BGC Partners continues to explore transition to a simpler corporate structure

If the company decides to execute such a conversion, it will be subject to the approval of the board of directors and the relevant committees.

International brokerage and fintech firm BGC Partners (NASDAQ:BGCP) earlier today released its financial results for the first quarter of 2020, providing an update on a potential corporate conversion.

As FinanceFeeds reported, in February of this year, Howard W. Lutnick, president and CEO of BGC, indicated that BGC Partners may convert the partnership into a corporation.

Today, the company said it continues to explore a possible conversion of its Umbrella Partnership/C-Corporation Structure (UP-C) to a simpler corporate structure. If the company decides to execute such a conversion, it will be subject to the approval of the board of directors and the relevant committees and will be completed no earlier than the end of 2020.

Any such transaction would be subject to tax, accounting, regulatory and other considerations and approvals.

Turning to the first quarter 2020 results, BGC’s GAAP results were negatively impacted by various non-cash and non-operating items, resulting in a net loss of $5 million. In the first quarter of 2019, BGC’s GAAP results benefited from non-operating gains of $42 million primarily related to a disposal and fair value adjustments to investments. Excluding these non-operating items from both quarters, GAAP pretax earnings delta would have improved by approximately $47.0 million in the first quarter of 2020.

First quarter 2020 GAAP pretax income also reflects restructuring charges of $22.7 million that were not recorded a year earlier, as well as a $30.1 million increase in year-over-year share-based compensation and allocations of net income to limited partnership units and FPU. These last two items totaled $52.7 million.

Additionally, the year-over-year change in Adjusted EBITDA would have improved by approximately $69.7 million in the first quarter of 2020 without the GAAP non-operating gain of $42.0 million and the GAAP non-operating loss of $5.0 million in the first quarter. of 2019 and 2020, respectively, as well as GAAP restructuring charges of $22.7 million in the first quarter of 2020.

Overall industry volumes have historically been seasonally highest in the first calendar quarter of the year, sequentially slower in each of the following two quarters, and slowest in the fourth calendar quarter. BGC’s energy and commodities, credit and equity businesses experienced strong double-digit growth. Although the company’s overall foreign exchange revenue declined, Fenics’ all-electronic foreign exchange volumes and revenue increased year-over-year by double-digit percentages as the market continues to embrace the electronic execution in this asset class and BGC’s all-electronic FX offerings won again. market share.

Additionally, the company’s total revenue in the first quarter of 2020 would have been more than $10 million higher had it not been for the relative strengthening of the U.S. dollar.

BGC’s revenue, excluding its insurance brokerage business, was up about 2% year-over-year for the first 21 trading days of the second quarter. This reflects the mixed global industry volumes so far in the quarter as well as the continued dislocation of BGC brokers and their clients due to COVID-19. The company’s forecast assumes that industry volumes and its non-insurance brokerage revenue are flat or slightly down year-over-year for May and June.

Additionally, BGC expects its insurance brokerage revenue to be relatively flat year-over-year in the quarter, but to deliver accelerated growth throughout the year. The company’s outlook includes the impact of its recent hires of insurance brokers which are incurring costs and not yet generating meaningful revenue. But for that investment, the midpoint of BGC’s adjusted pretax earnings outlook range would have been higher year-over-year.