BGC Partners, Inc.
Q1 2015 Earnings Call Transcript

Published: 29 Apr 2015

[Operator:]

Welcome to the Q1 2015 BGCP Partners Inc Earnings Conference Call. [Operator Instructions]. I will now turn the call over to your host, Jason McGruder, Head of Investor Relations. Mr. McGruder, you may begin.

[Jason McGruder:]

Thank you. Good morning. Our first quarter 2015 financial results press release and presentation summarizing our results were issued this morning. These can be found at the investor relations section of our website at BGCP.com. The financial results and other metrics for BGCP's majority owned division GFI Group consolidated with those of BGC for March 2nd, 2015 onward throughout the call. Whenever we refer to the results of "the company" we mean the consolidated results of BGCP Partners Inc. Throughout today's call we will be referring to our results only on distributable earnings basis. Please see today's press release for GAAP results. Please also see the section of today's press release untiled distributable earnings results compared to GAAP results, reconciliation of revenues under GAAP and distributable earnings and reconciliation of GAAP and distributable earnings for definition of these terms and how and when and why management uses them. Unless otherwise stated whenever we refer to income statement items we are doing so only on distributable earnings basis. Other than balance items our results provided in this call compared to the first quarter of 2015 is a year earlier period. Newmark Grubb Knight Frank is synonymous with NGKF or real estate services segment. I also remind you that the information on today's call regarding our business are not historical factors or forward-looking statements within the meaning of section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. Such statements involve risk and uncertainties except as required by law, BGCP undertakes no obligation to release any revisions of forward-looking statements. For discussion of additional risk and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, [indiscernible] exchange commission filings including but not limited to the risk factors set forth in our public filings including our most recent form 10-K and any updates to such respect contained in the subsequent Form10-Q or Form 8-K filings? I'm happy to turn the call over to our host, Howard Lutnick, Chairman & CEO BGCP Partners.

[Howard Lutnick:]

Thank you, Jason. Good morning and thank you all for joining us for our first quarter 2015 conference call. With me today are BGCP's President, Shaun Lynn, our Chief Operating Officer, Sean Windeatt and our Chief Financial Officer, Graham Sadler. BGCs Post-tax earnings increased by approximately 32% to $62 million, the third quarterly record in a row in terms of profits and the second consecutive quarterly record in terms of revenues. These best ever results also reflect pre-tax earnings growth of nearly 65% for our high-margin fully electronic businesses, due mainly to the remarkable success our brokers have had in converting voice and hybrid financial service desks to much more profitable fully electronic trading. This significant growth came despite the strong U.S. dollar which reduced our financial services revenue by more than $25 million during the quarter. Our results include GFI for the month of March. At the end of the first quarter BGC owned approximately 56% of GFI's outstanding common shares. On April 28th, BGC acquired an additional 11% of GFI resulting in our total ownership of 67% of GFI. We are now able to control the timing and process of the full merger of the two companies. While the front office operations of GFI and BGC will remain separately branded we have already begun integrating the back office, technology and infrastructure of these two companies. Beginning in the first quarter of 2016 we expect to have reduced our expense run rate by at least $50 million a year and by an additional $40 million by the end of the following 12 months for a total of at least $90 million in savings. We also expect to increase productivity per broker and to continue converting voice and hybrid brokering to a higher margin fully electronic trading, all of which should lead to increased revenues and profitability. By freeing up duplicative capital, set aside for regulatory and clearing purposes we will also be able to use our balance sheet more efficiently. Turning to trade port, we love the business of trade port and would be delighted to keep it but the reality of the stock market is that high growth, high margin like trade port often don't get the valuation they deserve inside a accompany like ours. So in order to maximize shareholder value, we are going to explore getting the right price for this asset. We have retained Cantor Fitzgerald to assist in the sale of trade port and we have had interest from a number of parties and we expect numerous parties to be interested in acquiring this business at an evaluation that reflects its high margins, growth rate, leading technology and strategic importance in the global energy and commodities marketplaces. We anticipate completing transaction before the end of 2015 to gain from the sale of this business will be excluded from distributable earnings. A successful trade port transaction combined with increased profits from integrating GFI, growing our fully electronic businesses and the strength of our real estate services business will lead to BGC's liquidity being dramatically higher. We also anticipate receiving over $635 million in additional NASDAQ OMX stock over time. As we execute our strategy we expect to have a significant capital with which to make accretive acquisitions, profitably higher, pay our dividends and repurchase shares and our units at BGC, all while maintaining our investment grade rating. I'm happy to report that our board declared a $0.14 qualified dividend for the first quarter which represents an increase of 16.7%. And yesterday's closing stock price, this translates into 5.8 annualized yields. With that, I'll turn the call over to Sean.

[Sean Windeatt:]

Thanks, Howard and good morning, everyone. Financial Services revenues were up by 23.9% to $355.7 million. These revenues would have been over $20 million higher in the quarter but for the strengthening of the U.S. dollar. At financial Services businesses increased its pre-tax earnings by 32.5% to $78.3 million. We were able to expand our pre-tax margins by over 140 basis points, 22% due largely to the significant growth of their more profitable fully electronic businesses. Excluding trade port revenues for our e-businesses rose by 73.7% to 40.8 million, while their pre-tax earnings increased by 64.9% to $20.5 million. This improvement was driven by revenue increases ranging from 54% to 133% for our fully electronic products in FX rates, credit, market data and software solutions reflecting our strong double digit organic growth and the acquisition of AFI. This e-business trend continued into the current quarter as revenues for these e-businesses more than doubled year-on-year over the first 16 trading days of April. Even excluding trade port, our electronic businesses have much higher quarterly revenues and growth rates than [indiscernible] within the two years before its sale over $1.2 billion. Including GFI we now have a pipeline of over $1.5 billion of annual voice and hybrid financial services brokerage revenue, a large portion of which can be converted to a fully electronic brokerage and generating valuable market data. So we expect our e-businesses to continue their positive growth momentum over the years to come. Looking at our overall Financial Services results by asset class, revenues from our fully electronic rates products were up by approximately 54% while our overall rates revenues were up by 7.3% for the quarter to $122 million. In comparison, rates volumes were down by 2% at Eurex. The global FX markets benefited from higher volatility in the quarter, although our growth outpaced the industry. Our EFX revenues including both spot and derivatives were up by over 80%. Our overall FX business was up by over 40.1% to $72.9 million. In comparison, overall FX volumes were up between 5% and 31% at Thomson Reuters, CME and EVS. We generated a 67% increase in revenues from our fully electronic credit desk while overall credit revenues increased by 2.6% to $67.2 million. These results outpaced the industry statistics. For example, the daily average prime dealer volumes for corporate bonds were down approximately 5% year-over-year according to the federal reserve while dealer gross national credit derivatives, our standing, were down approximately 46% according to [indiscernible]. Our revenues from exits [ph] and other asset classes increased by 22% to $32.6 million. This improvement surpassed most relevant industry volumes. For example ex-derivative volumes ranging from being down by 19% for ice it's being up by 16% at Eurex. This category no longer includes revenues from our energy commodity because we've broken them out as a separate category due to their significant growth and the addition of GFI. BGCs energy and commodities increased by 125.2%. This compares with a combined number of energy and commodities contracts, ICE and CME being up by 13% and 15% respectively. Moving on to our real estate services business, NGKF continues to benefit from the low interest rate environment, easier availability of credit and steadily improving U.S. economy. According to NGKF's research team - the overall leasing market continued to improve but the combined vacancy rate for office, industrial and retail properties declined from 9.1% to 8.5% year-over-year. Real estate capital markets first quarter U.S. commercial sales volumes were up by 17% according to real capital analytics. Financing activity was also robust with U.S. non-agency CMBS issuance up by over 20% for the trading 12 months ended March 31st, 2015 according to commercial mortgage alert. While helped by these positive industry trends, we believe that NGKFs continued to gain market share. Our revenues from the leasing and other services improved by 19.4% to $105.4 million while real-estate capital markets increased 149% to $53.8 million. Management services and other revenues were up by 2.9% to $41.1 million on NGKF's overall revenues improved by 33.7% to $204 million, pretax earnings increased by 28.7% to $19.6 million in real estate services. Industry-wide, commercial real estate brokers tend to be seasonally slowest in the first calendar quarter of the year, in terms of revenues and profitability. Sequentially stronger in each of the next three quarters, and then strongest in the fourth calendar quarter. Based on these historical patterns we are confident in reaching our goal for our real estate services business to generate at least a $1 billion in revenues for the full year 2015. Turning to head count we had 1293 real estate brokers and salespeople as of quarter end. Up 46% compared with 888 a year earlier mainly due to the additions of Cornish & Carey ARA. Average revenue per real-estate broker increased by 1% to $126,000. We finished March with 2579 financial services brokers and salespeople up by 72% from 1497 a year earlier, primarily due to the addition of GFI excluding trade port average revenue per financial services broker salesperson was flat at $144,000. Historically productivity has increased over the following year after significant head count growth as we continue to convert voice/hybrid brokerage to fully electronic. We expect increased broker productivity in financial services. Company-wide our front office headcount was up by 62% to 3282 brokers and salespeople. With that I would now like to turn the call over to Graham.

[Graham Sadler:]

Thank you, Sean, and good morning, everyone. As Howard mentioned our results included those of GFI for the month of March. These had an impact on a number of income statements and balance sheet line items. BGC generated consolidate revenues of $563.9 million, up 26.5% compared with $445.9 million. Our revenues from the Americas were up approximately 28% revenues from Europe, Middle East and Africa were up by 11%, while Asia-Pacific revenues increased by 67%. As Sean mentioned our non-U.S. results were negatively impacted during the quarter by the stronger U.S. dollar mostly in our European offices. Turning to expenses, compensation and employee benefits were up by 26.4% on an absolute basis but our compensation ratio improved slightly to 61.7%. While non-compensation expenses increased in absolute terms by 23%, they were down as percentage of revenues to 24.9% compared with 25.6% the absolute increase in quarterly expenses was primarily due to the impact of acquisitions as well as interest expense related to the company's fourth quarter issuance of $300 million or 5.73% senior notes due 2019. Our pre-income tax earnings before non-controlling interesting and subsidiaries and taxes were75.2 million, up by 33.7% when compared with $56.6 million. Our pre-tax margin this quarter expanded by around 75 basis points to 13.3% compared with12.6% a year ago. BGC's effective tax rate for distributable earnings was unchanged at 15%. Our post-tax earns were up by 31.5% to$62.1 million compared with$47.2 million. Our post-tax earnings margin improved by around 40 basis points to 11%compared with 10.6% while outpost tax earnings per share were up by 20% to $0.18. BGC had awfully diluted weighted average share count for distributable earnings of 378.7 million in the first quarter of 2015 and338.5 million under GAAP. Our earlier our fully diluted share count was 362.1 million for distributable earnings and322.1 million under GAAP. The GAAP share counts were lower because they excluded certain share equivalents in order to avoid anti-dilution. The share counts increased primarily due to issuances related to the acquisitions of Cornish & Carey, ARAA, [indiscernible] and energy group. - And new front office hires. This is partially offset by the redemption and/or repurchase of16.5 million shares and units ate cost to BGC of 124.8 million or an average cost of $7.57 per share or unit over the trailing 12 months ended March 31, 2015.As of the end of the first quarter of 2015, our fully diluted share count was $379.4 million, assuming conversion of the convertible senior notes into 40.3 million shares. At the end of the quarter, BGC's $150 million of8.75% of convertible senior notes was converted into approximately 24 million classes A common shares. These issues shares were already included in our fully diluted share count which was therefore not impacted by this conversion. Our 4.5% convertible senior notes due July 15, 2016 remain outstanding and are potentially convertible into approximately16.2 million shares. Moving on to the balance sheet, as of March 31, 2015, the company's liquidity, which we define as cash and cash equivalents, marketable securities that have not been financed, and securities owned, held for liquidity purposes, was458.4 million. Notes payable and collateralized borrowings are notes payable to related partners are $91.4 million. Book value for common share was $1.78. And total capital which we define as redeemable partnership interest, redeemable on-controlling interests, on-controlling interest in subsidiaries, and total stockholders' equity, was 983.8 million. In comparison, as of year-end 2014, the company's liquidity was $825.5 million, notes payable and collateralized borrowings and notes payable to related parties was $706.7 million. Book value for common share was $1.83 and total capital was $641.4 million. The changes in BGC's liquidity since year-end 2014 were primarily related to cash used to purchase GFI and ARA during the quarter. The redemption and/or repurchase of shares and units in the first quarter of 2015 and previously disclosed legal settlements. As Howard mentioned, we purchased yesterdayapproximately43 billion newly issued shares of GFI's common stock at yesterday's closing price of $5.81 per share for an aggregate purchase price of $250 million. The purchase price was paid to GFI in the form of a note due on June 19th, 2018 - 200 basis points. Due to intercompany eliminations the new shares and the note will have no impact on the consolidated balance sheet of BGC. GFI expects any funds received in payment of principle of the note will be earmarked companies due July of 2018. Or potentially be the basis of collateral with respect to such GFI notes. Following the issuance of the new shares, Bacons approximately 67% of GFI's outstanding common stock. With that, I'm happy to turn the call back over to Howard.

[Howard Lutnick:]

Thank you, Graham. Our guidance for the second quarter of 2015 as compared to a year earlier is as follows, we expect to generate revenues of between $650 and $680 million, an increase of between 51 and58percent when compared with last year's $430.3 million. Our revenue guidance would have been at least $18 million higher but for the continued strength of the U.S. dollar. We anticipator-tax earnings to be in the range of 70 to $80 million, an increase of between 32 and 51%as compared to $53 million last year. We expect our effective tax rate to remain around 15%. And as usual we intend to update our second quarter guidance byte end of June in 2015. Operator we would now be happy to open the call for questions, please.

[Operator:]

[Operator Instructions]. And our first question comes from Rich Repetto from Sandler O'Neill. You may begin.

[Rich Repetto:]

And I guess my first question centers around the electronic businesses, Howard. First, on the sale of trade port, when you talk about that, you know, in the press release, does that include the sale of sale of Fenix as well as you go out for, I guess bids on it? And also trying to see the contribution of GFI to the electronic businesses in 1Q. Then the last part of this all with electronics is, the margining the electronics was 50.2%. And that's down from the 54% of last year. And I'm just trying to see, you know, what caused the margin. It's still a very high margin, but difference compared to what you reported in '14.

[Howard Lutnick:]

Okay, so the first questions with respect to trade portend Fenix. We are just going to focus on trade port. So Fennel, we are keeping. We see tremendous growth available forfend ex, so the best way to say it is, it's just not right now for a transaction. We think there's enormous growth that we can add to it and with it, with respect to our businesses and we expect to do that. So we are just focusing on trade port in and of itself now. So that's the answer to question first. To answer question 3, which includes 2, is that the change - there was really no change in profitability of BGC's businesses. It was the inclusion of the GFI businesses which have generally similar margins associated with them, but slightly different. So the average just came down a touch but still over 50% and still extraordinary electronic businesses. And we did take in and add the GFI businesses tour electronic businesses and we went over them and analyzed them with the same level of precision we do with our own businesses. So it wasn't as if a voice broker adds it in and we count it as electronic. These are the actual businesses with those kinds of margins. We had strong double digit growth across the board in our businesses, and then you added in the GFI businesses and that's how you got those numbers. So I don't think we went through for this call to spread them out, but we had strong double digit growth, and then the addition of GFI covered the balance.

[Rich Repetto:]

Okay. And then I guess you talked about the savings frogfish. Now you're projecting $90 million over the2-year period. And I just wanted to get a feel for, is that still preliminary - because there is a lot - I'm not sure if we took guess at the expenses. Somewhere in the 650to700 million range at GFI. So I guess the question is this the preliminary estimate, and could there be more cost saves as you dig deeper? Or have you looked at it in detail?

[Howard Lutnick:]

So, first, it's a little shorter than two years because we're saying we'll get the first50 in by the end of this year and then we'll bring the 90 in by the end of the next. So it's more sort of a 19-month horizon or 20-month horizon, rather than little longer. Second of all, that's what we see now. Right? So that's what we see now, and obviously as we spend more time with the businesses, do I think it's likely thereafter that there will be more savings, ordering that period of time be we could exceed that amount? Sure. But we're going to guide, as we’ve always have at this company, for what we see here and now. We see and know what moves to take to execute those savings. So this is that - we hope thesis really a model of execution that we plan over the next period of time. So yes, you're right. Do I expect that we would have more savings beyond that? Sure. But since we haven't seen them, we're not just going to make up some number that we hope.

[Operator:]

And our next question comes from Patrick O'Shaughnessy from Raymond James. You may begin.

[Patrick O'Shaughnessy:]

So, first on the GFI deal, can you talk about the front office retention that you have seen since the deal closed? Certainly there was a lot of discussion during the tender process about folks being concerned about you guys. Howls that process going in terms of keeping the folks that you want to keep?

[Howard Lutnick:]

I think there's always nervousness around large companies getting together. And you can imagine we're in the middle of that a heated situation between the two companies, as it was at the time. So far, and I think going forward I think we're very comfortable, very happy. Great employees at GFI. That's why we pursued them. We have been looking to try to do this deal for many, many years. And they're quality, quality individuals, the same as we have inside BGC. And I think we're very confident and comfortable with the businesses that they currently are operating in, and the combination of the companies and the synergies that are going to come from the back office. They're going to benefit our partnership and the way we remunerate our brokers, and how we look after the individuals inside the company, and the positiveness that comes from them being shared. So there's all of this upside. And so far we've seen no turnover whatsoever with regards to us losing staff within GFI, and BGC. So we're very happy.

[Patrick O'Shaughnessy:]

And then as far as you guys now have 67% interest in GFI and you control the process to include the acquisition. How do you see it playing out at this point?

[Graham Sadler:]

Well, I think the first steps to begin a process to explore trade port transaction. And as we explore that, we're also going to explore all the work necessary to do the back end merger. And to do that correctly. So I think we are --we have begun both of those processes now. Trade port and the beginning of the back end merger.

[Patrick O'Shaughnessy:]

What specifically has to be accomplished with the back end merger? Is it kind of legal or regulatory stuff? Is it integration of systems? What are the things you have to check off your list?

[Howard Lutnick:]

I think it's just work, would be the simplistic - I wouldn't say there's vast [indiscernible] associated with it. It's just a bunch of work. And we're going to start that process. As you know, there was a support agreement and there were [indiscernible] accuracies with respect to the charter of GFI that we had to work through and become comfortable with and knowledgeable about. And we have done so. And by the execution of the transaction yesterday, we think two things will happen. We think the notes going into GFI will make GFI a better credit. And so there will be credit enhancement and therefore the coupon on their bonds will come down and that will add to our savings costs. And number 2, because we have 67% we now can work through the timing of the back end merger and do it correctly on the timing of issues. So I think it's just in our hands now, and in my lawyer's hands to-do it in the right way and the most tax efficient way. As Isai, I think it's just work. I don't think there's more intellect to it than that.

[Patrick O'Shaughnessy:]

Okay. So accounting questions for you, Graham. The note that you guys issued to GFI group, you said that there's no balance sheet impact. Is there going to be an impact statement - consolidated impact statement impact for you guys?

[Howard Lutnick:]

No, because it's just notes off between the two. There will be a very slight dilution to theft's shareholders. Very slight. But that's all.

[Patrick O'Shaughnessy:]

Okay. You guys talked about the FX impact on revenues being $20 million +on a year-over-year basis. What waste impact on expenses? Was it still a net hit to you guys?

[Howard Lutnick:]

Yes, it's still a net hit overall. Clearly on expenses it's much less because, as we said, it's really the strength of the dollar primarily versus the euro.

[Patrick O'Shaughnessy:]

Okay. And then last one formed, and then I'll get back in the queue, I don't know what you want to call it, the earn-out component for the GFI management team, basically one-third of GFI's earnings over the next three years, how is that going to be accounted for from you guys?

[Howard Lutnick:]

Well, whatever is the earned amount would come in equity, as partnership equity, and be available to them over a long period of time and be treated as compensation consistent with how that model works for all of our partnership equity that we distribute. So it would be consistent in that way. And it has a long tail, a long on compete, and then an amortization schedule consistent with those criteria.

[Patrick O'Shaughnessy:]

So that's included within your compensation expense?

[Howard Lutnick:]

Yes and according to GAAP without exception, when it's issued.

[Operator:]

And our next question comes from Niamh Alexander with KBW. You may begin.

[Niamh Alexander:]

Just on the GFI debt, that’s pretty expensive debt and I know how you talked about putting the notes through the collateral and potentially lowering it but what about repaying it? Is that an option, or is that something that you could do if it doesn't get too expensive in the market, I suppose?

[Howard Lutnick:]

Well, I think the first steps to drive down the cost of it, and if GFI is upgraded then the coupon will decline and that's certainly something that we are looking forward to with putting in this note which adds credit enhancement to GFI. And then the next step would be to examine what the cost would be and whether that makes economic sense. It's really just an economic decision. We bought GFI, you get good and the bad. You know, it is expensive debt. There is nothing you can do about it except for examine it. There is a transaction that could acquire it back cheaper, examine how to reduce its coupon by adding credit enhancement to it, and then lastly, refinancing it or paying it off when it matures. But that's not that long from now. But you are correct, it's the lousiest part of this transaction is the coupon on the debt. I have to suggest that is absolutely the top of our list of annoying.

[Niamh Alexander:]

Okay. But it sounds like if you had the flexibility to pay it down straight away, it's something that you could do, given how expensive it is and how efficient you guys are - does that kind of say like what getting close right now to the $1 billion dollars in debt, is that kind of - you feel that you’re capped out for a while maybe until you sell trade port and bring in some more cash?

[Graham Sadler:]

No, I mean, we are - we think about it, the $150 million of our convert was just converted into Class A equity. So actually our debt has declined. We took on GFI's 240 million, but taking on their $240 million in debt and taking $90 million of expense out of the place makes that debt very cheap as compared to the earnings of the enterprise taken as a whole, plus of course we still have our $635 million of NASDAQ stock coming in. We are a deeply underleveraged company; given our earnings, our EBITDA and the coming grow trade that you have seen. So no, we don't feel constrained even a little. We’re just interesting interested in maximizing shareholder value and that's the trade port model. But if we were able to call the bonds cheaply, we would. But if you may call the entire coupon payment, you might not. So it's really just to get a calculator and work out the math and see if it's a better deal for the shareholders and move on from there.

[Niamh Alexander:]

And then I guess with respect to this deal I mean historically broker transactions, it's always difficult to maneuver and not have your customer's kind of come up with a reason not to payout less. So is kind of the decision to not integrate on the front end, now that you have control of the company, it is an option to start integrating on the front end because we think there could be some more cost saves maybe than what you have announced so far, if you did this. How do you feel about that, or is that - why is that kind of off the table for now?

[Howard Lutnick:]

I think we expect to keep two brands separately for quite some time. There will be desks that come together, because that's a maximizing. There will be desks that stay separate and there will be and each type in between. I mean, the fact is we are maximizers. Our team is great at this and we are - as Sean said, we have got great people at GFI, we’ve got great people at BGC. You saw that our average revenue brand and financial services was the same. So yes, will we always be culling out less productive brokers or do we think the average revenue will increase? Of course we do. And do we think we can move some desks together and have them work together so they will maximize broker productivity? Of course we do. So do we think we have substantial upside? Yes. That's why Sean said exactly that. He expects substantial upside, but costs we will be able to take our costs, but our view with respect to this kind of thing is to say exactly what you know you can do and don't make up things that you hope to achieve, that you may not. And so we are at the $90 million which we feel confident that we can execute and as and if and when we see that there will be more savings to make, we will tell you about it and we will be talking to you in three months anyway, so there is not much time between the next time we talk to you. If we see more things, we'll tell you then.

[Niamh Alexander:]

I'll move on from that one. And then just lastly on the dividend, on your annual report, you did give an update. It's around 75% of the distributed earnings is your target. That's kind of how we should think about it going forward, as opposed to maybe looking at you wanting to have a new strategy of growing your dividend for a while, or anything else?

[Howard Lutnick:]

We have as a sort of rule of thumb that we would like to distribute at least 75% of our earnings to our shareholders. We think that is a good rule of thumb. It's not the law of the land; it's a rule of thumb. We want to grow our earnings and we want to grow our dividend. And those are the two things that are absolutely true. And we are going to do as many things to increase shareholder value that we can and one of them is to increase our earnings. And the next is to share that earnings with an increasing stock prices as we have done, and an increasing dividend distribution which we would like to continue.

[Operator:]

[Operator Instructions]. And our next question comes from Patrick O'Shaughnessy from Raymond James. You may begin.

[Patrick O'Shaughnessy:]

On trade port, the previous sale price that GFI had agreed to assume the group clearly wasn't competitive bidding process. Do you think there is upside for the trade port valuation versus the number that was out there previously?

[Howard Lutnick:]

Yes. Imagine me speaking in one-word answer. Shocking. Sorry, Patrick, but another point was that they negotiated that on last year's numbers, and the company has done very well this year. So you have newer numbers as well.

[Patrick O'Shaughnessy:]

Got you. Although the number that assuming you had agreed to also include Fenix, if I recall correctly.

[Howard Lutnick:]

True.

[Patrick O'Shaughnessy:]

The next question on the second quarter comp ratio, can you guys provide any guidance of what that might look like, at least directionally, would we expect to see that tick up a little bit with a full quarter contribution from GFI group?

[Howard Lutnick:]

Yes. I think it could, just little bit. I think that's fair, but not of significant consequence.

[Patrick O'Shaughnessy:]

And then last one for me, I promise, tax rate going forward, still every expectation that should stay at 15% for the foreseeable future?

[Howard Lutnick:]

So far, yes.

[Operator:]

And our next question comes from Rich Repetto from Sandler O'Neill. You may begin.

[Rich Repetto:]

I just want to prove to Jason that we go through the deck. So your Asia-Pacific region on the brokerage revenue, it looks like it jumped from quarter to quarter more than doubled. We got 36 million up to 73 million and up significantly year-over-year as well. So I'm just trying to see - I'm not that close on the geographic contribution from GFI, but what's causing the jump in the Asia region in brokerage revenue?

[Howard Lutnick:]

I would say it's both GFI - you know, obviously substantial percentage of GFI and then our organic business.

[Rich Repetto:]

Okay. And then just one other follow-up is, in the guidance for revenue for 2Q, can you give us a ballpark what GFI is in - of that, I think it was 650 to 680?

[Graham Sadler:]

So your questions what part of the profits is GFI, or what part of the revenues is GFI?

[Rich Repetto:]

Both, I guess. But I would take the revenue. The question was just mainly on the revenue because your guidance is 650 to 680. Is that 180 from GFI, or ballpark how much?

[Graham Sadler:]

We haven't done exactly but it's fractionally lower than that would be reasonable assumption.

[Rich Repetto:]

Fractionally lower than the number that I just said?

[Graham Sadler:]

Fractionally lower than the 180. You said in that range, but just slightly lower.

[Operator:]

And we have no further questions at this time. I will now turn the call over to Howard Lutnick, Chairman and CEO for your closing remarks.

[Howard Lutnick:]

Well, thank you everyone for joining us this morning and we look forward to speaking to you again next quarter. We are really excited and confident about how things are going forward-looking and we look forward to updating you next quarter. So have a great day today, everybody.

[Operator:]

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.