BGC Partners, Inc.
Q3 2015 Earnings Call Transcript

Published: 29 Oct 2015

[Operator:]

Welcome to the Q3 2015 BGC Partners Inc., earnings conference call. My name is Cory and I will be your operator for today’s call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. I will now turn the call over to Jason McGruder. Mr. McGruder, you may begin.

[Jason McGruder:]

Good morning to all here. Our third quarter 2015 financial results press release and presentation summarizing our results were issued this morning. This can be found at ir.bgcpartners.com. The financial results and other metrics for BGC’s majority owned division, GFI Group, Inc. are consolidated with those of BGC from March 2, 2015 on throughout today’s call. Whenever we refer to results for “the company”, we mean consolidated results for BGC Partners Inc. Throughout today’s call, we will be referring to results on a distributable earnings basis unless otherwise stated. Please see today’s press release for GAAP results. Also see the section of today’s press release entitled Distributable Earnings, Distributable Earnings results compared with GAAP results, reconciliation of revenues under GAAP and Distributable Earnings and reconciliation of GAAP Income to Distributable Earnings for definition of these terms and how, when and why management uses it. Unless otherwise stated, whenever we refer to income statement items, we are doing so only on a distributable earnings basis. Other than balance sheet items, the results provided on today’s call compare the third quarter of 2015 with the year earlier period. For purposes of today’s call, all the company’s fully electronic businesses are referred to as FENICS or e-businesses. These fully electronic offerings include the financial services segment, fully electronic brokerage products as well as offerings to market data and software solution across both BGC and GFI. FENICS results do not include the results of Trayport, which are broken out separately in today’s press release and presentation. Also, Newmark Grubb Knight Frank is synonymous with NGKF Real Estate Services. I also remind you that the information on today’s call regarding our business that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of Securities Exchange Act of 1934 as amended. Such statements involve risks and uncertainties. Except as required by law, BGC undertakes no obligation to release any revisions of forward-looking statements. 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 Securities and 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 risk factors contained in subsequent Form 10-Q or Form 8-K filings. I’m now happy to turn the call over to our host, Howard Lutnick, Chairman and CEO of BGC Partners.

[Howard Lutnick:]

Thanks, Jason. Good morning and thank you for joining us on our third quarter and 2015 conference call. With me today are BGC’s President, Shaun Lynn; our Chief Operating Officer, Sean Windeatt; and our Chief Financial Officer, Graham Sadler. I’m happy to report that this was our fifth consecutive quarter of record profits and the fourth quarter in a row of highest ever revenues. BGC’s post-tax earnings increased by approximately 30% to $72.9 million, while our revenues were up by approximately 56% to $700.9 million. Our record results are especially noteworthy as they came despite a strong US dollar, which reduced our financial services revenues by more than $24 million during the quarter. This significant improvement was driven by the addition of GFI, the ongoing success of Newmark Grubb Knight Frank, our real estate services company and the continued strong double digit percentage growth of our high margin FENICS, fully electronic businesses. FENICS increased its revenues by over 142% and its pre-tax distributable earnings by over 82%. This is the second full quarter in which our results include those of GFI. We’ve continued our very little turnover in GFI’s front office and the integration is progressing well. We expect to complete the full merger of BGC and GFI by the end of January 2016 and Shaun and Graham will have more to say about GFI a little later in the call. We are nearing the conclusion of the sales process for Trayport and anticipate the completion of the transaction before the end of 2015. Numerous serious potential buyers are participating in the process and we expect the final purchase price to reflect Trayport’s growth, its high margins, leading technology and its strategic importance in the global energy and commodities market. We plan to exclude the sale of Trayport from our calculation of distributable earnings. Our adjusted EBITDA increased by approximately 56% to $168 million for the quarter. We expect our adjusted EBITDA and distributable earnings to improve further as we increase the profitability of our Financial Services business. We continue to grow revenues from our highly profitable FENICS products and we benefit from the strength of NGKF. I'm happy to report that our Board declared a $0.14 qualified dividend for the third quarter, this represents an increase of 16.7% compared to last year. At yesterday’s closing stock price this translates into 6.7% annualized yield. The Board has also more than tripled the amount of available under our stock repurchase program raising it to $300 million. We believe that BGC's assets including Trayport and NASDAQ as well as NGKF and FENICS businesses are independently worth significantly more than what is reflected in our current stock price. Based on recent equity market and M&A multiples, we think that the market is undervaluing both NGKF and FENICS. We also believe that the market is yet to accurately value the more than $700 million in additional NASDAQ stock we anticipate receiving over time and the significant proceeds we expect to receive from Trayport, either of which are reflected currently on our balance sheet. Although no decisions have been made, we are considering a number of options designed to unlock substantial shareholder value. And with that, I will turn the call over to Sean.

[Sean Windeatt:]

Thanks, Howard and good morning everybody. Our Financial Services revenues were up by 59.9% to $417.7 million. As Howard mentioned, these revenues would have been up $24 million higher had the U.S. dollar not strengthened relative to other major currencies. The increase in revenues is driven by the acquisitions of GFI and R.P. Martin as well as by organic growth from our desks in foreign exchange, energy, and commodities. And Financial Services business increased its pre-tax earnings by 32.1% to $72.8 million and pre-tax margin was impacted by the inclusion of GFI, which currently have significantly lower margins. As the $90 million in annualized cost synergies are realized, we expect segment margins to expand dramatically from their current levels. In addition to these cost savings, we anticipate our revenues from FENICS continuing to grow faster than our overall Financial Services business. FENICS currently has better than 40% pre-tax margin and we expect these margins to expand over time as the business continues to grow. FENICS revenues rose by 142.2% to $60.7 million, while its pre-tax earnings increased by 82.1% to $25.3 million. The growth of our e-businesses reflected both double-digit organic revenue growth and the addition of GFI. FENICS continued to have impressive performance so far in the fourth quarter as revenues for these high margin offerings more than doubled year-on-year for the first 17 trading days of October 2015. The quarterly pre-tax earnings for FENICS are now actually larger than the quarterly revenues of eSpeed, which we sold in the second quarter of 2013 for over $1.2 billion. The financial results and strong growth of our e-businesses also compares favorably to other high valuable financial technology platforms that are either publicly traded or have recently been sold by other companies in our sector. Looking at our overall Financial Service results by asset class, revenues from our fully electronic rates products were up by approximately 40% while our overall rates revenues increased by 21.1% to $113.3 million. Our e-FX revenues, including both spot and derivatives were up by almost 57% while our overall FX business increased by 48.9% to $83.7 million. We more than doubled our revenues from fully electronic credit lists, while overall credit revenues grew by 27.1% to $68.1 million. Our energy and commodities revenues nearly quadrupled to $54.8 million while our revenues from equities and other asset classes increased by 70.2% to $50.4 million. Moving on to real estate services, NGKF once again had a very strong quarter. The pre-tax earnings is up by 78.2% to $42.5 million while revenues increased by 53.6% to $275.2 million. This impressive outperformance was driven in part by the additions of Cornish & Carey, ARA, Computerized Finance Integration and Excess Space. In addition, our real estate services business generated strong double-digit organic growth as we continue to add talented producers for our new business and were aided by strong commercial real estate market fundamentals. In terms of specific line items, our revenues from leasing and other services improved by 31.8% to $144.9 million. Real estate capital market increased by 183.8% to $81.1 million and management services and other revenues were up by 21.2% to $49.2 million. NGKF’s distributable earnings revenues have grown at a compounded annual rate of approximately 32% over the two years ended September 30, 2015. Based on our quarter-to-date results and strong pipeline of business, we expect this growth to accelerate from its industry leading pace for calendar year 2015. We expect NGKF to increase its full year revenues for distributable earnings by at least 38% to over $1 billion compared with $725 million in 2014. This growth would easily outpace the analysts’ projections for the top line growth of our publicly traded peers in commercial real estate services. Turning to headcount, we had 1,347 real estate brokers and sales people as at quarter end, up 19% compared with 1,135 a year earlier. Average revenue per real estate broker increased by 20% to $171,000. The increase in productivity was due largely to the strong growth in real estate capital markets which generally has higher revenue per broker. We finished September with 2,498 financial services brokers and sales people, up by 54% from 1,620 a year earlier. Excluding Trayport, our average revenue per financial services broker sales person was $153,000 compared with $160,000 a year earlier due primarily through the acquisition of GFI and the strengthening of the US dollar. In addition, our revenue per front office employee has generally fallen and mainly after a large acquisition. As the integration of GFI continues and as more voice and hybrid revenue is converted to more profitable fully electronic trading, we expect financial services broker productivity to grow. Companywide, our front office headcount was up by 40% to 3,845 brokers and sales people while revenue per broker sales person improved by 4% to approximately $159,000. With that, I would now like to turn the call over to Graham.

[Graham Sadler:]

Thank, Sean, and good morning everyone. As Howard mentioned, this was the second full quarter in which our results include those of GFI. This had an impact on a number of income statements and balance sheet line items. BGC generated consolidated revenues $700.9 million, up 55.8% compared to $449.8 million. Our revenues from the Americas were up approximately 51%. Revenues from Europe, Middle East and Africa were up by around 68%, while Asia-Pacific revenues increased by 55%. As Sean mentioned, our non-U.S. financial services results were negatively impacted during the quarter, by the stronger U.S. dollar, mostly in our European offices. Turning to expenses, our compensation ratio was up by around 200 basis points to 62.5%, while non-compensation expenses increased in absolute terms by 55.9%, that were flat as a percentage of revenues at 24.9%. We still expect to meet our expenses reduction run rate target of at least $50 million a year by the first quarter of 2016 and by at least $40 million in further annualized cost savings by the first quarter of 2017 for a total of at least $90 million in annual savings, all excluding Trayport. Also as a reminder, commercial real estate service providers generally have higher compensation ratios, but lower non-compensation expenses as a percentage of revenue when compared with Financial Services brokers, especially those with significant fully electronic revenues. Moving on to earnings, our pretax earnings before non-controlling interest and subsidiaries and taxes were $88.1 million, up 33.9% when compared with $65.8 million. Our pretax margin this quarter was 12.6% compared with 14.6%, which is before we purchased GFI. BGC's effective tax rate for distributable earnings was unchanged at 15%. Our post-tax earnings were up by 30.2% to $72.9 million, compared with $56 million. Our post-tax earnings margin was 10.4% compared with 12.4% while our post-tax earnings per share were up by 11.8% to $0.19. BGC had a fully diluted weighted average share count of $394 million in the third quarter of 2015 for both distributable earnings and GAAP. A year earlier, our fully diluted share count was 371.4 million for distributable earnings and 331.2 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, ARA and Computerized Facility Integration, equity-based employee compensation and new front office hires. This was partially offset by the redemption and/or repurchase of 4.9 million shares and units at a cost to BGC of $38.9 million or an average cost of $7.87 per share or unit over the trailing 12 months ended September 30, 2015. As of the end of the third quarter of 2015, our fully diluted share count was 395 million, assuming conversion of the 4.5% convertible senior notes into 16.3 million shares. Moving on to the balance sheet, as of September 30, 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 was $513.9 million. Those payable and collateralized borrowings were $841 million. Book value per common share was $2.10 and total capital, which we define as redeemable partnership interest, non-controlling interest in subsidiaries and total stockholders' equity was $1.040 billion. In comparison, as of the year-end 2014, the company's liquidity was $825.5 million, notes payable and collateralized borrowings and notes payable to related parties were $706.7 million. Book value per 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 controlling interest in GFI as well as to acquire ARA, Computerized Facility Integration and Excess Space. With that, I'm happy to turn the call back over to Howard.

[Howard Lutnick:]

Thank you, Graham. Our guidance for the fourth quarter 2015 is as follows. We expect to generate distributable earnings revenues of between $685 million and $725 million, an increase of between 33% and 41% when compared with $515.5 million last year. Our revenue guidance would be approximately $16 million higher, but for the continued strength of the US dollar. We anticipate generating pre-tax earnings of between $85 million and $100 million. That's an increase of between 17% and 38% and that campers with $72.6 million a year ago. At the mid-point of our guidance, we would produce our fifth consecutive record quarter of revenues and our sixth quarter in a row of record pre-tax earnings. We continue to expect our effective tax rate to remain around 15% and we anticipate updating our fourth quarter guidance towards the end of December. So with that operator, we're happy to open the call for questions please.

[Operator:]

Thank you. We’ll now begin the question-and-answer session. [Operator Instructions] And our first question comes from Rich Repetto from Sandler O'Neill. Rich, your line is open.

[Rich Repetto:]

Yes, good morning. Good morning, Howard. So I guess the first question is on just getting a little bit more insight into what you mean about considering a number of options designed to unlock substantial amounts of shareholder value. So I mean it appears pretty clear like the real estate is undervalued relative to comps, would some of the options be -- a real estate or I'm just -- maybe I just let you talk about what some of the options might be?

[Howard Lutnick:]

So, the bankers -- we had a variety of bankers pitching us and we are listening. So what we've done is we’ve built a real estate business, we sold our eSpeed to NASDAQ, we’ve built FENICS and we bought GFI. So we’ve been very active in both building, buying and selling. We’re going to sell Trayport and then we're really looking at obviously, NGKF is an incredibly valuable asset that is growing far faster than all the other real estate companies and the other real estate companies are doing very well. We’re just growing far faster and our FENICS business has really extraordinary value as Shaun said, you’ve got a fully electronic business with current 40% margins, which we think will expand from that whose profits exceed the revenues of eSpeed and that’s an enormously valuable asset. We've got the NASDAQ $700 million and we've got the Trayport asset. So those combination of those four things, somewhere in there, there have got to be moves to make to unlock shareholder value for us and we’re listening. So we’ve not sort of made a concrete decision, but we are all ears on how to produce value. We’re building great businesses, but we know the key to our success is augmenting shareholder value.

[Rich Repetto:]

And I understand so you’re sort of listening and evaluating, so can you give any sort of timeframe, is this something that’s not likely before year-end, but say, by spring of next year or is this something that’s a year-end thing?

[Howard Lutnick:]

I don't want to put a time on it. I would say it’s not an if, but a when. So we're -- it’s important to us to produce strong shareholder value and we’re building great businesses and they need to be recognized by the market whether it’s part of BGC or in some other form. So I don't want to put like a tight timeframe on it like I'm doing something between now and the end of the year, but because that seems sort of too soon to call, I mean we are going to try to do Trayport by then, that’s sort of a different comment, but I think the idea is we want to be smart about it, we've done each of the transactions we’ve done so far have been really, we thought about them clearly, we thought about them long and I think we did them right, the NASDAQ transaction was right. Both the sale of eSpeed to Nasdaq and taking 10% of the equity in Nasdaq and then keeping that 10% of the equity has really worked out extraordinarily well for us. Buying GFI has worked out well I think, selling Trayport entirely derisks the whole business of GFI. We’re just trying to be smart, and so, we just want to make sure we do it the right way for our shareholders and we’re going to take our time, we’re going to think about it but we will produce the value for shareholders.

[Rich Repetto:]

Got it, and then I guess just another follow-up would be on the buyback where you know that you tripled the amount available. If the stock stayed, it seems like you’re aggressive below eight. I guess the question is, in trying to engage your appetite and aggressiveness at level sort of around that high 8s to 9 levels where they trade now.

[Howard Lutnick:]

I guess we think about it in these terms which is, we’re going to sell Trayport and balance sheet cash for this company is going to be much, much larger. As we closed the backend merger of GFI, we have about just over 24 million shares of issuance that are coming, that come with that you know that came with the Trayport and with the GIF transaction, they came with it. And so, we want to constrain our share count. And we want to constrain our share count. So I think you'll find us to be over time relentless buyers of our stock because we like our stock here and that’s why the board has authorized the share repurchase. So I'm not going to put a final point on price but we really, really like the value of our stock here, we really like.

[Rich Repetto:]

And I guess, the very last one Howard is something very near indeed, but the electronic business, the FENICS business I guess is how you're referring to you, but high margins at 40% but the BGCP prior was low-to-mid 50s as well. So I guess how quick can you get that back just to say or what can you do get it back. I know you’ve said in the prepared remarks that you expect to expand margins but how soon will that get say to the 50% level?

[Howard Lutnick:]

I think these kind of businesses, right so you have the infrastructure that came with GFI and you had BGC's infrastructure and rationalizing those two infrastructures but bringing them together to get the full benefit of the economics of the fully electronic business just takes time. There is no way you can rush it, you can't get off of one network. BGC's network was widely larger, so yes, of course we can use BGC’s network in lieu of GFI's network but you can’t just shut it off on a Tuesday and get those benefits. The math will come, the margins will come, but I think if you sort of look at it over the period that we suggested that we would get the synergies over the course of the next year or so through to the first quarter of ’17, you’re going to see the margins just march upward by the calendar because we no longer have to pay maintenance on this, so we can no longer use the network on that, we're going to move the computer network, the system on to this or to that. I mean, our business will just grow by math. The math, data centers, the roll off things like that and that on top of our voice pipeline driving business to electronics and getting us more scale will get us margins. I don't really want to go out and say what the margin is going to get to but there is nothing about our current business that is different than what our business was in the past. It's simply a matter of doing the work to integrate them and drive that forward but there is nothing about the core business that somehow is less profitable than the businesses we’ve had in the past.

[Rich Repetto:]

Got it. Okay, thanks and appreciate you taking my questions Howard.

[Operator:]

Our next question comes from Patrick O'Shaughnessy. Patrick your line is open.

[Patrick O'Shaughnessy:]

So question on the Financial Services brokerage business. Obviously the new stories in press releases would indicate that we're still seeing some banks retrench from their brokerage activities, and I think in particular the European banks. So given that retrenchment account, what’s your outlook for the business for the next few quarters? And I think more broadly when do we hit that inflection point where the new liquidity providers, the non-big banks start to actually make up for this trading volume from those big banks and the Financial Services business can actually start to grow again?

[Howard Lutnick:]

I think Patrick, we’ve been seeing this over the last six months, obviously in the last weeks we have seen a lot of news from some of them major sell side banks, but we have seen the likes of the new clients come on board within the -- for the last 18 months, you can see them in Europe now. This time is upon us now, new clients are coming on every day. It’s going to take them time to build inventory and market presence, technology. And the market is just readjusting itself. We are marching towards MiFID and Basel III, which is upon us, which is a constraint for a lot of the major sell side banks, and that’s pushing towards some of the new clients, new customers that are coming into the marketplace. You’ve seen recently some major new clients to become members of the LCH such as Citadel. I think this time is upon us now. But it takes time. In my perspective, we have – the recent headwind for us, as we have said, has been the way the currency has moved against us in Europe. Even though we have seen some good increases in say business and new clients, there has been a bit of a headwind against us on that. But in my perspective, we are excited, it’s challenging, but we are excited because this is the new world.

[Patrick O'Shaughnessy:]

All right. Well, let me try to pin you down with something and realize that I am probably not going to be successful with that. But on an organic currency neutral basis, do you think the Financial Services brokerage business could grow in 2016 or do you think that some of these macro headwinds you are facing are still going pressure things and maybe that growth is 2017 or later event?

[Graham Sadler:]

I think volatility will overwhelm cutbacks in particular bank. I think the cutbacks on particular banks tend to be newsworthy, because it’s something to write about to some newspapers, more than it is volume of the world. There is nothing about the world that we live in that has clients trading less over time. Money, it continues to grow in the world, the scale and scope of assets under management are vast, the need for sell side participation and eventually additional clients continues to be vast. So I think, if you were going to rank them, I would rank volatility first, I would rank volatility second and I would rank volatility third, I would put quantitative easing fourth and then I would put dislocation amongst some of our clients next. I would think that the dislocation in clients means that those individual traders and those individual market makers are going to speed the breadth and scale by which new participants come into the market, because they are all going to get jobs, they are all going to find people to back them with capital and that capital is going to come into the market and all that is going to do is to speed us. So I think that market was softer in the first two weeks of October. No doubt about it. More volatile, meaning there were plenty of good days, just not as many good days as they softer quieter days and that’s why our guidance was relatively constrained and real estate business continues to be extraordinary and successful. The first couple of weeks of October were uneven and volatility was a little light. But I think that that will be the driver. So next year is primarily about volatility and I think with reasonable amount of volatility, the company will do perfectly well. I don’t think you can use sort of headlines of people cutting staff to suggest at all that that would be the driver of our Financial Services results. Our Financial Services results are wildly larger than any particular bank or series of head cuts in these banks, will people all get jobs and they all become our clients again one quarter later just another four.

[Patrick O'Shaughnessy:]

Got it. Appreciate that. And then moving to the commercial real estate side of things, obviously pretty strong results in 2015 and I think your outlook is very positive, but as we think about potential risks to commercial real estate, how do you view the potential risk from rising interest rates? How do you view the potential risk from an economic slowdown? And my guess is you feel like you can grow regardless of this, but I love to hear your thoughts on how the business is positioned given some potential macro headwinds.

[Graham Sadler:]

Okay, so interest rates, our first driver would be a material and consequential change in interest rates will have an effect on the capital markets businesses across the real estate sector. But I’ve said, a material and consequential increase in interest rate, which does need a quarter of a point or a half a point, those are not consequential values. So what’s happened is core or class A buildings in great markets have been trading at interest rates or cap rates in the 3% to 4% range which has created so much capital value in the markets that there is plenty of room in which transactions will continue to occur really through interest rates going 1% higher. I think once interest rates move more than 100 basis points higher, I think you are going to start seeing a dramatic, not a dramatic, but it will have a real impact on the torrid capital market pace that is existing in the world today, but you won’t see it impacted until you get 100 basis points and I think that is just well, well off into the future. You have to remember spreads on real estate right now are really high. Meaning, you can buy great real estate at yield at historically high spread to treasury, right. So it’s still a tremendously attractive asset and you need a real interest rate move, so I don’t think you will see touch leasing for quite some time, because remember if you get interest rates growing up that means you have a growing economic, if you have a growing economic, you got people growing their business so I think the natural offset to a capital market slowdown with real interest rate rise would be a continuing and actually picking up pace of leasing, so we’ve grown our capital markets business, you saw 184%. We signaled to you guys six months and a year ago that we felt we were undersized in capital markets and we were going to build that business and we are building it and now we are going to participate much better in what I think is going to be an excellent capital market business for the next two, three years before you see interest rates anything remotely like that. And our leasing business, as you know, is world class in America and we are very well positioned for that interest rate rise, because that means that comes with economic growth. So if we were all capital market, right, you would have good couple of years to go and then you got some issues, but since we are undersized in capital market, I just think we can grow through these things and continue to outpace the market in new markets. We just happen to be sort of in the right places at the right time.

[Patrick O'Shaughnessy:]

Got it. And then the last one from me, kind of talking about your excess capital that you have and your desire to continue to build your scale in commercial real estate, what are some of the areas in commercial estate that you might look for acquisitions? Is it building out certain capabilities, is it building out certain geographies, all the above, where are you looking?

[Graham Sadler:]

Okay, so first would be building our capital markets business, right. We bought ARA which is institutional multifamily. And that puts us strongly in the mix of doing business for the biggest institutional buyers of real estate which is important. Now we’ve been building out our commercial real estate just selling office buildings, selling retail, shopping centers and malls and so we are going to build that business. So that’s number one. Number two, property and facilities management, the management of real estate is a business that we are also undersized and you should expect us to grow that business substantially over time and so those two areas the Computerized Facility Integration Company provide the software to large tenants to manage their real estate. That is a first step into a really interesting electronic way into managing real estate and we think we are going to scale that. Our software now manages 3 billion square feet of real estate, so you are going to start to see us coming at the business of property management and facilities management from a different direction, but you should expect us to grow that business substantially. And then with all due respect, we got the rest of the free world, right. We are American based and eventually we are going to start talking about growing in the rest of the world.

[Patrick O'Shaughnessy:]

Do you have any constraints on your rest of the world growth given the partnership with Knight Frank over in London?

[Graham Sadler:]

We have an excellent partnership with them, which we always talk about. We always talk about how to grow that business and grow it together so where they are great, we would expect them to stay exactly the way it is and in the places where they are weak or they don’t really have a big position, it’s a big world out there. I think that’s an area of us to come together as partners and grow and build and give us opportunity to invest around the world in interesting locations. We just have the physical capacity and the global know-how to build businesses like this, we love building brokerage businesses and the world is not something that worries. We’re a global company in financial services and we’re excited to do it in others. So I think working together with Knight Frank would be our first choice and I would expect to do that over time, but to do it globally.

[Patrick O'Shaughnessy:]

All right. Great. Thank you.

[Operator:]

[Operator Instructions] And our next question comes from Robert Krayn from MidOcean Partners. Robert, your line is open.

[Robert Krayn:]

All my questions have been answered. Thank you.

[Operator:]

We have no further questions at this time. I will now turn the call back over to Mr. Lutnick for closing remarks.

[Howard Lutnick:]

While we were just talking about ourselves, Sean made a point that you should not rule out given the scale and scope of our Newmark business, the ability for FENICS to start to take data, knowledge and capacity that we’ve built in financial services and drive that data kind of business and that electronic business through the real estate markets, that is just -- it’s something we talk about here and it’s not something topical for next quarter and the quarter after. But these are, if you can imagine what we’re thinking about and talking about, just look at the resources and the way we built our FENICS business and then start imagining it in real estate, you’re going to see some really cool and interesting things over the course of the next couple of years coming out of FENICS with respect to real estate. We just have exciting raw materials to play with and the world is coming away, it does not mean the last two or three weeks having been a little uneven, but that does not change the fundamentals of this business, assets under management in the world are growing and the pressure from Basel III and MiFID as Sean said continue to put pressure on the banks. That pressure is going to be filled by funds, whether it’s hedge funds, money managers, buy side, all sorts of ways people are going to drive in that business, we have global connectivity with a really first class electronic system that connects them all and I think we’re in really good position overtime and we expect to execute on that. And as I said in my answer to Rich earlier, we think we’re stewards of our shareholder value and we expect to listen, to talk and ultimately as I said, not if but when unlock shareholder value to make sure our shareholders get the value that they deserve from the assets that we’ve built. So I deeply appreciate you spending this morning with us and I hope you have a great day today. Thanks everyone.

[Operator:]

Thank you. Ladies and gentlemen, this concludes today’s conference. Thank you for participating. You may now disconnect.