Bgc Group Inc (BGC) 2005 Q4 法說會逐字稿

Good morning. Welcome to the eSpeed fourth quarter earnings conference call. [OPERATOR INSTRUCTIONS] I will now hand the call over to Mr. Jason McGruder, Vice President of Investor Relations. You may begin.

Good morning, this is Jason McGruder, Vice President of Investor Relations for eSpeed. I would like to remind you all that the information provided on this conference call contains 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 are based upon current expectations that involve risks and uncertainties. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. Our actual results and the timing of certain events may differ significantly from the results discussed in the forward-looking statements.

Factors that might cause or contribute to such a discrepancy include, but are not limited to, the costs and expenses of developing, maintaining and protecting our intellectual property, including judgments or settlements paid or received and their related costs, the possibility of future losses and negative cash flow from operations, the effect of market conditions including trading volume and volatility, our pricing strategy and that of our competitors, our ability to develop new products and services, to enter new markets, to secure and maintain market position, to enter into marketing and strategic alliances, to hire new personnel, to expand the use of our electronic system to induce clients to use our marketplaces and services, and to effectively manage any growth we achieve, the affects of the attack on the World Trade Center on September 11, 2001 and other factors that are discussed under risk factors in eSpeed's annual report on form 10-K filed with the Securities and Exchange Commission. We believe that all forward-looking statements are based upon reasonable assumptions when made.

However, we caution that it is impossible to predict actual results or outcomes or the effects of risks, uncertainties or other factors unanticipated results or outcomes and that, accordingly, you should not place undue reliance on these statements. Forward-looking statements speak only as of the date when made and we undertake no obligation to update these statements in light of subsequent events or developments. Actual results and outcomes may differ materially from anticipated results or outcomes discussed in forward-looking statements. I would like to now turn the call over to our host, Howard Lutnick, Chairman and CEO of eSpeed, Inc.

Thank you, Jason and good morning, everyone. I would like to take this opportunity to welcome Jason to our team. Jason recently joined us from DoubleClick and he is our new Vice President of Investor Relations and we are please to have him onboard. I would like to thank you all for joining us to discuss our fourth quarter and full year 2005 results. While 2005 was a difficult and challenging year for us, we remain optimistic about our business. Joining me this morning is eSpeed's management team, Kevin Foley, Paul Saltzman, and Jay Ryan. Jay will review our fourth quarter financial results, after which Paul will discuss our fully electronic business, Kevin will provide an update on our voice-assisted business and new products, and finally, I will review our guidance and outlook for the fourth quarter and for the full year of 2006. So with that -- and then, of course, we will be available to answer your questions. So with that I would like to turn the call over to Jay to begin the call.

Thanks, Howard, and good morning. For the fourth quarter we reported GAAP net income of $0.01 per diluted share and non-GAAP net operating income of $0.02 per diluted share. The primary difference between non-GAAP net operating income and GAAP net income for the fourth quarter of 2005 consists of $1.6 million in charges related to the impairment of fixed assets and capitalized software costs and $600,000 in costs related to patent litigation. These charges are partially offset by a gain of $1.1 million from September 11th related replacement insurance proceeds and a gain of $500,000 due to the reduction of previously accrued costs associated with our attempt to acquire MTS earlier in the year. Each of these numbers is net of tax. For the full year 2005 we reported GAAP income of $0.04 per diluted share and non-GAAP net operating income of $0.14 per diluted share.

The primarily difference between non-GAAP net operating income and GAAP net income reported for 2005 consists of costs of $3 million related to patent litigation, $2.1 million of costs incurred in our efforts to acquire MTS, $1.6 million related to the impairment of fixed assets and capitalized software development costs, our $300,000 charitable contribution to the Canter relief fund and $200,000 for business partners securities. These charges were partially offset by $1.1 million in proceeds from September 11th related replacement insurance and a $600,000 gain on the sale of an investment. Each of these numbers is net of tax. Related to revenue, we reported GAAP revenues for the fourth quarter of 37.8 million. These revenues include $1.7 million in September 11th related replacement insurance proceeds, as during the quarter our spending surpassed our original insurance payment of $20.5 million. Excluding this revenue item, which we include in our nonoperating results, our operating revenues were 36.1 million, in line with our fourth quarter guidance.

For the full year 2005, non-GAAP operating revenues were 150.2 million, reflecting our transition to fixed price agreements and the improvement of our market position over the course of the year in our core U.S. Treasury business. I would now like to turn to operating expenses. On a sequential basis operating expenses in the fourth quarter of 2005 of 34.8 million were marginally down from 34.9 million in the third quarter of 2005. The sequential comparison includes some increases and decreases among the line items that I would like to discuss in more detail. First, you will note a $1.4 million decrease in compensation and benefits costs. Following our annual compensation review and considering the Company's operating results, we paid out less in year-end bonuses than had been previously accrued, providing us with a one-time reduction in compensation expense for the fourth quarter.

This decreased expense was materially offset by two items during the quarter. First was an increase in amortization expenses of approximately $550,000, which relates to costs associated with new product development. While we are optimistic about the future returns on this investment, it is not required to support our core business. A second area of investment expense during the quarter was an increase of almost $700,000 for communications and client networks. This investment expense relates to three business initiatives. First, network costs related to investment in the infrastructure supporting our wireless product. Next, the buildout of voice and screen connectivity related to BGC's expansion.

And finally, our establishment of an additional data center in the Midwest. This investment has two significant objectives. One, to provide us with ever greater scale and capacity for the expected dramatic growth of electronic trading volumes. And secondly, to create a hub to service our Midwestern accounts and for our customers who trade with the Chicago exchanges, which will provide significantly enhanced transaction speed and execution. Total headcount decreased by seven in the fourth quarter, resulting in a total employee base of 380 at the end of the year 2005. For the full year 2005, operating expenses were 139.1 million, up 23.3 million from 115.8 million in the full year 2004. These increased expenses were primarily due to two factors. First, increased headcount related to new hires in senior management, technology, and sales, as well as the first full year impact of our Echo acquisition. Additionally, there were increased expenses associated with the granting and the resulting amortization of restricted stock as we transitioned from an options based compensation model to more of a restricted stock based model.

Secondly, we have continued to invest in eSpeed's technical platform to support the growth of our fully electronic businesses and support the continuing growth of BGC and its associated voice-assisted revenues. Looking forward, we expect first quarter 2006 operating expenses to be approximately $37 million, a sequential increase of approximately 6%, which will be primarily attributable to an increase in compensation employee benefits. This increase reflects the one-time reduction in compensation expenses realized in the fourth quarter. Additionally, we plan to increase headcount in certain areas of our developing businesses as we continue to invest in new products. We expect to maintain this overall level of expense run rate in 2006 given our current revenue projections, as we continue the same level of new product and software development while focusing on the management of these costs and associated returns.

Turning to cash. We calculate free cash flow as operating cash flow less net cash use and investing activities, including fixed assets, software development, intellectual property and investments. For the fourth quarter of 2005 we generated negative free cash flow of approximately $5.9 million, primarily due to the payment of our annual employee year-end cash bonuses. For the full year of 2005 we generated negative free cash flow of $2.8 million. As of December 31, 2005, our cash position was 178.4 million, down 5.9 million or 3% from 184.3 million at the end of September, 2005. This decrease was primarily driven by the payment of yea-end cash bonuses. For the full year 2005 we used 28.9 million in cash to repurchase 3.5 million shares of our stock. As of today our fully diluted weighted average shares of common stock outstanding is 50 million shares and we currently have approximately 58.7 million remaining on eSpeed's $100 million share repurchase authorization.

Finally, we recognized an additional 1.7 million of September 11th related replacement insurance in the fourth quarter. As we complete the move into our new global headquarters and in light of the significant technology investment we have made over the past four years, we will be nearing the end of our spend on replacement assets during 2006. I would now like to turn the call over to Paul.

Thanks, Jay. Good morning, everyone. It's a pleasure to talk to you again about our fully electronic business, including U.S. Treasuries. eSpeed's fully electronic volume, excluding new products, was 7.5 trillion for the fourth quarter of 2005, up 32.3% from the fourth quarter of 2004, when our volume was 5.7 trillion, but down 6.4% due to seasonal factors from our third quarter 2005 volume of 8 trillion. These figures can be compared to a year-over-year increase of 5.6% and a quarter over quarter decrease of 5% in overall U.S. Treasury volumes as reported by the Federal Reserve. Average daily Fed treasury volume was 538 billion for the fourth quarter of 2005. There were 61 trading days in the fourth quarter of 2005 compared to 64 in the third quarter of 2005 and 62 in the fourth quarter of 2004. These figures suggest that eSpeed had an essentially flat market position quarter over quarter and a gain year-over-year.

We are not satisfied with the sequential results, since our objective was and continues to be gaining market position. But we are nonetheless pleased to see fourth quarter results reaffirming our previous three consecutive quarters of improvements in the face of significant competitive pressures, a challenging market environment for our customers, and seasonably low volumes in the December quarter. We are optimistic that 2006 will continue the positive trends and our market position that we have seen throughout 2005. I would like to take a moment to discuss our market position and related Federal Reserve volume comparisons. As we have discussed in the past, we have seen an increasing percentage of volume traded through non-primary dealers, some of which have employed computer-based trading models and who don't report their figures to the Fed. As such, there is less correlation between our reported volumes and those reported by the Fed. We believe tha this trend will partially reverse itself as the primarily dealer community invests in new technologies to create computer-based algorithmic trading tools.

We expect the effect of this investment to significantly increase the percentage of volume traded by primary dealers and thus increase the correlation of our reported volumes with the figures published by the Fed. Until then, comparing our volume figures with Fed statistics will be marginally less meaningful than in past quarters. As we have stated on previous calls, our largest clients have been migrating to a fixed pricing model, which we expect will continue to increase our volumes but also lower the correlation between volume and revenue. In the long run, we believe the expected doubling of treasury volumes by 2008 will, over time, double the number of fixed price customers. We expect this transition will come from variable price customers qualifying for our volume discounts and fixed price arrangements. This should, in turn, increase our revenue and profits.

We remain confident that a persistent strategy focused on client service, and tailored technology solutions that make trading on eSpeed easier and that create profit opportunities for our customers, will enhance our market position and generate revenue for eSpeed. This, along with incentives through customized pricing arrangements that include fixed pricing components, will position our fully electronic business for growth. I would now like to turn the call over to Kevin. Kevin?

Thanks, Paul. Good morning, everyone. I will begin with a review of our hybrid voice-assisted business and then discuss our new products. Voice-assisted volume for the fourth quarter of 2005 was 7.6 trillion, a decrease of 11.3% when compared with 8.6 trillion in the third quarter of 2005. This decrease is due primarily to seasonality factors and three fewer trading days in the quarter. However, in comparison to the 3.7 trillion of voice-assisted volume in the fourth quarter of 2004, volume has increased 106.3%, reflecting the strong year-over-year growth of BGC and of our hybrid pipeline. eSpeed's screen-assisted and voice-assisted revenue decreased sequentially by $300,000 to $7 million in the seasonally slow fourth quarter of 2005 and increased by $1.1 million versus the fourth quarter of 2004.

Our hybrid model provides eSpeed a significant long-term pipeline opportunity, both in terms of transaction volume and in terms of increased revenues across our product offerings, as marketplaces mature from telephone-based trading to screen-assisted trading then to voice-assisted electronic trading and, eventually, with the development of benchmarks to fully electronic trading. Both the Euro brokers and ETC Pollock acquisitions by BGC, along with BGC's continued organic expansion, have broadened the range of products contributing at both the voice-assisted and screen-assisted end of the pipeline. As these markets embrace technology, we expect increasing volumes and a greater share of trading revenue. I'll now review our new products. Fully electronic volume for new products was 540 billion in the fourth quarter 2005, compared to 376 billion in the third quarter of 2005 and 497 billion in the fourth quarter of 2004, which represented increases of 43.5% and 8.6% respectively. We continue to see major opportunities to leverage our position in the global financial markets.

We've rolled out technology for trading in foreign exchange, repos, equities and futures contracts and have continued to invest in developing and growing these businesses with dedicated and experienced sales professionals. Looking ahead, we will continue to refine our sales and customer service efforts in order to build liquidity in these products. We continue to invest in our foreign exchange platform and remain committed to achieving positive results in 2006. Regard to futures, although we have a relatively small futures business at this time, our sales have shown momentum over 2005. We offer traders the unique ability to trade certain kinds of U.S. Government bonds and futures simultaneously. Similarly, our strategy for foreign exchange includes the development of an integrated cash futures platform, which should extend our desktop penetration and increase the value proposition that we offer our customers. Volume for the eSpeed equities direct access product was 147 million shares in the fourth quarter 2005, compared with 154 million shares in the third quarter of 2005 and 123 million shares in the fourth quarter 2004.

We are adding features that differentiate our equities product, which we expect will bring volume and revenue growth. Our new product offering has been enhanced with BGC's recent announcement that it will launch the first integrated voice and electronic U.S. dollar repo trading platform for the primary dealer community. BGC intends to go live with the platform in the first quarter of 2006, offering a wide range of U.S. Treasury repo products that can be either electronically traded directly by the customer or managed through a voice broker. In line with our model, here we have a traditional voice business with the most liquid instruments emerging from being solely voice-assisted to the hybrid fully electronic platform.

Major milestone in product innovation over 2005 was our launch of the world's first wireless government bond trading solution through a deal with Sprint/Nextel announced back in June. Our customers can now trade virtually anywhere in real time through an eSpeed trading application on their Blackberry devices. Customer response has been encouraging and, in meeting the market's appetite for innovative trading solutions, our customers are reminded why we are different and what our focus on technology ultimately means to them. Now, I'll turn the call back over to Howard who will discuss our outlook for 2006.

Thank you, Kevin. For the first quarter of 2006 we expect to generate revenues in excess of $37 million. And we expect our non-GAAP net operating income to be in the range of 0 to $0.01 per diluted share. This guidance is based on our expectation that the average daily Federal Reserve U.S. Treasury volumes will be between 585 and 600 billion for the quarter. For the full year 2006 we expect to generate revenues in excess of $152 million and to incur operating expenses in the range of 147 to $150 million. Therefore, we expect full year non-GAAP net operating income in the range of $0.02 to $0.06 per diluted share. We have not included in our guidance any growth estimates for new products beyond the levels that we have today. Operator, we are now available to answer questions.

Thank you. [OPERATOR INSTRUCTIONS] Our first question comes from Chris Donat of Sandler O'Neill. You may ask your question.

Howard, can you provide us, or any one of you really, with a little more color on the new products and the strengths you saw in the fourth quarter versus the third, specifically with products?

Well, the -- yes, we have had varying improvements and structural changes across our platform, certainly our futures product increased its volume in foreign exchange. We have had some success with adding new market makers and different types of market makers, which we think will start to form the foundation of our optimism going forward in this year. So again, it is the law of small numbers and we are really only back to the levels we were at before. But, certainly we are and remain optimistic about our new products. And as I said, we have not included revenue improvement in our guidance because until we see it and until we have it, we don't feel that it is right to just put in projections into our guidance, so we've left that out.

Okay. Are either the futures or FX breakeven or can you give a sense of how profitable, at this point, or is that more of a future event?

Can you say that again?

In terms of the new products are any of them profitable at this point?

No.

Okay. And in terms of expenses, did you say that compensation and benefits expected up 6% in the first quarter?

Yes. Hi, it's Jay. Yes, we mentioned an increase in expenses going into the first quarter of approximately 6%, which is primarily driven by the comp and benefits line, as we obtain a somewhat of a benefit in the fourth quarter as any accruals that were not fully paid out would reverse in.

Okay.

So comparatively.

Got it. Okay. And then last question here on the uptick, only it wasn't that great, but in communications and client network is that the new data center and are those expenses a pretty good run rate going forward?

Yes, we put in a new data center and there are a few other business initiatives that fed into that line, but in our forward-looking expense guidance we've assumed that what you see in fourth quarter is approximately what will carry through.

Okay. Thanks very much.

Raj Sharma of Polestar Research, you may ask your question.

Good morning, guys. Q4 was really largely as expected. My question really is the '06 guidance, you really, I know Howard, you just said that there is no -- you are not building in any growth in new products, but also do you expect any of the trends that have happened in fully electronic business and voice-assisted business to change in '06? I mean do you expect market share to go down? Do you expect pricing to be worse?

Well, I think from a comparison point of view, if you look at the fourth quarter we are projecting actually top-line revenue growth from those numbers. In the fourth quarter we only had 36.1 million in revenue and obviously by projecting $152 million we are projecting above, significantly above those levels. So while a year on year comparison looks relatively flat, we are really getting back closer to the levels we were earlier in the year before we had part of the difficulty with respect to our repricing of our business. So we do expect our business to grow. But it is going to be growing off of the fourth quarter levels and that is just the math of comparisons year-over-year as opposed to taking us from where we are today and how that will grow.

But it seems like -- I know you are not building any growth in new products, but also you are not building any growth in the voice-assisted, the BGC related business that has been doing really well or even the fully electronic business, whereas you have given us an operating expense level that is really current and fully loaded. Is that an accurate statement.

It has to be growth to take us from the 36 million to the revenues of $38 million a quarter. 152 million a year is 38 million a quarter, so we are, in fact, building in $2 million a quarter of core business growth from really our voice-assisted, screen-assisted and fully electronic revenue lines. That is where we expect that $2 million a quarter to come from. We have not, as you pointed out, put in any growth for new products. And we certainly not built in any growth from areas outside of those line items. So it does include $2 million a quarter and that is almost from those line items. If you take out some of the software solutions and other items, it is just under 10% growth, which is not -- which is what we look for. So we are looking for 9 - 10% revenue growth of those line items combined and that is what we see today.

But I guess I can let other people ask questions, but really in all the trends I see in the business are positive and improving market shares going up. You have upped the treasury, the projection for the treasury volumes top-line. I mean if you think that treasury volumes are going to double in a couple of years, then there should be more growth, even in the fully electronic business and also in the voice-assisted business. But it doesn't seem to be incorporated into the guidance at all. That is what I'm sitting here and wondering.

Well, Paul pointed out that while historically we had a smooth relationship between volume and revenues, so increased volumes brought us consistently increased revenues, now we have, I guess, it is a more staired or more chunky model which is, as volumes grow new users, or smaller users, then transact more business and qualify up the ladder to fixed price arrangements. And therefore, the more fixed price payors we have, the more revenue we will have but also the less correlated volumes and revenues will become. So our business is becoming less and less correlated to revenues. However, the model that we have entered into really does mean that over time the number of users who pay us a fixed fee increases and therefore our revenues increase without a comparative increase in fixed expenses.

Jay went through that. Our expenses while growing remain discretionary other than, of course, that we have decided to invest in a data center, which will become and is now core to our business because we felt it would increase our transaction speeds and the capacity to handle both the doubling of the treasury business and we don't think the doubling of the treasury business means that the volumes in our business just double. We think that the number of bids and offers might grow 20 fold in growing the volume transactions of just the doubling, because algorithmic and computer based trading are capacity issues and we are building far ahead for that capacity. And also, our futures business and the ability for our clients to trade back and forth between the futures and cash also requires substantial bandwidth investment. So we've made that investment. But outside of that investment, the balance of our investments, as Jay pointed out, are not with respect to our core business and therefore are discretionary. And so a substantial amount of our expenses are not yet coming with revenue.

And we have not built in revenue projections. We are optimistic and we do expect to, in fact, earn revenue from these investments. Obviously, that would be the only reason to do those investments would be to make money. But, we just don't feel comfortable projecting revenue numbers that we don't yet have in our hands. I think we will feel much more confident when we have revenue and we start to see clear revenue growth, month over month and quarter over quarter, to start then projecting where we think it will go. So you might consider that conservative or you might consider it prudent, but we feel that this is the most appropriate way to put out our guidance.

Howard, even coming back to the fourth quarter number, we know that the fourth quarter number, even fully electronic or voice-assisted, is a seasonally low number. So if you were to annualized based on the fourth quarter number is that -- I mean especially given that the reintroduction of the 30 year, the long bond, and all the volatility in the markets I just -- .

Again, what's changed about the Company is that as we've entered into fixed price arrangements with a significant number of our largest clients, the relationship between volumes and revenue has the correlation has changed so that therefore even in the seasonally slower quarter our revenues don't decline as much. In fact, you might see that the difference between the third quarter and the fourth quarter was probably more attributable to the number of days in the quarter being less, simply because that is how the calendar works, than it would be from the seasonality. In the old days you would have seen seasonality be a bigger driver. Just because of the calendar in 2005 there were two extra days than you would normally see in a quarter put in the third quarter, and that meant the third quarter's and second quarter's numbers were comparatively larger and the first and fourth quarter were comparatively smaller. That is why we put out the number of days in the back of our quarterly market activity report simply so that you can follow that.

But we think from the fourth quarter levels that we think that we will grow from here, that we are looking forward to approximately a 9% top-line revenue growth in our fundamental businesses of electronic transactions, and BGC's voice businesses. BGC, as you will see from these numbers going forward, is having substantial success and substantial growth, which is very attractive, as Kevin pointed out, in our pipeline. And so we see a 9% top-line revenue growth from our transactions and we have not built in new products, which is something, obviously, that Kevin is very focused on and working hard on delivering. And therefore, we think from these levels we can grow and we are certainly growing from our fourth quarter numbers.

Just one last question. Buybacks in the fourth quarter, do you have any -- it looks like there weren't any buybacks in the fourth quarter.

That is, correct. We cannot and have not commented on stock buyback timing. We do have approximately a 58.6 million remaining in authorized stock repurchases and I can't and won't comment on the timing and decision to buyback stock.

Great. Thank you so much.

[OPERATOR INSTRUCTIONS] Aaron Braun of [Peacock] Willow Creek. You may ask your question.

Good morning, gentlemen. Thank you for the update. I did want to follow-up on the last part of the last questioner regarding the cash position. 170 million in cash presently, which equates to about $3.40 a share. The marketplace currently is valuing the common shares at a relatively low level based on your projected earnings for '06, which granted don't factor in any growth from the new areas. But given the low multiple of revenues and no credit for any intellectual property or new initiatives, does it make any sense for the Company, at this juncture, to evaluate either a very significant dutch tender, taking the Company private, or trying to identify a buyer, maybe one of the other exchanges, which obviously have garnered a lot of investor interest and have pretty highly valued currencies at this point. I wondered if you could give us your thoughts on that.

Well, the key strength of the Company is its scale and its leverage. The pre-9/11 scale of our technology and the number of products and its capacity across a broad range and spectrum of currencies and financial instruments was extraordinarily broad and extraordinarily deep. And with BGC's emergence and growth, we are just getting the opportunity now to dust off what is an impressive and enormous scale of technological prowess that we will get to roll out and achieve our pipeline. So with respect to just our future going forward, the conversion of those lines that earn 2.5% and the conversions of those lines that earn 7% to the lines where we make 65% will give us back our opportunities to have broad growth and profitability going forward.

We did, as you may be aware, look with respect to our cash this summer. We looked to make an acquisition in the space which we felt would have been highly profitable for us because we could have substantially eliminated the technology costs of MTS, the company we were looking to acquire, leveraged our scale and the technology prowess of eSpeed taken tens of millions of expense out of that company and done an enormous benefit for ourselves and that would have used up all our cash. And that was only six months ago. So we continue to look at acquisition opportunities. We continue to consider our own stock and we are open minded as to the best use and the best value for the Company. But the Company is in a very attractive position and just the pipeline and the strength and growth of that pipeline. While the screen-assisted open outcry line is only $1 million a quarter, when one realizes that is only 2.5% of the revenue opportunity and that as that business matures and becomes electronic, those revenues become 65% revenues to us at virtually no marginal cost, one can see a much more confident Company in our future than maybe the current numbers and current market anticipates.

Your statements about our intellectual property are right on. We have a strong position in intellectual property. We have been the leader in this space and we have protected our position. And it is expensive to defend our position, but it is something that we feel confident in and we feel justified in pursuing. And we think over the long-term that will produce value for us. We do have some of our licenses rolling off in 2007, but we do have a substantial number of other patents and other intellectual property that we think will add value to the Company in the long run. So we are definitely open minded. We have definitely considered a variety of movements. A number of our shareholders have suggested this dutch auction and we have discussed that with our board and we are open minded and always considering options and opportunities for the Company.

Great. Thank you for your thoughts. I appreciate it.

Lon Shane of Jay Goldman. You may ask your question.

Hi. Could you explain, the days -- on the fixed price contract is that impacted by the amount of days in the quarter? Isn't the fixed price contract not related to the days in any period?

The fixed price contracts, of course, are not related to days, but the accounting models simply say if they are paying us X amount of dollars per year and there are 250 trading days a year, just divide and that is the revenue you get per day in each and every quarter. We don't really divide them by four, we divide them by the number of days. That is how the model work.

Okay. And then just as a point of clarification. The revenues in this most recent quarter were down from 18.9 to 16.5 million. The volume was down significantly less than 10%. Can you just reconcile, given the structure of fixed price contracts, how that relationship holds?

The revenue declined primarily related to three less trading days. Secondarily related to the fact that there were lesser volumes. And we do still have a significant number of clients who do pay variable fees, so the volumes do have a variable fee component to them. And lastly, you may recall there was a large trading customer in the marketplace that went poof at the beginning of the fourth quarter.

Okay. Thank you.

At this time we have no further questions.

Well, I would like to thank you all again for joining us today. We feel confident about our expanding network, our improved trading speeds, our capacity, our competitive pricing model, our high service standards and the position of BGC's growth that is adding substantially to our pipeline going forward. We provide a value proposition that we see market participants appreciate and we expect our business to grow from these fourth quarter levels and we remain optimistic about our opportunities that lie ahead. So with that I would like to say thank you and please have a great rest of your day.