Ladies and gentlemen, welcome to the BGC Partners Inc first quarter 2020 earnings call. Just to let you know, we will be starting in a couple of moments. Thank you for your patience. Welcome to the BGC Partners Inc first quarter 2022 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. I'd now like to hand over the conference to your speaker today, Jason Chryssicas, Head of Investor Relations. Thank you, and please go ahead.
Thank you and good morning. We issued BGC's first quarter 2022 financial results press release and the presentation summarizing these results yesterday after the market closed. You can find these at ir.bgcpartners.com. Please note you can find additional details on our quarterly results in yesterday's press release and investor presentation. Unless otherwise stated, the results provided on today's call compare only the first quarter of 2022 with the prior year period and compare revenue excluding insurance due to its sale on November 1st, 2021. We will be referring to our results in this call only on an adjusted earnings basis, unless otherwise stated. We may also refer to adjusted EBITDA.
We may refer to our liquidity, which we define as cash and cash equivalents, plus marketable securities that have not been financed, reverse repurchase agreements and securities owned less securities loaned and repurchase agreements. We define total capital as redeemable partnership interest, total stockholders' equity, and non-controlling interest in subsidiaries. Please see yesterday's press release for results under generally accepted accounting principles or GAAP. Please also see the relevant sections in the back of today's press release for the complete and updated definition of any non-GAAP terms, reconciliations of these items to corresponding GAAP results, and how, when, and why management uses such terms. Additional information with respect to our GAAP and non-GAAP results mentioned on today's call is available on our website at ir.bgcpartners.com and in our investor presentation. We refer to the company's technology-driven business as Fenics. Fenics offerings include Fenics Markets and Fenics Growth Platforms.
I also remind you that the information regarding our business on today's call that are not historical are forward-looking statements. These include statements about the effects of COVID-19, the impact on the company's business, results, financial position, liquidity, and outlook. Any forward-looking statements involve risks and uncertainties, and except as required by law, BGC undertakes no obligation to update forward-looking statements. Any outlook and targets discussed on this call assume no material acquisitions, buybacks, extraordinary transactions, or meaningful changes to the company's stock price.
For a discussion of additional risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, see BGC's SEC filings including but not limited to the Risk Factors and Special Note on Forward-Looking Information set forth in these filings and any updates to such Risk Factors and Special Note on Forward-Looking Information contained in subsequent reports on Form 10-K, Form 10-Q, or Form 8-K. I am now happy to turn the call over to Howard Lutnick, Chairman of the Board and CEO of BGC Partners .
Thank you, Jason. Good morning, and thanks for joining us on our first quarter 2022 conference call. I have with me today BGC's Chief Financial Officer, Steven Bisgay, and our Chief Operating Officer, Sean Windeatt. BGC's adjusted earnings margins continued to improve, representing the sixth consecutive quarter of year-over-year margin expansion, which reflects the increased conversion of our voice hybrid revenue into our higher margin technology-driven Fenics business. Fenics continued to grow at an industry-leading pace and represented 25% of BGC's overall revenue during the first quarter. We continue to make significant progress building out our FMX platform, which combines Fenics UST's leading U.S. Treasury business with a new state-of-the-art U.S. interest rate futures platform. FMX, partnering with the LCH, will deliver a comprehensive and efficient cross-margining platform across U.S. dollar-based futures and interest rate swaps.
Our objective is to create a competitive offering in the enormous and currently monopolistic U.S. interest rate futures market. We are also progressing on our comprehensive cryptocurrency offering, which includes the expansion of Lucera's infrastructure across the cryptocurrency ecosystem, leveraging our wholesale global electronic trading network to connect the world's largest capital markets participants to the exchanges and market makers of this asset class. Lucera is now connected to 26 of the deepest cryptocurrency liquidity pools with a strong pipeline of additional clients, venues, and digital custodians to be added throughout the year. Additionally, we are expanding our electronic and voice hybrid cryptocurrency execution capabilities globally. During the first quarter, for example, BGC brokered the first-ever block trade of micro bitcoin options on CME. ECS also added new clients to its cryptocurrency options offering, which leverages its award-winning analytics, pricing, and distribution software.
Our crypto platform is powered by our multi-billion-dollar global infrastructure and state-of-the-art Fenics trading technology. FMX and cryptocurrencies represent extraordinary opportunities for BGC as they scale in 2023. On a personal note, I'm happy to report that I am cancer-free as of March first, and I want to say thank you to all of you for your support along the way. It really made a big difference. If you would like more details about my health, my most recent update video is available on our website, on Rumble, or on YouTube. With that, I'll turn the call over to Steven Bisgay.
Thank you, Howard, and hello, everyone. BGC generated total revenue of $506.5 million, slightly lower by 1.7% as compared to last year, excluding insurance. Total revenue would have been over $10 million higher, or up 0.3% over last year, but for the strengthening of the U.S. dollar. Overall, industry-wide trading volumes were mixed during the first quarter. Energy and commodity volumes were higher due to global volatility across the complex. Rising interest rates and volatility drove trading activity higher in short-duration U.S. rates products. However, a flattening and an eventual inversion of the U.S. yield curve weighed significantly on medium- and long-term cash rates and interest rate swap volumes during the quarter.
BGC's rates business continues to be well-positioned as the market acclimates to the pace of rising interest rates and inflation, and as the Federal Reserve unwinds its $9 trillion balance sheet at a pace of $95 billion per month. We continue to expect tailwinds in our rates business to begin in the latter half of this year. By geography and excluding insurance, Americas revenue increased by 4.9%, while Europe, Middle East and Africa, and Asia Pacific revenues both decreased by 4.6% compared to last year. By asset class, energy and commodities increased by 8.6%, while rates, FX, equities, and credit decreased by 1.8%, 4.1%, 4.7%, and 6.8% respectively. Deeper integration of Fenics technology across the entire business drove front office productivity 7.2% higher during the first quarter.
As we continue to automate our business, we expect productivity and profitability to continue moving higher. Now turning to Fenics quarterly performance. Fenics generated first quarter revenue of $125.3 million, an improvement of 16.4%. Fenics Growth Platforms recorded revenue of $13.1 million, an improvement of 23.5%. Fenics Markets generated revenue of $112.3 million, an increase of 15.7%, and had a pre-tax adjusted earnings margin of 34.2%, an improvement of 336 basis points. Moving on to expenses. Our compensation and employee benefits under both GAAP and adjusted earnings decreased in the first quarter of 2022 due to the sale of the insurance brokerage business and cost reduction initiatives.
Our adjusted earnings compensation as a percentage of total revenue was 50.7%, which was over 300 basis points lower versus a year ago. Our non-compensation expenses under GAAP and adjusted earnings decreased by 6.8% and 8.9% respectively, driven by lower occupancy and equipment expense due to the sale of our insurance brokerage business, as well as lower interest and communications expenses. These expense reductions were partially offset by higher selling and promotion charges as COVID-19 restrictions have relaxed across many of the major geographies in which we operate. Moving on to our adjusted earnings. Our pre-tax income was $113.1 million with a 226 basis point margin expansion to 22.3%.
We recorded post-tax adjusted earnings of $103.2 million, an increase of 2.1% and a 256 basis point margin expansion. We generated first quarter adjusted EBITDA of $141.3 million, down 4%. Turning to share count. Our weighted average share count decreased 1.2% sequentially, and 9.7% year-over-year to 502.9 million. Our fully diluted spot share count as of March 31st, increased by 1.1% sequentially to 502.9 million shares. Compared to a year ago, BGC's fully diluted spot share count decreased by 54.1 million shares or 9.7%.
As of March 31st, our liquidity was $539.6 million compared with $594.8 million as of year-end 2021. The change in our liquidity reflects payments for year-end bonuses, tax payments, and timing differences between commissions earned in the seasonally busier first quarter and commissions collected from the seasonally slower fourth quarter. Cash uses have historically been the greatest in the first quarter. Cash and cash equivalents were $509.2 million versus $553.6 million as of December 31st, 2021. Notes payable and other borrowings were $1,051.9 million compared with $1,052.8 million.
Total capital was $753.5 million compared with $682.1 million as of year-end 2021. In February 2022, the U.S., U.K., E.U., and other countries imposed sanctions on Russian counterparties, and as a result, we have ceased trading with those clients. For context, we derive less than 1% of total revenue from both our Moscow branch and sanctioned Russian counterparties. As of March 31st, BGC has reserved $6 million in connection with unsettled trades and receivables with sanctioned Russian entities. With that, I'm happy to turn the call over to Sean.
Thanks, Steve, and good day everyone. Fenics, our technology-driven higher margin business, continued to grow at a market-leading rate. Our Fenics strategy is focused on converting the company's $1.4 billion voice hybrid revenue base into higher margin technology-driven Fenics Markets revenues, while concurrently scaling its state-of-the-art fully electronic Fenics Growth Platforms, including FMX and cryptocurrencies. Looking at Fenics in more detail. Our Fenics Growth Platforms revenue improved 23.5% from a year ago, driven by growth across Fenics U.S. Treasuries, Lucera, Fenics FX, and Fenics GO. Fenics U.S. Treasury revenues increased over 52%, driven by market-leading ADV growth, new product offerings, and more traders using the platform. During the first quarter, Fenics UST had ADV growth of over 18%, outperforming the overall market.
Fenics UST global market share increased approximately 320 basis points year-over-year to 20% in the first quarter. As of the end of the first quarter, all Fenics UST customers are paying to transact on the platform, which will drive revenue growth throughout 2022. Lucera, our infrastructure and software business, continued its strong growth trajectory with its revenue improving 56% year-over-year. This growth was driven by onboarding two large global investment banks, the expansion of existing relationships, and adding new cryptocurrency clients. Lucera is providing connectivity to the world's deepest crypto liquidity pools via its world-class infrastructure. During the first quarter, Lucera added connectivity to an additional 19 cryptocurrency venues and liquidity providers.
Fenics FX, our ultra-low latency electronic FX trading platform, had a record quarter generating strong double-digit volume growth, which drove revenue 47% higher versus last year. Fenics FX growth outpaced both its FX ECN peers and the overall market. Fenics GO, our global options electronic trading platform, saw revenue increase five-fold from a year ago, driven by the integration of MatchBox, as well as market share gains across HSI and KOSPI index options. Looking at Fenics Markets. Revenues improved by 15.7%, driven by strong growth across FX, rates, credit, and market data. Fenics MIDFX, the leading wholesale FX hedging platform, continued to generate solid double-digit volume and revenue growth across Spot FX and Asian NDFs.
March 2022 marked a record month for this business as heightened FX volatility attracted record volume to the platform as large global banks looked to hedge FX risk on Fenics MIDFX's highly efficient risk-neutral platform. Fenics Market Data signed 47 new contracts during the first quarter, with total contracted value increasing 63% versus a year ago. Fenics Market Data continues to see strong demand for its rates and regulatory service data packages with additional products rolling out throughout 2022. Fenics Market Data, which has a highly recurring and compounding subscription revenue model, grew over 21% year-over-year.
Fenics Direct, our web-delivered multi-dealer FX options platform, nearly doubled its ADV in the first quarter, driving revenue 101% higher versus the prior year period. Fenics NDF Match business, which helps clients reduce foreign exchange exposure continue to capture market share, driving double-digit volume and revenue growth versus a year ago. Our Voice Hybrid business generated revenues of $381.2 million, down 6.5% from last year due to the continued conversion of Voice Hybrid to Fenics Markets revenue. BGC's energy and commodity business grew 8.6% in the first quarter, driven by solid double-digit growth across the energy complex, including BGC's leading environmental business. Our rates business declined by 1.8%, primarily due to the challenging market conditions across medium and long-term rates products.
For example, interest rate swap industry net volumes were down 35% compared to last year. Primary dealer volumes for U.S. Treasuries maturities less than 3 years improved by 29%, while volumes for maturities 6 years and greater were down 10%. Now turning to our second quarter 2022 outlook. BGC's revenues were approximately 2.5% lower for the first 19 trading days of the second quarter when compared to the same period last year, excluding insurance. We expect to generate total revenue of between $420 million and $470 million as compared to $458 million last year, which excludes $54.4 million of insurance revenue.
Because the company generates a significant portion of its revenue in euros, if the recent strengthening of the U.S. dollar were to remain for the balance of the quarter, BGC revenues would be reduced $20 million below the midpoint of the guidance. The strengthening of the dollar doesn't change the volumes of our revenues in euros, it just changes how we present ourselves in U.S. dollars. We anticipate pre-tax earnings to be in the range of $81 million-$101 million versus $97.4 million, and we anticipate our full year 2022 adjusted earnings tax rate to be in the range of 8%-10% versus 6.4% for full year 2021. With that, I'd like to turn the call back over to Howard.
Thank you, Sean. We are continuing to make important progress growing our Fenics business, which continues to drive our margin expansion. We are excited about our near-term initiatives, including the upcoming FMX futures launch and our continued rollout of our comprehensive cryptocurrency offering. We believe that both of these initiatives will drive value for our BGC shareholders. Finally, we expect our board of directors and applicable committees to determine whether to proceed with a corporate conversion by the end of the second quarter. With that, operator, we're happy to open the call for questions.
Thank you very much. So as a reminder, if you would like to ask a question during this session, please press star followed by one on your telephone keypad. That's star followed by one on your telephone keypad. We do have a couple of questions. Our first question comes from Gautam Sawant from Credit Suisse. Your line is now open. Please go ahead with your question.
Hey, Howard. Good morning. This is Gautam, and thank you for taking my questions. It's also great to hear that you're cancer-free and doing well.
Thank you. Very good for me too.
Can you please expand on your macroeconomic perspective and how it translates into the 2Q revenue guidance? We understand that volumes were mixed in the first quarter, and the firm could have a $20 million FX headwind, but can you walk through the businesses that are punching above their weight and where revenues could be pressured?
Sure. While rates are rising and rising aggressively, it is difficult for the rates community to figure out where to trade. You have, you know, the flattening yield curve and potentially inverting yield curve in the longer end has held down volumes, and you saw that on interest rate swap volumes being down 35%. These are just short-term issues, maybe over the next couple of quarters. As this settles out and the Fed gets to its final resting place at the end of the year, it is an enormous tailwind for the company. Our rates business is very, very large, and we are just thrilled that rates are coming back. I mean, we've suffered with zero interest rates for years and trying to make a living brokering fixed income when rates are zero is really an extraordinary challenge.
Once rates get into the couple of hundred basis points, making money transacting business becomes much, much more fun. While these are in the rates world, I would say short end very busy, long end deeply constrained over the next, say, two quarters, and by the end of the year, you start to see a ramping up of rates volumes, and that will continue through 2023. We think that this is a great tailwind for the company, albeit you know a quarter or two to get through the rates process until we get to the other side. Foreign exchange, obviously, while a headwind because the dollar is wildly appreciating. You know, last year, remember the euro was 1.20, right?
Every time we make euros, when we generate a significant amount of revenues in euros, you know, they were worth $1.20, now they're only worth $1.05. That's the headwind. However, you know that eventually the European Central Bank will start raising rates quickly as well. They're just a couple of quarters behind. We think this then goes back the other way as the European Central Bank starts to raise its rates, consistently with how the U.S. is raising rates, and that will dissipate. I think again, this is a two-quarter world in terms of presentation, but in terms of macro view, I mean, what's better than these foreign exchange rate moves? I mean, it's great for our business, it's great for volume. These things do not impact volumes.
They do impact presentation. Credit, which you've seen, has taken this rate rise on the chin. Volumes in credit are down, and they will remain down until the rates stabilize at the end of the year. I think the industry-wide credit volumes are down. You've seen it with MarketAxess . You've seen it across the industry. It's not a BGC related event. It's really credit in general related event, and I think that's just raising rates. You know, companies just stall and try to figure out what to do next. The markets are much tougher in credit markets for deals to get done. And so I think you see credit volumes declining. Rates challenging for two quarters and then really being positive.
Foreign exchange, really positive, although because we're dollar-based, we present ourselves in dollars, we're gonna consider presenting ourselves in constant currency, which I think will make this easier to show that we're producing as many euros as we always expect to. We're just talking about presenting them in dollars, credit being challenged. The rest of our business, you know, futures and cryptocurrency, we are really excited about.
Got it. Just to follow up on, you know, you mentioned the futures business. Can you provide us with the progress update on bringing strategic investments into the FMX interest rate derivatives exchange as you're progressing towards the 4Q 2022 launch with the U.S. Treasury, Eurodollar, and SOFR futures?
Sure. As you saw in our U.S. Treasury business, our Fenics UST, we didn't have partners and we launched in 2018, and now we've gotten 20% market share at the end of the first quarter of 2022. That's sort of 4 years and so we're not really interested in waiting 4 years to do futures in the same thing. Basically, we've decided we're going to bring in the banks as partners. We are in active conversation with banks and market makers. Our objective is to bring them over the line together. These are big institutions, thoughtful institutions, but ones with lots and lots of committees and bureaucracy. Our objective is to bring them across the line together, so we have a broad coalition of supporting institutions, and that remains apace.
That is our expectation that we will bring them in before the close. Before, I mean, before it opens, I should say, and close their investment, before we open. That's our current expectation. However, you know, it's hard to get everybody to cross the line at the same time, but that is our objective.
Thank you. Last question for me. Can you provide us with how the firm is thinking about capital deployment priorities this year as well as equity compensation given the level of uncertainty in 2022? Is BGC still tracking to a 3% equity issuance target this year? Could you please help us size the range of repurchases? I know in the past you've talked about a potential 75% capital return target.
Number one, we will constrain our issuance, net issuance to well below 3%. I think if you sort of modeled 1%, you'd be closer to where we expect to do it. Our days of issuing significant amounts of equity, net are behind us. It is a corporate objective to have issuance to be constrained. If you modeled 1%, you'd be more consistent with how the company is thinking. Capital return policy. We balance two things. We balance buying back our stock, which we think is cheap, and so we continue to buy back.
You know, we bought back our stock last year in enormous sums, and while as Steve Bisgay said, the first quarter we tend to pay bonuses and taxes, those are the two big uses of money in the first quarter, so we tend to be constrained in our cash uses in the first quarter, that dissipates going forward, and we don't really have those issues going forward. We balance buying back stock and acquisitions, you know, and what we can use to grow our business. You know, we've made our investments in futures. We made our investments in crypto. Those do not any longer entail significant capital expense. That has already been invested in the past. It's already been made. I think those are the two balances.
Are there good companies for us to tuck in and add? The balance we will be buying back shares. I think a 75% capital return policy, which has historically been the value model of the company. I think if you just add in acquisitions to that mix, I think you'd be closer to how the company's thinking.
Got it. Thank you for taking my questions.
Thank you very much. Our next question comes from Rich from Piper Sandler. Your line is now open. Please go ahead, Rich.
Yeah. Good morning, Howard, and congrats on the health and I look forward to getting together in June. First question is more on the FMX. Howard, like, I understand the you know wanting to pull everybody across the line, but you know how do you balance like maybe an early indication of who's involved sometimes that attracts others. When you say how do you balance that sort of thinking and giving investors confidence that you do have these people you know on board?
Our futures initiative, I'm happy to report, is the opposite of a secret. We are, you know, building, you know, the competitor, and I think our clients have expressed to us, you know, the banks and market makers have expressed to us that we are really the only credible opportunity to compete with the Chicago Mercantile Exchange and its $80 billion monopoly market cap. I think they all know it, and they all know who else is at the table. You know, we have not been secretive about who's at the table. You know, we want this to be a broad-based, strong, capable initiative. We require a couple of things from the banks.
They have to be supporting the platform, you know, in order to be equity players. You have to realize that this is not just, you know, you come on and have equity. You need to be on the platform and ready and willing and able and supporting the platform. These things are going to come with both equity and volume commitments. Doing that is just a detailed process. They all know who we're talking to. We've told them who we're talking to, and we expect them to come across the line together. I mean, you know, the proof is in the delivery and outcome. That is clearly our expectation. You know I would not say it on this call unless I was strongly optimistic that that will occur.
Okay. If I heard you correctly, Howard, then we shouldn't expect any announcements until the launch. Is that what you're saying? The other thing is, you know, of the major banks, do you expect to get participation from all of them? Or let's just say the majority.
I would say I expect an announcement of their participation before the launch. That is my expectation. You know, that is my expectation, that it will happen before we open for business at the end of the year. Your second question is, do I expect them. I expect the participants who matter most for volume in U.S. Treasuries and U.S. Treasury and futures and swap futures, Eurodollar futures and U.S. Treasury futures. I would expect most of them. I never say all, because all includes, you know, every single one. I would expect most to participate.
Okay. Then just a question on corporate, the corporate conversion that, you know, you said will have a decision by the end of the second quarter. Can you talk about what are the main factors now and how it could impact. What are the last points or decision issues that you need to sort of resolve or come to grips with to make that decision?
This is literally the board of directors and its committees need to determine and weigh all of the balancing decisions on whether they want to convert the company into a simpler corporate form. There are benefits to remaining where we are, and they are weighing those benefits, and I expect them to make the decision to a simpler corporate form. We know that our shareholders would prefer a simpler corporate form. We know that. Management would like and has suggested the company move to a simpler corporate form because we think it will make these calls more simple, right? For you guys to analyze our company to make it more simple. We're just waiting on them to do their work and just keep it simple.
Hopefully they will come to that decision, but that decision is present, meaning in the current quarter. They'll make that decision, then we'll announce their decision, and then we'll go forward. It is in their hands. It is not in management's hands.
Got it. Okay. One last quick question. You know, you expect in the what you call longer dated part of the curve to you know have more activity I guess in the second half. You know, how, in other words, there's a lot of front-end volatility I would expect in the second half as well as you debate whether we have 7, 8 or 6 Fed rate cuts. I guess how strong is your belief that the second half you know will transfer into this a lot friendlier environment for your complex?
Look, I am incredibly optimistic and positive that when the light at the end of the tunnel is clear, meaning that the world does not wait for the Fed to finish. Volumes will move in the long end relatively quickly once people think, okay, there's one or two more hikes and we think they're X and Y and Z, and that's the end of it. I think then you're going to see volumes in the long end start to move. The short end, as you saw, up 29%, I think that's going to continue. We think the front end is going to continue to be a really excellent volume area. We are waiting for the long end to stop balancing it, right? Right now, it is offsetting it with declines.
We think that will go away and will become a growth area as well once you see the light at the end of the tunnel. Whether you put that in the, you know, middle of the fourth quarter or the beginning of the fourth quarter, I don't know. It's when the market sees the Fed is finishing with this round of rate hikes, in my opinion, I think you will see volumes in the long end start to dramatically increase, and I think they could well equal the volumes in the short end and which would be a wonderful tailwind for our rates franchise.
Got it. Thanks, Howard, and congrats again on the good health.
Thanks.
Thank you very much. I'd just like to remind everyone that if they would like to ask a question, please press star followed by one on your telephone keypad. That's star followed by one on your telephone keypad. I have no further questions now, so I'd like to hand it back to Howard for some closing remarks.
Thank you all for joining us this quarter, and I deeply appreciate all of your support throughout the time where I had cancer. I am delighted that I am cancer-free. I feel really good, and I look forward to joining Rich at his conference and joining you all, you know, when I can now go back out and see people and travel, which I am doing now at a pace. I'm back to traveling. I'm back to seeing people. I feel great, and I have no lasting anything. Thanks for your support, and I look forward to speaking to you again next quarter.
Thank you very much, ladies and gentlemen. That now concludes this session. Thank you. Goodbye.