-GAAP terms, reconciliations of these items to 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 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 A. Windeatt, co-chief executive officer of BGC Group.
Thank you, Jason. Good morning, and welcome to our second quarter 26 conference call. With me today are my fellow co-chief executive officers, John Joseph Abularrage and Jean-Pierre Aubin, along with our chief financial officer, Jason Williams 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 two quarters of the year. Since 2022 and the return of interest rates, we have grown our revenues double digits every year. Our half-year revenues in 2026 were greater than our full-year revenues of just three 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 would like to turn the call over to John to discuss our 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 new institutional participants. Combining BGC's extensive client network and Fanatics' database of over 100 million customers, together BGC and Fanatics will 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 that predict outcomes as opposed to our traditional data, which reflects past events. Merging these two together will allow us to offer new and exciting datasets to our clients. As part of this agreement, BGC will receive upfront consideration and a performance-based earn-out 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 Case and Capital Labs, this transaction 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 market and G10 products and precious metals. Credit revenues increased by 5.4% to $79.3 million, driven by Portfolio Match, along with higher European and emerging market credit volumes. Equities grew by 2.8% to $76.0 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 Case, which we sold in the fourth quarter of 25. 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 Case. This growth was driven by higher electronic trading volumes across rates, credit, foreign exchange, and increased Fenics market data revenues. Fenics Growth Platform's 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 thousand contracts, more than 16-fold higher than a year ago. DELFER ADV rebounded strongly in June following reduced Iran-driven volatility, achieving a monthly record of more than 59 thousand contracts. U.S. treasury futures continued to scale in the second quarter, averaging more than 15 thousand contracts per day, and total open interest ended at more than 140 thousand contracts, up from approximately 22 thousand contracts a year ago. As you know, we currently list only the 2- and 5-year U.S. treasury futures contracts, but we will 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%. 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 $171.0 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 would like to turn the call back to Sean to go over our third quarter outlook.
Thank you, Jason. I am pleased to provide the following guidance for the third quarter of 26. We expect to generate revenues of between $775 million and $835 million compared to $737 million in the third quarter of 25, 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 nine 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 represents 17% earnings growth for the third quarter and 24% earnings growth for the first nine 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 am excited to announce that we will be hosting our first-ever FMX Investor Day on October 13, with further details to follow. I am also excited to share that our keynote speaker will be Geoffrey Hinton, who won the 2024 Nobel Prize and the 2018 Turing Award for his work with artificial and deep neural networks. With that, operator, we would now like to open the call for questions.
Questions and answers
We will now be conducting a question-and-answer session. One moment while we poll for questions. Our first question is from Patrick Moley with Piper Sandler.
Yes. Good morning, gentlemen. 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 compute and memory capacity being an emerging commodity market. I was hoping you could walk us through the growth opportunity there and the monetization model. Is this primarily a brokerage of OTC blocks between participants in the AI ecosystem? Is there a market data or benchmarking opportunity? And then, ultimately, when should we expect revenues from this business to be reflected in the financials? And then I have a follow-up. Thanks.
Hey, Patrick. A bunch of questions, so I will do my best. The obvious point is CapEx is going to be close to $1 trillion globally. We look at it and think there has not been an effective market formed to hedge risk. The focus so far has been on cleared futures, but for BGC the real opportunity is going to be in the OTC market: cash-settled derivatives to hedge exposure and OTC-delivered trades when counterparties want actual physical delivery. We are number one in ECS and this is a natural extension of our power markets. We intend to drive standardization across what is a highly fragmented market and that market needs a broker. I would assume we will start to trade relatively soon, but it is early and the market is too nascent to give financial guidance at the moment. We have a group of some of our best ECS brokers working on this, and we have connectivity to hyperscalers, the new providers, and our traditional client base. We are uniquely positioned to enter the market and help standardize things, and we are very excited about the potential opportunity. I hope that answers the question.
No. Definitely. Thanks for that. And then just to follow up on the third quarter guidance and margins, I think a pretty impressive revenue guide. This quarter, pretax adjusted margin was up 100 basis points year over year. That looks like it will accelerate this quarter based on the midpoint of the guide to maybe a 150 basis point step-up year over year. Could you talk about the longer-term realistic multiyear margin destination, how you are thinking about that today, and what is driving that incremental margin step-up year over year? Thanks.
Yes, Patrick. I think you framed it correctly. What you are seeing is the gearing we have always spoken about. In the prepared notes we pointed out the quarter and the nine months. In the guidance for Q3 you are seeing the flow-through at just under 40 percentage points, a mixture of incremental business growth and cost savings we have identified and executed during the year. On incremental revenue the margins are well in excess of 30%. Looking into 2027 and beyond, our electronic platforms and FMX business will, once at full speed, dwarf the margins of our existing business. Our runway remains very positive.
As a reminder, if you would like to ask a question, please press star 1. Our next question is from Eli Abboud with Bank of America.
Good morning, everyone. Thanks for taking the question. I wanted to ask if you were seeing any impacts from the SLR reforms, which took effect at 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 is worth calling out?
Hello, Eli. GP here. It is early stage, but we did notice strong activity from the banks linked to the SLR. Yes, it is positive. We have a strong market share with sub-banks that provides us the ability to notice the positive aspects of the SLR reform across various underlyings.
And I have a couple on FMX as well. Can you talk about how progress is coming in onboarding buy-side clients? If you have seen operational obstacles there, can you give any details on what pushback you are getting from that client channel?
Sure, Eli. The onboarding of the buy side is accelerating. We are happy with the progress. The pipeline of buy-side participants and new participants coming on the exchange is happening at least as fast as we hoped, and these new participants will drive contract volumes going forward. We are not seeing a problem. As we said before, going into Year 3 of FMX the buy side is taking notice and starting to trade more actively. We are pretty happy with where we are.
Got it. On FMX generally, Year 3 was framed as all about market share. The three-year anniversary is shortly here. What should our expectations be? Where do you expect to end Year 3 in terms of market share? Can you give a baseline expectation?
Higher would be the answer. We have avoided giving direct targets because it is a new exchange and we are constantly building. We are not going to change that approach now. I am confident the number going into Year 3 and at the end of Year 3 will be higher than the averages you see now.
And last one for me: can you walk us through some of the assumptions you baked into the Q3 26 revenue guide? It looks like listed energy futures volumes are up quarter to date versus Q2. Energy is your largest segment, so I would have anticipated sequentially higher revenues. Is there conservatism baked into that guide or softer areas in other asset classes? Any detail would be helpful.
As you know, we guide based on what we see. Q3 is always interesting to guide for because it includes the summer months of July and August and the biggest month of the quarter is September, which is why we give a range. ECS is our largest asset class at around 36%. We are not seeing anything that causes concern, and sustained geopolitical tensions are a factor in our range. A mid-point guide of just under 10% growth and a higher end of 13.5% seems reasonable to us.
Thank you. Thank you. Our next question is from Patrick Moley with Piper Sandler.
Yes. Thanks for taking the follow-up. Maybe just a broad one on the Fanatics partnership. Could you elaborate on how that came together, some of the nuances of the partnership in terms of revenue share, what you are getting out of it, and why Fanatics was the right partner? Fanatics is more of a sports-oriented platform while your customers may be focused on economic indicators and interest rate prediction markets. How do you marry that and how did this come together?
Sure. The genesis was that we had a DCO that was active with a few trades a year, so we knew we had that asset. When prediction markets started trading in the market, we looked at how to best capitalize on it. From prior acquisitions and disposals, our focus is on maximizing shareholder value. The conversation started internally about what to do with the DCO. Our general counsel introduced me to a specialist in the field, and we thought the real value was in applying for a DCM and putting the two together. I was then introduced to Michael Ruben, who runs the Fanatics Sports and Exchange business. From the beginning we thought this was a perfect marriage. Fanatics' reach in consumers and retail is over 100 million customers in their database, which addresses a long-standing criticism that we have no reach into retail. Partnering with Fanatics solves that problem. Fanatics Fest demonstrates the company's reach and audience. We will bring the institutional market BGC is known for to that retail market. Combining these two on contracts that institutional clients care about will move prediction markets forward. On the data side, the majority of the data we currently sell is backward-looking; with prediction markets you get predictive data and new datasets and client interest. Partnering with Michael Ruben, Glenn Schiffman, and the Fanatics team is an excellent fit and we are excited about it.
Okay. And then I apologize if I missed it, but anything you have disclosed or are willing to disclose on the economics of that partnership?
We said there is an upfront consideration. There is an earn-out associated with exchange volume. Finally, there is a partnership on the data side. Arran Rowsell is running the project for us, and we will endeavor to deliver the right shareholder value through that structure.
All right. Great, John. Thanks for that color. I look forward to your October FMX Investor Day. It's a day after my wedding anniversary, but I will try to make it work. See you guys soon.
We can extend an extra invitation to your wife. Have a good one, guys.
Thanks. Thank you. There are no further questions at this time. I would like to hand the floor back over to Mr. Windeatt for any closing remarks. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.